| Mon 19 Nov 2001, 0:00 | | Absa Group - Interim Profit And Dividend Announcem |
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ABSA GROUP LIMITED
SALIENT FEATURES OF THE GROUP RESULTS
Six months ended Year ended
30 September 31 March
2001 2000 Change 2001
%
(Unaudited) (Audited)
Headline earnings (Rm) 1,309 1,066 22.8 2,446
Headline earnings per share (cents) 201.8 164.4 22.8 377.2
Attributable income (Rm) 1,298 1,066 21.8 2,442
Earnings per share (cents) 200.1 164.4 21.8 376.5
Dividends per share (cents) 53.0 44.0 20.5 116.0
Dividend cover (times) 3.8 3.7 3.3
Return on average shareholders' funds (%) 18.4 17.5 19.1
Return on average assets, excluding
acceptances (%) 1.28 1.18 1.32
Net interest margin (%) 4.13 4.26 4.25
Charge for bad and doubtful advances as a
% of average advances 1.15 1.08 1.09
Non-interest income as % of operating
income 45.7 43.9 44.9
Cost-to-income ratio (%) 61.2 65.0 63.2
Total assets (Rm) 213,759 187,350 14.1 196,377
Net asset value per share (cents) 2,268 1,942 16.8 2,124
Total advances (Rm) 170,037 149,381 13.8 156,396
Non-performing advances to total
advances (%) 4.5 4.8 4.4
Capital to risk-weighted assets (%)
-Banking operations 10.4 10.6 11.2
-Group 12.1 12.4 12.4
GROUP INCOME STATEMENT
Six months ended Year ended
30 September 31 March
2001 2000 Change 2001
(Unaudited) (Audited)
Rm Rm % Rm
Interest income 11,939 10,838 10.2 22,571
Interest expense (7,730) (6,988) (10.6) (14,708)
Net interest income 4,209 3,850 9.3 7,863
Charge for bad and doubtful advances (938) (795) (18.0) (1,643)
Income from lending activities 3,271 3,055 7.1 6,220
Non-interest income 3,547 3,007 18.0 6,408
Operating income 6,818 6,062 12.5 12,628
Operating expenditure (4,750) (4,456) (6.6) (9,019)
Net income from operations 2,068 1,606 28.8 3,609
Share of associated companies'
retained income 31 18 72.2 35
Net income before taxation 2,099 1,624 29.2 3,644
Taxation (730) (499) (46.3) (1,101)
Net income after taxation 1,369 1,125 21.7 2,543
Minority interest (71) (59) (20.3) (101)
Net income attributable to shareholders 1,298 1,066 21 8 2,442
Headline earnings 1,309 1,066 22.8 2,446
Determination of headline earnings Rm Rm % Rm
Net income attributable to shareholders 1,298 1,066 21.8 2,442
Adjustment for:
Net goodwill written off 11 - - 12
Net profit on disposal of subsidiary - - - (8)
Headline earnings 1,309 1,066 22.8 2,446
Number of shares in issue (000s) 648,547 648,547 648,547
Weighted average number of shares in
issue on which headline earnings per
share are based (000s) 648,547 648,547 648,547
GROUP BALANCE SHEET
30 September 31 March
2001 2000 Change 2001
(Unaudited) (Audited)
Rm Rm % Rm
Assets
Cash and short-term assets 6,574 6,597 (0.3) 6,402
Short-term money market assets 14,486 9,153 58.3 10,462
Liquid assets and other securities 11,687 8,831 32.3 10,642
Advances 170,037 149,381 13.8 156,396
Other assets 4,241 4,952 (14.3) 4,639
Investments 2,527 3,326 (24.0) 2,671
Associated companies 378 254 48.8 332
Property and equipment 2,347 2,383 (1.5) 2,425
Intangible assets 170 158 7.6 164
Client liabilities under acceptances 1,312 2,315 (43.3) 2,244
Total assets 213,759 187,350 14.1 196,377
Liabilities
Deposits and current accounts 186,529 161,188 15.7 167,736
Provisions for liabilities and charges 6,585 6,555 0.5 8,021
Insurance funds 1,291 1,013 27.5 1,163
Subordinated debt 2,879 3,107 (7.3) 2,962
Liabilities to clients under acceptances 1,312 2,315 (43.3) 2,244
Total liabilities 198,596 174,178 14.0 182,126
Shareholders' funds
Share capital 1,297 1,297 - 1,297
Share premium 1,532 1,532 - 1,532
Reserves 11,882 9,756 21.8 10,932
Shareholders' funds 14,711 12,585 16.9 13,761
Minority Interest 452 587 (23.0) 490
Total liabilities and shareholders'
funds 213,759 187,350 14.1 196,377
Contingencies 13,558 13,399 1.2 14,198
GROUP STATEMENT OF CHANGES IN EQUITY
30 September 31 March
2001 2000 Change 2001
(Unaudited) (Audited)
Rm Rm % Rm
Share capital 1,297 1,297 - 1,297
Opening balance 1,297 1,286 1 1,286
Shares issued - 11 (100) 11
Share premium 1,532 1,532 - 1,532
Opening balance 1,532 1,532 - 1,532
Non-distributable reserves 886 608 46 749
Opening balance 749 566 32 566
Movement in foreign currency
translation reserve 152 69 >100 157
Transfer (from)/to insurance contingency
reserve Changes in value of investments held(13) - - 9
by short-term insurance company (33) (45) 27 (18)
Share of associated companies' retained
income 31 18 72 35
Distributable reserves 10,996 9,148 20 10,183
Opening balance 10,183 8,449 21 8,449
Foreign currency translation effect - - - (20)
Transfer (to)/from insurance contingency
Reserve 13 - - (9)
Share of associated companies' retained
income (31) (18) 72 (35)
Attributable income 1,298 1,092 19 2,452
Dividends (467) (285) 64 (757)
Change in accounting policies - (90) (100) 103
Total shareholders' funds at end
of period 14,711 12,585 17 13,761
GROUP CASH FLOW STATEMENT
Six months ended Year ended
30 September 31 March
2001 2000 2001
(Unaudited) (Audited)
Rm Rm Rm
Cash retained from operating activities 183 379 (2,088)
Net cash inflow from operating activities 2,836 2,517 5,268
Net decrease in operating funds (1,942) (1,649) (6,688)
Taxation paid (711) (489) (668)
Cash (utilised in) /generated from investing
activities (163) (908) 1,285
Cash flows from financing activities - 500 511
Other movements 152 69 137
Increase/ (decrease) in cash and cash
equivalents 172 40 (155)
Cash and short-term assets at beginning
of period 6,402 6,557 6,557
Cash and short-term assets at end of period 6,574 6,597 6,402
PROFIT CONTRIBUTION BY BUSINESS AREA
Six months ended Year ended
30 September 31 March
2001 2000 Change 2001
Rm Rm % Rm
Retail banking 384 302 27 663
Absa Bank operations 313 242* 29 534
UniFer 71 60 18 129
Commercial banking 430 339 27 754
Business banking services 296 221* 34 458
Bankfin 109 100 9 210
MLS Bank 25 18 39 56
Wholesale banking 279 250 12 631
Domestic operations 217 180 21 482
International operations 40 64 (38) 122
African operations 22 6 >100 27
Total banking 1,093 891 23 2,048
Insurance and financial services 240 194 24 447
Other (24) (19) (26) (49)
Total headline earnings 1,309 1,066 23 2,446
Notes:
*Prior to the implementation of the new business model no distinction was
made between the retail and business banking operations of the Group. The
comparitive figures for both these segments are estimates only.
Commentary
Earnings and dividend announcement
Absa Group Limited is pleased to report that headline earnings for the six-
months ended 30 September 2001 increased by 22,8% to R1 309 million (201,8
cents per share) compared to R1 066 million (164,4 cents per share) for the
corresponding period of the previous financial year.
The return on average shareholders' funds improved from 17,5% to 18,4% and
the return on average assets from 1,18% to 1,28%.
Commercial and wholesale banking operations, insurance and financial
services all performed well while personal banking recorded an excellent
performance for the six months.
An interim dividend of 53,0 cents per share has been declared. This
represents an increase of 20,5% on the previous year's interim dividend of
44,0 cents per share.
Operating Environment
The domestic economy is in the initial phase of an economic downswing, in
reaction to the global economic slowdown. Equity markets have performed
poorly and investor sentiment towards emerging economies remains
unfavourable. The lower and more stable interest rate environment during the
period stimulated demand for home loans and instalment finance but overall
consumer credit demand failed to live up to the expectations of double digit
growth. The main drawback in this regard was the low growth in overdrafts
and other loans mainly because of subdued domestic corporate credit demand.
Private sector credit extension increased by 9,5% year-on-year compared to
10,4% of the previous year.
Strategic acquisitions
An opportunity to increase the Group's shareholding in UniFer to 61% for an
amount of R102 million was taken up during the past six months. The Group's
African operations were expanded through the acquisition, subject to
regulatory approval in South Africa, of 80% of the equity of Banco Austral
in Mozambique for an amount of R95 million. The Mozambican government holds
the remainder of the equity.
Review of Operations
The Group's new customer focused business units were fully operational for
the period under review and their success is already evident in the results
for the period. Personal banking operations recorded strong earnings growth
as a result of successful customer retention strategies and improved service
levels. Commercial banking operations overcame tough competitive market
conditions and were successful in maintaining market share without
compromising the quality of the book or the asset margin.
The domestic operations of Absa Corporate and Merchant Bank (ACMB) posted a
solid increase in earnings for the period under review and increased
earnings from Africa offset, to a degree, the poor performance of some of
the international operations. Income from international operations
contributed modestly towards the Group's earnings and was affected by
increased provisions for bad debts in Asia and an increase in the effective
tax rate of the London branch.
Insurance and financial services operations experienced a marked increase in
the flow of quality leads and their conversion into product sales as a
result of improved customer focus facilitated by the new business model.
This, together with effective rating structures for insurance policies of
the short-term insurance company and the direct marketing of new products by
the life insurance company, boosted the contribution from bancassurance to
Group income.
Net interest income increased by a satisfactory 9,3%, largely because
advances grew by 13,8%. Lending margins declined moderately because of the
relatively low prevailing interest rates, competition, de-construction of
the value chain and disintermediation. The latter phenomenon is
particularly noticeable with regard to the growth in retail deposits, which
at 6,3% was lower than advances growth and necessitated increased funding
from more expensive wholesale deposits.
Increased provisions in respect of micro-lending in UniFer have resulted in
an increase of 18,0% in the charge for bad and doubtful advances. However,
the level of bad debts in the conventional banking activities of the Group
has improved. The charge for bad and doubtful advances as a percentage of
advances for the Group has increased from 1,08% to 1,15% compared to the
corresponding period of the previous year.
Non-interest income now represents 45,7% of total revenue and continues to
improve towards the Group's medium-term target of 47%. Annuity income -
commissions and fees - improved markedly as a result of increased
transaction volumes and fee adjustments designed to close the gap relative
to transaction fees charged by the market. Income from trading increased by
12,6% despite the difficult trading conditions, but the poor performance of
equity markets restricted revenue growth from this source.
The Group is well on track to achieve its stated target of a cost-to-income
ratio of 61,0% by year-end. This ratio has improved from 65,0% in September
2000 to 61,2% for the six months under review. The increase in operating
expenditure was contained to 6,6% for the period and was only 3,7% when
micro-lending operations are excluded. In line with the practice in the
banking industry, the Group discloses indirect taxes as part of the tax
charge in the income statement to reflect its full tax contribution. The
effective tax rate of the Group is 34.7% compared to the 30.8% for the
corresponding period of the previous year. This increase is the consequence
of lower dividends and lower profits on the sale of investments that are
both non-taxable revenues.
Accounting policies
The financial statements of the Group comply in all material respects to
South African Statements of Generally Accepted Accounting Practice and are
consistent with those applied in the previous financial year. The following
accounting statements have been adopted from 1 April 2001:
The new accounting statement on Events after the balance sheet date (AC
107). In terms of this statement, dividends proposed or declared after the
balance sheet date and related secondary tax on companies are not recognised
as a liability at the balance sheet date but only on the date of proposal or
declaration. This change in recognition of liabilities relating to dividends
has been applied retrospectively and comparative amounts have been restated;
and
The new accounting statement on investment properties (AC 135) and its
impact on the existing statement on property plant and equipment (AC123). In
terms of this statement, owner-occupied buildings must be depreciated over
its expected lifespan. This change has been applied retrospectively and
comparative amounts have been restated; and
The revised accounting statement on Employee benefits (AC 116). In terms of
this statement, leave provisions in respect of past service of employees
have been recognised. This change has been applied retrospectively and
comparative amounts, as well as retained earnings in respect of 2000, have
been restated.
The adoption of these statements, as stated above, has necessitated the
restatement of earnings of the previous period (negative R26 million) and
retained earnings (negative R93 million). This has not had a material effect
on the reported earnings and financial performance ratios of the Group.
Prospects
The current global economic slowdown is expected to continue until the
middle of 2002 but at this stage it is not anticipated that this will have a
major effect on the current trading conditions in South Africa in the short
term. Therefore, given the subdued economic growth and downward pressure on
global interest rates, a further slight decline in the repurchase and prime
rates early in 2002 should not be ruled out. Thereafter, interest rates
should remain at these levels for the remainder of 2002. Domestic credit
extension is unlikely to improve notably in response to the lower and stable
interest rate conditions and top-line growth of the banking industry should
remain under pressure.
Absa will leverage further efficiency benefits from its new business model
and continue to focus on the needs of customers in targeted market segments.
The Group is well positioned to benefit from its dominant position in
certain markets and to expand in certain selected areas. The Group is
confident that the service quality and growth momentum can be sustained into
the foreseeable future. In view of the above it is anticipated that the
performance for the six months can be sustained for the full year.
On behalf of the board
D C Cronje E R Bosman
CHAIRMAN GROUP CHIEF EXECUTIVE
Declaration of ordinary dividend NUMBER 30
Notice is hereby given that an interim dividend of 53,0 cents per ordinary
share has been declared and is payable to shareholders registered in the
books of the company at the close of business on Friday, 14 December 2001.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa, the company
has determined the following salient dates for the payment of the dividend:
Last day to trade cum-dividend Friday, 7 December 2001
Shares commence trading ex-dividend Monday, 10 December 2001
Record date Friday, 14 December 2001
Payment of dividend Tuesday, 18 December 2001
Share certificates may not be dematerialised/ re-materialised between
Monday, 3 December 2001 and Friday,
14 December 2001, both days inclusive.
On 18 December 2001, the dividend will be electronically transferred to the
bank accounts of shareholders that utilise this facility. In respect of
those who do not, cheques dated 18 December 2001 will be posted on or about
that date.
On behalf of the board
W R SOMERVILLE
Group Secretary
19 November 2001
ABSA GROUP LIMITED
This information is also available on our website at
http://www.absa.co.za/iff
Directors:
DC Cronje (Chairman)
DC Brink (Deputy Chairman)
ER Bosman* (Group Chief Executive)
NB Bam
L Boyd
BP Connellan
AS du Plessis
FJ du Toit*
G Griffin
LN Jonker
P du P Kruger
DF Mostert
TMG Sexwale
FA Sonn
PEI Swartz
T van Wyk
*Executive
SPONSORS: Co-Sponsor:
ABSA CORPORATE AND MERCHANT BANK
Lead Sponsor: Corporate Finance Department
MERRILL LYNCH SOUTH AFRICA 3rd Floor, Absa Towers North, 3W2
(PROPRIETARY) LIMITED 180 Commissioner Street,
(Member of the Merrill Lynch Group) Johannesburg, 2001
138 West Street, Sandown,
Sandton, 2196 PO Box 8054, Johannesburg, 2000
Telephone (011) 350-4000
PO Box 5591, Johannesburg, 2000 Telefax: (011) 350-7422
Telephone (011) 305-5555
Telefax: (011) 305-5610
ABSA GROUP LIMITED
TRANSFER SECRETARIES: (Registration number.
SOUTH AFRICA 1986/003934/06)
Mercantile Registrars Limited JSE CODE : ASA
8th Floor, 11 Diagonal Street, ISIN CODE : ZAE000013389
Johannesburg, 2001
PO Box 1053, Johannesburg, 2000
Tel : (011) 370-5000 REGISTERED OFFICE:
3rd Floor, Absa Towers East, 170
UNITED KINGDOM GDR DEPOSITARY Main Street, Johannesburg 2000
Bankers Trust (part of Deutsche Bank
Group) POSTAL ADDRESS:
Winchester House PO Box 260595, Excom, 2023
1 Great Winchester Street Telephone (011) 350-4000
London EC2N 2DB, United Kingdom Telefax: (011) 350-4928
e-mail : groupsec@absa.co.za
GROUP SECRETARY: WR Somerville
WEBSITE: www.absa.co.za
