| Mon 19 Nov 2001, 0:00 | | Boe Limited - Audited Results For The Year Ended 3 |
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AUDITED RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2001
- Headline earnings per share up 15%
- Dividend per share up 19%
- Return on equity increased to 18%
- Cost to income ratio improved to 50%
FINANCIAL HIGHLIGHTS
Actual Pro forma
Change 2001 2000
Headline earnings R'm 10% 1 192 1 084
Headline earnings per share cents 15% 52.1 45.3
Attributable earnings per share cents 12.4 40.6
Net number of shares in issue 'm 2 257 2 298
Weighted average number of shares 'm 2 286 2 392
Net asset value per share
(investments at market value) cents 13% 287 253
Dividends proposed/declared per
ordinary share cents 19% 19.0 16.0
Dividend cover times 2.7 2.8
Return on equity % 18.1 15.8
Interest margin % 4.3 4.3
Cost to income ratio % 50.0 54.0
Non-interest income to total income % 51.5 47.9
Bad debts as a % of advances % 1.4 1.0
Provisions as a % of advances % 2.8 2.4
Capital adequacy ratio of
BoE Bank Ltd % 11.2 13.0
Return on total assets % 1.8 1.8
CONSOLIDATED INCOME STATEMENT
Actual Pro
forma
R'm 2001 2000
Income from advances 7 012 6 440
Interest on deposits 5 056 4 614
Net margin 1 956 1 826
Other income 2 077 1 678
INCOME FROM NORMAL OPERATIONS 4 033 3 504
Bad and doubtful debts 671 412
Operating expenses 2 018 1 893
PROFIT FROM NORMAL OPERATIONS 1 344 1 199
Exceptional items (860) (40)
PROFIT FROM OPERATIONS 484 1 159
Financing costs 102 103
Share of earnings of associate companies 61 73
PROFIT BEFORE TAXATION 443 1 129
Taxation 160 159
ATTRIBUTABLE INCOME 283 970
Exclusions 909 114
Loss on sale of ABIL shares 716 -
Loss arising from SA Eagle case (Kempton Park) 30 -
Profit on settlement of Norwich case (30) -
Amortisation of goodwill 130 80
Other 63 34
HEADLINE EARNINGS FOR THE YEAR 1 192 1 084
SEGMENTAL ANALYSIS OF HEADLINE EARNINGS
Actual Pro
forma
R'm Contribution 2001 2000
DIVISIONAL ANALYSIS
BoE Merchant Bank 17% 206 87
BoE Group Treasury 5% 65 61
BoE Corporate 21% 247 198
BoE Bank Business Division 15% 175 128
Total Corporate Banking Divisions 58% 693 474
Investment Management Business 14% 167 191
Retail Banking 2% 23 147
Capital and Investments 26% 309 272
100% 1 192 1 084
GEOGRAPHICAL ANALYSIS
RSA 94% 1 126 1 024
UK 6% 66 60
100% 1 192 1 084
CONSOLIDATED CASH FLOW STATEMENT
Actual Actual
R'm 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES 1 482 3 242
Cash received 14 315 13 824
Cash paid (12 402) (13 265)
Increase in operating assets (3 979) (1 970)
Increase in operating liabilities 3 548 4 653
CASH FLOWS FROM INVESTING ACTIVITIES (832) (59)
CASH FLOWS FROM FINANCING ACTIVITIES (202) (2 909)
CASH AND CASH EQUIVALENTS
Net increase 448 274
At beginning of the year 1 557 1 283
At end of the year 2 005 1 557
CONSOLIDATED BALANCE SHEET
Actual Actual
R'm 2001 2000
ASSETS
Investments 10 221 10 903
Advances 47 458 43 366
Other assets 9 557 8 193
67 236 62 462
EQUITY AND LIABILITIES
Capital and reserves 6 402 6 798
Interest-bearing borrowings 849 851
Life funds liabilities 7 420 6 653
Deposits and other accounts 49 847 46 253
Other liabilities 2 718 1 907
67 236 62 462
Off balance sheet assets under management 66 359 52 306
Total assets under management 133 595 114 768
CONSOLIDATED CHANGES IN EQUITY STATEMENT
Actual Actual
R'm 2001 2000
CAPITAL AND RESERVES
Balance at beginning of the year 6 798 12 610
Changes in share capital and premium (231) (4 578)
Shares held by group entities (2) (127)
Share options exercised and convertible
debentures redeemed 43 41
Part payment on acquisition of Edge 46 -
Issue expenses (1) (1)
Effects of group restructure - (3 708)
Share buy-backs (317) (783)
Changes in reserves (165) (1 234)
Net profit/(loss) for the year 283 (255)
Dividends (430) (369)
Revaluation of investments directly to reserves (14) 12
Foreign currency translation reserve directly to reserves (4) 18
Loss on buy back of shares formerly taken to share
Premium - (640)
Balance at end of the year 6 402 6 798
NOTES
1. The financial statements comply with South African Statements of
Generally Accepted Accounting Practice. Accounting policies used are
consistent with those applicable for the 30 September 2000 Annual Financial
Statements.
2. Pro forma figures have been used for the comparative results where
appropriate, due to the substantial changes which took place within the BoE
Group. A full reconciliation to the actual figures can be found in the
September 2000 Annual Financial Statements.
A YEAR OF REFINING STRATEGY, ENHANCING CAPITAL MANAGEMENT AND IMPROVING
OPERATING EFFICIENCIES
Following the restructuring implemented by the Group during 2000, the focus
in 2001 has been on three key areas:
- Refining strategy and structuring the business to align with this
strategy;
- Enhancing capital management and improving the return on capital for
shareholders; and
- Improving operating efficiencies within the parameters of the Group's
strategy.
Group headline earnings for the year were R1 192 million and headline
earnings per share was up 15% from 45,3 cents to 52,1 cents. Within NBS,
residential property development and small commercial property loans
operations had a poor year as a result of increased provisions for bad
debts. This was offset by strong performance in the corporate banking
businesses.
- Total income increased by 15%. This comprised an increase of 24% in other
operating income with net interest income (margin) increasing by 7%. Margin
was affected by the reduction in cash used for share buy-backs and lower
interest earned on free flow capital due to falling interest rates.
Excluding these effects, the increase in margin would have been 13%. Buy-
backs, however, have had a positive impact on the Group's earnings per share
and return on equity.
- Stringent expense control has resulted in overheads increasing by only 2%
after adjusting for new businesses acquired. BoE's cost to income ratio was
50,0%, an improvement from 54,0% last year.
- Strong asset growth was achieved by the core corporate and business
banking divisions. The investment management business started to see a
positive turnaround in asset growth.
- The Group increased its provisions aggressively for properties in
possession (PiP's) and non-performing loans (NPL's). The NBS division
specifically, has ceased lending in the residential development and
commercial property market. The bad debt expense was 1,4% of advances
against 1,0% in the prior year. Of the total bad debt charge of R671
million, R418 million relates to NBS. PiP's and NPL's are fairly valued in
the current circumstances. PiP's are now reducing satisfactorily.
- The Group has improved its liquidity and ended the year in a strong
position. The term and diversity of BoE's funding was lengthened through a
one-year, currency hedged, US$130-million offshore syndicated loan and the
issuing of a R1 750-million three-year unsubordinated bond. Retail deposits
grew by 13%, and now represent 37% of total deposits.
Strategy
BoE's strategy is to position the Group as one of South Africa's leading
specialist banking and investment management groups. The core of the
strategy is to be a specialist provider of financial solutions to
businesses, and through businesses to individuals.
The Group will focus on market segments which have the potential to grow
faster than the economy as a whole, in which BoE can achieve a meaningful
market share and where the risk/return ratio is acceptable. BoE has:
- Focused on three main business areas:
- Merchant, Corporate and Business Banking;
- Investment Management; and
- Retail Banking, primarily focused on the low-income to middle-income
market.
- Disposed of its stake in African Bank Investments Limited (ABIL) by way of
a specific share buy-back by ABIL. In doing so, BoE has recorded a non-
headline write down of R716 million, reversing part of previously disclosed
revaluation gains.
- Acquired new businesses to complement existing businesses:
- Credcor, a leading provider of credit through retailers to consumers,
mainly in the emerging markets;
- Cashbank, a specialist provider of housing finance to the emerging
market (October 2001);
- Edge Investments, a multi-manager and insurance broker, providing
investment solutions in the individual and employee benefit markets; and
- Stenham Gestinor, an international private client asset management and
trust company.
- Strengthened the executive team and ensured that the business units have
depth of management to ensure succession.
Enhanced capital management
After the restructuring in 2000 BoE still had excess capital. This year
further capital was deployed through acquisitions and the continuation of
the share buy-back programme. BoE bought back 74 million shares with a value
of R317 million. Return on equity has improved to 18%. Further improvement
is necessary and this will remain a focus for the year ahead.
Operating performance
BoE Merchant Bank, with a particularly pleasing performance from its private
equity business, had strong earnings growth. The competition in this market
remains fierce, but BoE believes it is well placed to continue with strong
results.
BoE Corporate and BoE Bank Business Division both delivered good growth and
returns on equity.
The Group's retail banking initiatives aimed at the lower to middle income
markets are marketed predominantly through corporates and merchants. The
strategy is premised on meeting five basic needs: an accessible, low-cost
physical distribution network; affordable transaction costs; a simple,
single savings account; competitive personal loans products; and a secured,
low-interest home loan product.
The Investment Management divisions performed below expectations. The Group
has now integrated these divisions in line with BoE's stated strategy.
Consistent investment performance is translating into asset growth which,
along with a reduction of the cost base, has laid the foundation for
earnings growth in the new year. The acquisition of Edge Investments allows
the Group to approach the employee benefits market aggressively, through a
more comprehensive product offering. The acquisition of Stenham Gestinor
strengthens BoE's offshore platform, bringing additional products and a
wider distribution base. The offshore businesses have now been integrated
into the Investment Management business and BoE has therefore accounted for
foreign exchange gains of R80 million in income, in accordance with
Generally Accepted Accounting Practice.
Non-core investments
Good progress has been made in dealing with non-core investments and
focusing the Group on its core business of banking and investment
management. In the 2000 financial year BoE wrote down its holding costs of
Monex and Century City, the only two large non-core investments left. The
recapitalisation of Monex and the offer to buy out minority shareholders
will enable BoE to deal with this investment at the appropriate moment.
Century City continues to trade in line with initial expectations and is
yielding a positive return to the Group.
The future
Managing the transition of the Group over the last eighteen months has been
challenging. The rapidly changing global environment and recent events in
America have added to uncertainty in the year ahead.
Against this backdrop, BoE has emerged as a stronger Group. It has returned
to its core focus as a specialist banking and investment management Group.
In 2002 the Group will :
- Grow the Investment Management and Retail Banking businesses off the
foundation of our strong Corporate and Business banking base;
- Actively manage capital to ensure that the return on equity is increased
to satisfactory levels; and
- Maintain the drive for further operating efficiencies. The Group will
continue to persue synergies and further cost alignment and to exploit cross-
selling opportunities.
The Group is budgeting for continued earnings growth.
Approval
The annual results set out adjacent were approved by the board of directors
on 15 November 2001 and are signed on its behalf by:
WJ McAdam TA Boardman
Chairman Chief Executive
Declaration of dividend
Notice is hereby given that a final dividend of 12 cents (2000: 11 cents)
per ordinary share was declared on 15 November 2001 in respect of the six
months ended 30 September 2001.
The last date to trade in the shares for the purposes of entitlement is
Friday, 7 December 2001. The shares will commence trading ex dividend on
Monday, 10 December 2001. The record date is Friday, 14 December 2001 and
the payment date will be Tuesday, 18 December 2001. Share certificates may
not be dematerialised/rematerialised between Monday, 3 December 2001 and
Friday, 14 December 2001.
By order of the board
JH Acutt
Company Secretary
15 November 2001
Directors: WJ McAdam (Chairman), CJW Ball (Deputy Chairman), TA Boardman
(Chief Executive), MWT Brown, P Gorvalla, B Kennedy, PS Leaf-Wright, JG
Maxwell, JR McAlpine, JAC McGregor, LA Meyerowitz, JG Modibane, E Osrin, JR
Sanders (British), CML Savage, WJ Swain, PA Wessels, DF Woollam
Registered Office: BoE, Clock Tower Precinct, V&A Waterfront, Cape Town,
8001 * PO Box 86, Cape Town, 8000. Telephone: +27 21 416 6000. Telefax:
+27 21 416 9927
Company Registration Number: 1987/003281/06. Share Code: BOE ISIN:
ZAE000014890
Transfer Secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg, 2001. PO Box 1053, Johannesburg, 2000 Telephone: +27 11 370
5000
