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Absa Group Limited
Media Release
15 January 2002
ABSA ISSUES PROFIT WARNING ON UNIFER INVESTMENT
The Absa Group issued a statement to its shareholders today on its holding
in Unibank Investment Holdings Limited ("UniFer"), warning them that
unforeseen losses at the microlender are expected to have an adverse affect
on Absa's earnings for the year to 31 March 2002.
Absa holds 61,3% of the share capital in UniFer, South Africa's second-
largest microlender.
Absa, however, reassured investors that all of its other operations and its
main commercial banking units were performing well and were expected to
produce good results.
"Excluding the UniFer situation, Absa is operating on budget," said Absa
Group Chief Executive Nallie Bosman.
Absa, with the cooperation of UniFer's other major shareholders has embarked
on a comprehensive programme to clean up and support the microlender. In
terms of this plan, an application has been made for the listing of UniFer's
shares on the JSE Securities Exchange to be suspended as a result of the
deterioration of the company's advances book.
UniFer and Absa both issued statements to shareholders this morning.
Information recently came to the attention of Absa and the other
shareholders, which required the directors of UniFer to launch an intensive
investigation into the advances book. UniFer's audit committee accordingly
requested comprehensive independent investigations to ascertain the extent
of this deterioration and its causes. This process resulted in the detection
of a material deterioration in the advances book of UniFer and it has become
apparent that the provision raised in respect of the UniFer advances book
have been materially insufficient.
This deterioration has been caused by the high level of growth in advances,
the uncertainty of the Persal situation and is also symptomatic of the
changing microlending business environment.
In its statement, UniFer said the detailed investigations to review the
recoverability of the advances book were still proceeding and the process to
verify the required provisions was still underway. UniFer's directors
expected the required provisions to be verified within 30 days.
"While we are confident that we already have a good picture of the
provisions, the board believes that prudence requires us to verify the
numbers and allow time for independent advisors to form an opinion," said
Absa Group Executive Director Frans du Toit.
Absa will also lead efforts to recapitalise UniFer. Absa put the programme
into action immediately, with the approval of the other major shareholders,
in a bid to stem losses and put UniFer back on a solid business footing.
Recapitalisation has become necessary due to the material effect the
provisions will have on the company's solvency. UniFer will also undertake a
rights offer for an amount that will ensure UniFer meets its capital
adequacy requirements. Absa will support UniFer by following its own rights
entitlement, underwriting the remainder of the rights offer and providing
support to depositors and the necessary liquidity to UniFer during this
period, should it be required.
The rights offer will take place at an issue price based on the net asset
value of UniFer, after taking into account the once-off provisions required.
If the net asset value per share is negative, the rights offer will be
undertaken at one cent per share.
No depositors will suffer any loss relating to UniFer's current situation
and Absa will protect their interests.
"As UniFer's majority shareholder and as one of South Africa's largest
financial services groups, Absa is reluctant to see UniFer fail and intends
to clean-up the business and leverage the synergies that exist between it
and UniFer," Bosman said.
Issued by: Steve Matthewson
Manager: Media Relations, Absa Group
Tel: (011) 350 5768
Cell: 083-256-0717
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