| Mon 17 Nov 2003, 8:58 | | REVIEWED PRELIMINARY ANNUAL FINANCIAL RESULTS |
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AFRICAN BANK INVESTMENTS LIMITED - REVIEWED PRELIMINARY ANNUAL FINANCIAL RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2003
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Share code: ABL
ISIN: ZAE000030060
("ABIL")
REVIEWED PRELIMINARY ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER
2003
Features
Headline earnings per share of 140,4 cents
Sales increased by 15,4% to R3,5 billion
Non-performing loans down by R364 million
Total ordinary dividends up 86,7% to 56 cents
Special dividend of 100 cents
Return on assets of 10,6%
Return on equity of 25,9%
GRAPHS
Return on assets (%)
2001 2002 2003 Pro
Forma
Return on assets 13.9 8.9 10.6 10.8
Target 10 10 10 10
Dividends per share (cents)
DPS Special DPS
y01 25
y02 30
y03 56 100
Return on equity (%)
2001 2002 2003 Pro
forma
Return on equity 31.6 23.2 25.9 30,4
Target 30 30 30 30
GROUP INCOME STATEMENT FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2003
Reviewed Audited
12 months 12 months
to to
30 30
September September
R000 2003 % change 2002
Revenue
Interest income on 2 295 519 14 2 005 388
advances
Net assurance income 246 804 (5) 259 811
Non-interest income 323 407 8 299 580
Total revenue 2 865 730 12 2 564 779
Charge for bad and (444 935) (20) (553 228)
doubtful advances
Risk adjusted revenue 2 420 795 20 2 011 551
Other interest income 143 131 73 82 827
Interest expense (463 685) 19 (389 181)
Operating costs (1 036 241) 10 (938 367)
Net income from 1 064 000 39 766 830
operations
Share of associate 1 529 (77) 6 778
companies" income
Net income before 1 065 529 38 773 608
taxation
Indirect taxation: (84 947) 122 (38 348)
Value added tax and STC
Taxation (314 071) 38 (227 629)
Net income after 666 511 31 507 631
taxation
Minority interest (6 609) (25) (8 765)
Net income attributable 659 902 32 498 866
to ordinary
shareholders
Headline earnings and
earnings per share
Net income attributable 659 902 32 498 866
to ordinary
shareholders
Adjustments:
Net goodwill amortised 17 691 12 839
Other capital items 2 466 (1 063)
Headline earnings 680 059 33 510 642
Weighted number of 484 398 488 939
shares in issue (000)
Fully diluted number of 488 939 486 816
shares in issue (000)
Headline earnings per 140,4 34 104,4
share (cents)
Basic earnings per 136,2 34 102,0
share (cents)
Fully diluted headline 139,7 34 104,4
earnings per share
(cents)
Declared dividends per
share (cents)
Interim 25,0 12,0
Final 31,0 18,0
Total ordinary 56,0 30,0
dividends
Special dividend 100,0 -
declared
Total dividends 156,0 30,0
GROUP BALANCE SHEET AS AT 30 SEPTEMBER 2003
Reviewed Audited
30 September 30 September
R000 2003 % change 2002
Assets
Fixed assets 193 719 2 189 029
Investments in 9 324 (47) 17 605
associates
Policyholders" 53 682 (18) 65 080
investments
Goodwill 20 463 57 13 007
Deferred tax asset 58 812 (7) 63 459
Net advances 4 399 746 (10) 4 900 199
Gross advances 6 314 097 (12) 7 166 640
Provisions (1 914 351) (16) (2 266 441)
Other assets 109 735 (78) 496 983
Taxation 4 625 (78) 21 325
Statutory assets - 479 474 14 421 751
Bank and Insurance
(note 1)
Short-term deposits 1 148 562 37 835 460
and cash
Total assets 6 478 142 (8) 7 023 898
Liabilities and
Equity
Life fund reserve 80 326 (15) 94 713
Structured loans and 2 251 180 (1) 2 269 313
debentures
Liabilities to 884 485 28 690 332
depositors
Other liabilities 173 094 (83) 1 040 840
Deferred tax 10 576 (20) 13 256
liability
Taxation 95 335 (57) 219 411
Bank overdraft 150 (99) 19 846
Total liabilities 3 495 146 (20) 4 347 711
Ordinary 2 788 751 15 2 433 522
shareholders" funds
Outside shareholders" 4 541 (92) 55 990
funds
Secondary capital 189 704 2 186 675
Total capital and 2 982 996 11 2 676 187
reserves
Total liabilities and 6 478 142 (8) 7 023 898
equity
Note 1:
Insurance prudential cash reserves of R197 million have been reclassified into
statutory assets in 2003, with no retrospective adjustment to 2002.
Adjusting the cash reserves for 2002, would have the effect of increasing
statutory assets and reducing short-term deposits and cash by R159 million.
CASH FLOW STATEMENT FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2003
Reviewed Audited
12 months to 12 months to
30 September 30 September
2003 2002*
Cash generated from 1 666 944 1 492 603
operations
Normal and indirect taxation (504 427) (463 355)
paid
Increase in gross advances (22 467) (1 324 722)
(Decrease)/increase in (473 769) 426 898
working capital
Shareholder payments and (303 402) (117 825)
transactions
Cash outflow from investing (11 661) (195 093)
activities
Cash (outflow)/inflow from 179 049 727 180
financing activities
Net increase in cash and 530 267 545 686
cash equivalents
Cash and cash equivalents at 815 614 269 928
the beginning of the year
Cash and cash equivalents at 1 345 881 815 614
the end of the period
Statutory cash reserves - 197 469 0
Insurance
Short-term deposits and cash 1 148 562 835 460
Bank overdraft (150) (19 846)
* Prior year"s numbers have been restated to more accurately reflect the
effect of the Saambou PLB provisions that were acquired at no cost and
changes in the categorisation of the statement.
Commentary
The focus of the group is to underwrite largely unsecured credit risk through
the provision of personal loans to the formally employed emerging market and
tailored solutions to small, medium and micro enterprises (SMMEs). Its
profitability and sustainability is dependent on its ability to underwrite this
risk and efficiently manage the collections process. ABIL currently manages a
loan book of R6,3 billion which is diversified over 1,4 million clients.
Overview
In the past year we have achieved significant progress in all areas of our
business: the consolidation of our competitive position, the restructuring and
streamlining of our existing businesses and structures, innovation in our
service offering to customers, a notable improvement in the credit environment,
the appointment of top skills at board, executive and senior management level,
the re-establishment of our funding profile and renewed growth in our loan book
after three years of self-induced restraint in a volatile environment. These
initiatives were aided by improved economic conditions.
Key features of this set of results include:
* Headline earnings increased to R680,1 million
* African Bank"s credit rating upgraded to zaA- (long term) and zaA1 (short
term)
* A R1,0 billion ABL2-bond raised by African Bank
* Group capital adequacy increased from 38,1% to 44,5%
* Costs (excluding the Saambou PLB) lower than in 2002
* Return of R863 million to shareholders through:
* An ordinary dividend of 56 cents declared for the year, 86,7% higher than
the 30 cents per share paid in 2002
A special dividend of 100 cents per share declared
* A R124 million share buy-back at 595 cents per share (ex-dividend) in May
2003.
Financial Summary
Headline earnings for the year ended 30 September 2003 increased to 140,4 cents
per share (2002: 104,4 cents) or to R680,1 million (2002: R510,6 million).
ABIL distinguishes between books on which lending takes place ("lending books"),
and books that are merely collected and on which no new advances take place
("paydown books").
The performance for the group during the 12-month period for 2003 was mainly
influenced by:
* a 14,5% increase in interest income on advances, as a result of the
contribution from the Saambou PLB, the lending books that grew by 12,5% on
the back of a 15,4% growth in sales volumes and risk-adjusted yields that
improved to 44,7% (2002: 38,4%). The latter was aided by a changing mix in
the portfolio to higher margin retail debit order business and lower
charges for bad debts as the effects of the credit bubble started to
diminish;
* a 4,5% increase in the net financing costs, as interest-bearing liabilities
and the cost thereof increased over the period. This was partially offset
by the building up of significant cash balances. Average cash for the year
was R1,2 billion (2002: R806 million);
* costs that have been contained, with year-on-year costs lower than in 2002
after taking into account the acquired Saambou PLB costs; and
* secondary tax on companies (STC) increasing to R33 million as a result of
increased dividend payments.
Looking Ahead
Sales on the lending books are expected to remain robust and should largely
compensate for the decline in the paydown books over the coming year. Gross
yields are expected to continue to increase as lower yielding paydown books are
replaced with higher yielding debit order business. Bad debt charges to the
income statement should remain steady at current levels and ABIL will continue
to focus on reducing its operating costs. The outlook for both return on assets
and return on equity are positive.
Investors should note that the special dividend of 100 cents per share will
attract R60,5 million of STC, which may have to be accounted for as a tax charge
in the 2004 year. This will reduce potential earnings per share by 12,5 cents
for the 6 months to 31 March 2004.
The challenges and focus areas for the coming year will be:
* continued refining of credit underwriting with specific emphasis on the
further development of behavioural scorecards to better differentiate the
pricing to our customers;
* enhanced collection processes and progress on the rehabilitation of clients
in financial distress;
* further cost reductions in both African Bank Retail and Specialised
Lending;
* the harmonising of governance structures across the group;
* further progress in the employment equity objectives at executive and
senior management levels;
* exploring new products and markets under the leadership of a dedicated
innovation unit; and
* the integration of sustainability objectives and targets across the group.
Capital Management
Effective capital management is a key determinant in the sustainability of any
bank. The strength of this process was most evident when in 2002 ABIL withstood
the liquidity and confidence crisis that swept the banking sector, and emerged
stronger and well positioned to participate in the consolidation process that
followed.
Capital optimisation requires the careful balancing of two key factors, namely
capital adequacy and return on equity.
Capital Adequacy
The capital adequacy for ABIL as at 30 September 2003 was 44,5% (2002: 38,1%).
ABIL has stated in the past that the build up of capital over the last two years
was excessive, and that given the necessary steps of a credit rating upgrade and
a new benchmark debt issue, it would set about addressing the surplus capital.
In arriving at an optimal level of capital to be maintained, ABIL has developed
a methodology which is applied to its different asset classes. The methodology
shows that the optimal capital level for the group is some 30%, which leaves an
excess capital buffer of 14%.
The group is committed to bringing the capital ratio down towards the optimal
level over the medium term. This implies a surplus capital position of R887,9
million as at 30 September 2003. The transition from the current levels to the
target range will be managed to ensure smooth yet decisive progress towards the
target, with careful consideration of the impact on funding and credit rating
stability.
The first step in this process has been the declaration by the group of a
special dividend of 100 cents per share and the maintenance of a lower dividend
cover on the ordinary dividends. The full financial impact of the special
dividend is set out below.
Return On Equity
Return on assets (RoA) improved from 8,9% to 10,6% (target 10%) while the impact
of surplus capital resulted in an average gearing of 2,5 times, yielding a
return on equity (RoE) of 25,9% against the prior year of 23,2%. The targeted
capital ratio of 30% would result in a gearing of approximately three times and
would put the group at its targeted RoE of 30%. On a pro forma basis, had the
special dividend been paid at the beginning of the financial year, the RoA would
increase to 10,8% and the RoE would increase to 30,4%.
Impact Of The Special Dividend
For purposes of comparative analysis, the impact of the special dividend is set
out below. The pro forma analysis is calculated assuming the special dividend
was paid on 1 October 2002.
As reported Pro forma %
Impact on ratios
Headline EPS (excluding STC) 140,4 132,2 (5,8)
Return on assets (%) 10,6 10,8
Return on equity (%) 25,9 30,4
Net asset value per share 588,1 467,4 (20,5)
ABIL Group capital adequacy 44,5 35,1
(%)
Cash Reserves
In addition to the R479 million in statutory and prudential cash reserves
(liquid and insurance prudential investments), the group has R1,1 billion in
available cash reserves as at 30 September 2003. This will reduce to R613
million after the payment of the special dividend and STC. As at 30 September
2002 the group had R835 million in cash reserves, and after paying the full
proceeds of the Saambou PLB acquisition of R1 billion, has generated an
additional net R1,3 billion in the year to 30 September 2003, underlining the
strong cash generative capability of the group.
Advances, Sales And Customers
There are a number of contrasting trends within the ABIL advances portfolio,
which when looked at in aggregate, may distort the outlook. Thus the gross
advances have been classified into two main portfolios:
* Lending Books - These comprise the main lending activities of African Bank
Retail (up 11,2%) and the books within the Specialised Lending Division
which are continuing businesses (up 19,1%). African Bank Retail debit order
loans now form the biggest portfolio on the balance sheet and the Standard
Bank JV continues to grow strongly, albeit off a low base. Increased sales
and new product offerings have resulted in a 27,9% increase in Credit
Indemnity"s book. During the period, the performing payroll portion of the
Saambou PLB was transferred and integrated into African Bank Retail. The
effect was to increase the growth on the overall lending books from 8,8% to
12,5%. Ignoring this transfer, African Bank Retail lending books have
accelerated from 3,6% annualised growth in the quarter ending 30 June 2003
to 6,8% by 30 September 2003. Given the recent vibrant sales trends, the
group believes that growth in the lending books in 2004 will exceed that
achieved this year.
* Paydown books - These comprise the acquired Saambou PLB and Persal
portfolios on which no new lending is taking place as well as the
businesses in Specialised Lending which are being wound down. These
portfolios will continue to decline during 2004 at similar rates to this
year.
The net effect of these dynamics for the current year was that average gross
interest-bearing advances increased from R5 238 million to R5 415 million.
The retail debit order advances continue to become a far more significant part
of the business and this transformation in the mix of advances will persist over
the next few years. The increasing proportion of retail debit order products in
the portfolio is having a positive impact on the gross margins.
Throughout the period of market instability that led to the demise of Saambou
and Unifer, the ABIL group maintained a very conservative stance to credit
granting and shortened the term of loans. This had a negative impact on sales
and ultimately the advances portfolio.
As market conditions improved towards the end of 2002, the group began to
carefully adjust the credit criteria, which on the back of strong demand for
credit from our customers has had a positive impact on sales during the course
of 2003 without a concomitant increase in default rates.
The growth in the size of the lending books was achieved through an increase in
the number of loans granted (up 8,0%) and a higher average size of loans (up
6,9%).
Turnover for the group on the lending books increased 15,4% to R3 538,3 million
(2002: R3 065,2 million). The group sold 1,4 million new loans, of which
1,1 million loans were to customers who have done business with the group before
and have chosen to support it again. The group also managed to attract 290 000
new customers.
Sales for African Bank Retail for the second half of the year were R1,2 billion,
an increase of 20% over the R1,0 billion of the first half.
African Bank Retail Sales (Indexed)
Oct Nov Dec Jan
y02 100 99.60769966 118.2556364 106.1153659
y03 117.9652793 120.6631407 113.6254229 124.5875597
Feb Mar Apr May
y02 96.71922091 90.41856873 107.505542 87.7920286
y03 109.9853403 114.6117053 114.5313758 122.67907
Jun Jul Aug Sep
y02 93.43990658 103.547537 80.03040123 91.91712992
y03 126.5411489 141.7367113 143.6359589 160.7291197
The 2002 sales exclude R152 million of once-off Persal consolidation loans in
October to December
African Bank Retail has a fairly even mix of repeat clients (60%) and new
clients (40%). In the shorter-term products of CI and MCG, the repeat client
ratios are much higher at 81% and 93% respectively.
The average term for new loans in African Bank Retail has remained static at 18
months. In CI (five months) and MCG (eight months) the average term increased as
these businesses extended their range of products to include longer-term
products to clients with a proven credit history with the businesses.
Portfolio Underwriting Margin
The group focuses on managing the risk-adjusted yield, being the overall yield
on the advances portfolio less net credit losses, as the main measure of
underwriting efficiency.
As anticipated, the overall yield on the advances book (being interest,
insurance and fees), increased in the past twelve months to 52,9%, compared to
49,0% in 2002. The improvement was the result of the changing mix in the
portfolio to higher yielding debit order products and the pay down of lower
yielding books. The risk-adjusted yield during this period was also positively
influenced by the decrease in the charge for provisions and bad debts and
accordingly increased from 38,4% to 44,7%.
Net financing costs were flat for the year, with interest earned on cash
compensating for higher funding costs. The average cost of funds increased from
13,5% to 14,5% during 2003, although this should begin to decline as the effect
of the lower interest rates feeds through.
The net effect of the movements in these profit drivers is that the operating
margin increased by 33% from 14,8% in 2002 to 19,7% in 2003.
Operating Efficiency
The cost-to-income ratio at ABIL is 36,2%, relative to the 36,6% in September
2002. Overall, ABIL"s costs, after adjusting for the R100 million in increased
costs from the acquisition of the Saambou PLB, were flat on that for 2002.
African Bank Retail"s cost reduction programme continued to prove effective and
yielded operating expenses excluding the Saambou PLB acquisition for the year to
September 2003, some 7% lower than the comparable period to September 2002.
Including the acquisition, the business managed to bring down its cost-to-income
ratio from 33,0% to 31,3%.
Specialised Lending"s costs increased by 10,8% over the financial year. Its cost
to-income ratio is 45,8%, which is higher than the 42,3% in September 2002. The
reorganisation and divisionalisation of the unit will reverse this trend.
While these cost-to-income ratios appear competitive, the group also manages its
costs on a cost-to-assets basis. The latter ratio climbed from 17,9% in
September 2002 to 19,1% in September 2003, as a direct result of the rapid
reduction in the pay down books. The group has initiated strategies including
the integration of the Collections businesses (Saambou and African Bank), the
divisionalisation of the Specialised Lending operations and other cost cutting
drives, that have started to have an impact on this ratio and will continue into
2004.
Taxation
The total taxation charge has increased from 34,4% to 37,4% over the period.
Apart from the 29,4% normal tax charge on profits, the group paid R33,0 million
(2002: R9,3 million) in STC and R51,9 million (2002: R29,1 million) in
apportioned input VAT disallowed, which added 3,1% and 4,9% respectively to the
tax charge.
Non-Performing Loans
NPLs decreased by R364,4 million from R2 989,7 million in September 2002 to
R2 625,3 million in September 2003. NPLs in African Bank Retail declined by
R425,3 million (15,4%) while NPLs in the lending books of Specialised Lending
declined by R3,9 million. NPLs in the paydown books of Specialised Lending
increased by R64,7 million. The latter was entirely attributable to GEMS and
ACFC which are in the process of being wound down.
The decrease in NPLs and resultant decline in provisions was as a result of:
* an improving credit environment, which resulted in a decline in new non-
performing loans. The vintage chart of African Bank Retail reflects that
the twelve month non-performing capital default rate has dropped from
almost 17% in 2001 to 9,5% by 2003;
* write-offs against 100% provisions of R875 million, being 13,1% of average
gross advances;
* increasing cash collections on the non-performing portfolio.
The improved credit conditions are evident in the following graph, which
indicates that the vintages, (being the percentage of loans by value in any
month of sales reaching non-performing status) have declined steadily over the
last two years.
VINTAGE CHART FOR AFRICAN BANK RETAIL
(Non-performing loans as % of original principal debt)
Months on book
4 5 6 7 8
0.67 5.38 7.37 10.05 11.35
0.39 5.4 7.23 9.5 10.57
0.46 4.55 6.46 7.04 10.23
0.29 3.24 9.34 10.46 12.39
0.28 4.87 7.46 9.04 11.16
0.34 2.86 5.54 8.05 9.82
0.32 3.01 5.55 7.61 9.15
0.15 2.2 4.23 6.24 7.61
0.17 2.06 3.71 5.05 6.88
0.14 1.07 2.94 4.5 5.89
0.06 0.94 2.12 3.61 4.82
0.08 1.32 3.04 4.81 6.02
0.07 0.95 2.08 3.62 4.25
0.03 1.15 2.07
0.06
Months on book
9 10 11 12 13
13.32 14 14.49 16.53 16.69
11.15 13.67 14.1 15.12 14.91
10.89 12.46 12.49 13.94 13.4
12.57 14.11 13.02 14.55 13.95
11.52 12.91 13.25 14.42 14.69
11.46 12.21 13.52 13.9 14.35
10.57 11.42 11.63 12.59 12.86
8.6 9.78 10.82 11.14 11.85
8.11 8.92 9.8 10.24 10.94
7.01 8 8.87 9.57 10.21
6.26 7.16 8.31 9.47
7.33 8.64
Months on book
14 15 16 17 18
17.27 17.7 18.15 17.96 18.25
15.62 15.5 16.16 15.85 16.11
14.7 14.22 15.35 14.58 15.23
14.95 14.68 15.49 14.28 15.38
15.31 14.88 15.98 15.81 16.34
14.95 15.52 15.48 15.68 15.73
13.05 13.24 13.25 13.25 13.35
12.03 12.52 12.36 12.52 12.27
11.28 11.62 11.96
10.85
Months on book
19 20 21 22 23 24
17.83 17.83 17.54 17.31 16.98 16.72
15.63 15.75 15.37 15.51 15.04 15.02
14.33 14.99 14.23 14.73 13.8 13.5
14.52 15.1 14.39 15.05 14.11 14.68
15.99 16.48 16.22 16.63 16.1 16.29
15.8 15.72 15.88 15.86
12.98 12.55
Provisions
Provision coverage of NPLs decreased from 79,5% to 74,7%, mainly as a result of
heavy bad debt write-offs against the portion of the non-performing book that is
100% provided for and improved cash collections during the year. The provisions
have been calculated in accordance with AC133 and accordingly the general
provision previously held has been reduced to the Banks Act minimum and has been
renamed the portfolio provision. The balance, being R26,2 million, was
transferred to specific provisions.
In addition, other insurance coverage declined, mainly as a result of the credit
life cover on the Saambou PLB declining as loans matured. Overall, after write-
offs of R875 million, the group created specific provisions of R545,6 million
against new NPLs of R510,6 million, a coverage ratio of 107%.
The group will continue to maintain a conservative stance with regard to
provisions on NPLs for the foreseeable future.
Collections
Collection efforts during the year have been rewarded through steadily improving
cash collection rates in all environments as collection processes have matured.
Based on an analysis of the NPLs in African Bank Retail as at 30 September 2002
of R2 762,1 million, cumulative cash received on these loans in the 12 months to
30 September 2003 amounted to R358,1 million, 13% of the balance outstanding or
65% of net NPLs after provisions. This rate of cash collections (adjusted to
present values), implies an average 30 months to collect the residual value of
the NPLs for African Bank Retail.
Recoveries of bad debts written off previously almost doubled in 2003, from
R43,3 million in 2002 to R74,5 million.
The average collection rate on the Saambou PLB to 30 September 2003 was 69,3%,
with the latest monthly collection rate at 65,4%, still running ahead of
original projections.
ABIL is endeavouring to discover ways in which to unlock the cash owed by
clients who continue to default despite all recovery efforts, both in the active
book and the written-off book. To this end specific research has been
commissioned, the outcome of which may result in certain collection strategy
changes. In addition, efforts are taking place with regards to the
rehabilitation of defaulting clients, especially the overlapped clients in the
Saambou PLB. This will be enhanced when the final conversion of those loans take
place in the first quarter of the 2004 financial year.
SEGMENTAL RESULTS
African Bank Retail
Total income for this business was up 15,7% to R2,1 billion which was achieved
through a combination of higher gross advances due to the inclusion of the
Saambou PLB for the whole year and increased margins due to the increased
proportion of retail debit order products.
Bad debt charges declined from 8,1% of advances to 6,4% due to improved credit
conditions. Operating expenditure was up 9,5% for the year, however after
adjusting for the costs acquired in the Saambou business, organic costs declined
by 7%.
Headline earnings for the unit were up 40% to R599,9 million from R428,6 million
in 2002.
Non-performing loans were down 15,3% to R2,3 billion and provision coverage
declined from 79,2% to 74,1%, mainly due to high levels of loan write-offs.
Specialised Lending
Total income was up 2,3% for the year, as strong growth in the ongoing
businesses was offset by declining revenues in the businesses being sold or
wound down.
The bad debt charge has declined from the high levels of 2002. However, the
division is still being affected by the higher charges on the businesses being
wound down. The impact of this should reduce significantly in 2004.
Operating expenditure increased over the year and is being addressed through the
divisionalisation process as well as a number of cost reduction and efficiency
drives. Due to the nature of its products and markets, this division does
operate at a higher cost-to-asset ratio, however this is compensated for through
higher margins.
Specialised Lending headline earnings were 15,6% higher at R122,2 million (2002:
R105,7 million), mainly as a result of a strong performance from Credit
Indemnity. The result was negatively impacted by the losses in GEMS and ACFC,
both businesses which are being wound down. The impact of these wind down
businesses should be eliminated into 2004 and thus the prospects for growth in
this division"s headline earnings are promising.
SEGMENTAL ADVANCES AND PROVISIONS ANALYSIS 30 SEPTEMBER 2003
NPLs
Headline Gross % of
earnings advances gross
R"000 R"000 R"000 advances
African Bank
Retail 599 881 5 360 955 2 336 796 43,6
Specialised 122 178 953 142 288 479 30,3
Lending
Credit
Indemnity 100 095 315 641 62 030 19,7
Miners Credit
Guarantee 51 428 270 785 46 504 17,2
Commercial
Vehicle
Finance 9 810 114 399 684 0,6
Gilt Edged
Mgt Services (10 055) 135 220 67 779 50,1
Contractor
Finance (36 143) 110 546 110 546 100,0
AB Commerce (524) 5 008 936 18,7
Other 7 567 1 543 - 0,0
Group and Consol (9 033)
STC (32 967)
Total 680 059 6 314 097 2 625 275 41,6
Total provisions
% of Provision
gross coverage
R"000 advances %
African Bank
Retail 1 730 621 32,3 74,1
Specialised 230 395 24,2 79,9
Lending
Credit
Indemnity 55 539 17,6 89,5
Miners Credit
Guarantee 30 787 11,4 66,2
Commercial
Vehicle
Finance 6 587 5,8 963,0
Gilt Edged
Mgt Services 49 275 36,4 72,7
Contractor
Finance 86 760 78,5 78,5
AB Commerce 134 2,7 14,3
Other 1 313 0,0 n/a
Group and Consol
STC
Total 1 961 016 31,1 74,7
Black Empowerment
ABIL"s approach to empowerment embraces the main pillars of transformation
contained in the recently published Financial Sector Charter. Full details of
ABIL"s credentials relative to the charter are in the group"s corporate charter,
on www.africanbank.co.za. The group is confident that it is already in a
favourable position with regards to the requirements of the charter and will
focus on improvements in the coming year, specifically in the areas of
transforming executive management further and direct ownership. ABIL is
evaluating several alternatives for direct ownership and anticipates progress
within the next reporting period to September 2004.
Accounting Policies
The accounting policies adopted for purposes of this report comply with South
African Statements of Generally Accepted Accounting Practice as well as with
applicable legislation. They are consistent with the prior period, with the
exception of the introduction of AC133. ABIL has incorporated AC133 into its
final results for the 12 months ended 30 September 2003. The only area of
potential major impact for ABIL is the recognition, measurement and valuation of
the advances portfolio and related provisioning. The approach prescribed by
AC133 is largely consistent with the previous methods used by ABIL and
consequently there has been no material change in the provisions as a direct
result of the statement. Any small differences have been included in the income
statement charge for movements in provisions.
Reviewed Results
The results have been reviewed by ABIL"s auditors, Deloitte & Touche Chartered
Accountants (SA) and their review opinion is available for inspection at ABIL"s
registered office.
Declaration Of Final Ordinary Dividend and Special Dividend
On 14 November 2003, the board of directors proposed and approved a final
ordinary dividend No 6 of 31 cents per ordinary share.
The board also approved a special dividend No 1 of 100 cents per share.
The two dividends will be paid out simultaneously.
Salient Dates For payment of Dividends:
Last day to trade cum-dividends Friday, 5 December 2003
Shares commence trading ex- Monday, 8 December 2003
dividends
Record date Friday, 12 December 2003
Payment date of dividends Monday,15 December 2003
Share certificates may not be dematerialised or rematerialised between Monday,
8 December 2003 and Friday, 12 December 2003, both days inclusive.
On behalf of the board
Ashley Mabogoane,
Chairman
Gordon Schachat,
Deputy Chairman
Leon Kirkinis,
Chief Executive Officer
14 November 2003
STATEMENT OF CHANGES IN EQUITY FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2003
Non-
distri-
Share butable
R000 capital reserves
Balance at 30 September 2001 12 858 81 713
Dividends paid
Cancellation of treasury shares (429)
held by subsidiary
Employee share trust shares issued
to employees (cost)
Loss incurred on group employees
acquiring
ABIL share trust shares
Transfer from non-distributable to (81 713)
distributable reserves
Net income for the year
Balance at 30 September 2002 12 429 0
Dividends paid
Employee share trust shares issued
to employees (cost)
Loss incurred on group employees
acquiring
ABIL share trust shares
Treasury shares acquired
by subsidiary
Net income for the year
Balance at 30 September 2003 12 429 0
Distri-
butable Treasury
R000 reserves shares Total
Balance at 30 September 2 191 249 (233 596) 2 052 224
2001
Dividends paid (132 027) (132 027)
Cancellation of treasury (150 197) 150 626 0
shares held by subsidiary
Employee share trust shares 20 532 20 532
issued to employees (cost)
Loss incurred on group
employees acquiring
ABIL share trust shares (6 073) (6 073)
Transfer from non- 81 713 0
distributable to
distributable reserves
Net income for the year 498 866 498 866
Balance at 30 September 2 489 604 (68 511) 2 433 522
2002
Dividends paid (206 066) (206 066)
Employee share trust shares 37 849 37 849
issued to employees (cost)
Loss incurred on group
employees acquiring
ABIL share trust shares (11 792) (11 792)
Treasury shares acquired
by subsidiary (124 664) (124 664)
Net income for the year 659 902 659 902
Balance at 30 September 2 943 440 (167 118) 2 788 751
2003
Note 1:
In accordance with Generally Accepted Accounting Practice, neither the final
ordinary dividend of 31 cents and the special dividend of 100 cents, nor the
associated STC have been reflected as a deduction from equity as at 30 September
2003.
ADVANCES ANALYSIS
30 30
September September
R000 % growth 2003 2002
Lending books 12,5 4 137 734 3 678 355
African Bank Retail 11,2 3 430 358 3 084 305
Payroll - Corporates and (16,8) 1 503 814 1 806 908
Other
Retail/debit order 51,5 1 761 261 1 162 426
Standard Bank joint 43,8 165 283 114 971
venture
Specialised Lending 19,1 707 376 594 050
Credit Indemnity 27,9 315 641 246 711
Miners Credit Guarantee (3,1) 270 785 279 360
Commercial Vehicle 71,3 114 399 66 797
Finance
ABCommerce n/a 5 008 -
Quatro 30,5 1 543 1 182
Pay down books (37,6) 2 176 363 3 488 285
African Bank Retail (38,3) 1 930 597 3 127 826
Persal (37,5) 457 543 731 559
Saambou PLB (38,5) 1 473 054 2 396 267
Specialised Lending (31,8) 245 766 360 459
Gilt Edged Management (35,2) 135 220 208 560
Services
African Contractor (21,6) 110 546 141 028
Finance
Safrich (100,0) - 10 871
Total (11,9) 6 314 097 7 166 640
Average gross interest- 3,4 5 414 818 5 237 697
bearing advances
ADVANCES WALKFORWARD ANALYSIS (AFRICAN BANK RETAIL)
Lending Saambou
R000 books Persal PLB Total
Gross advances
as at
30 September 3 084 305 731 559 2 396 267 6 212 131
2002
New loans 1 005 944 0 0 1 005 944
granted - 1st
half
- 2nd half 1 209 789 0 0 1 209 789
Loans 208 355 0 (208 355) 0
transferred
(note 1)
Net receipts (1 677 604) (171 493) (476 269) (2 325
366)
Interest, 1 139 433 97 611 517 613 1 754 657
charges and
adjustments
Gross cash (2 817 037) (269 104) (993 882) (4 080
receipts 024)
Bad debts (400 431) (102 524) (238 589) (741 544)
written off
Balance as at
30 September 3 430 358 457 543 1 473 054 5 360 955
2003
Note 1:
Payroll loans converted onto African Bank systems in June
2003.
ASSET QUALITY ANALYSIS AS AT 30 SEPTEMBER 2003
African Bank Retail
R000 2003 2002
Advances
Performing 3 024 159 3 450 076
Non-performing 2 336 796 2 762 055
Total 5 360 955 6 212 131
Provisions and
reserves
Portfolio 20 417 31 708
provision
Specific 1 575 073 1 960 700
provisions
Stangen credit 88 466 85 607
life reserves
Total 1 683 956 2 078 015
provisions
Other 46 665 109 464
insurance
coverage
Total 1 730 621 2 187 479
provisions and
