| Wed 31 Mar 2004, 15:11 | | Audited financial results for the year ended 29 |
|
Capitec Bank Holdings Limited - Audited financial results for the year ended 29
February 2004
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
JSE share code: CPI ISIN code: ZAE000035861
Audited financial results for the year ended 29 February 2004.
* Profits up 51% to R45 million
* Dividend of 20c per share
* A growing network of 148 bank branches nationwide
Key financial indicators
2004 2003
Rm % Rm
* Earnings 45 51 30
* Headline earnings per share (cents) 70,2 53 46,0
* Dividend per share (cents) 20,0 - 19,0
* Shareholders" funds 428 11 386
* Market capitalisation 398 143 164
* Loans advanced (1) 1 904 29 1 477
* Bad debt % (1) 1,4 (46) 2,6
(1) Excludes Namibia and Botswana subsidiaries
sold in 2003
Our view of the business
A profit margin of 2,4% (2003:2,0%)
All our profits for the year are derived from short-term loans. We increased our
turnover to R1,9 billion, an increase of 29% over 2003. The profit of R45
million is a satisfactory increase over last year"s R30 million, but a return of
only 11,6% on our capital (2003: 8,0%). Our profit is equal to 2,4% of turnover.
We carry a tax loss and the R19 million tax expense was actually written off
against the tax asset - in short, we generated R19 million more cash than our
profit figure indicates. Much remains to be done before we can report a decent
return on capital of more than 20%.
The network effect
On Sunday 22 February 2004 our branch in Idutywa was converted to a full Capitec
Bank branch. This is our 148th bank branch. Since May 2003 we have been
converting ten to fifteen branches a month and we plan to have over 200 bank
branches throughout South Africa by July 2004. It is not possible to do retail
banking out of a single branch. Banking has become an example of the network
effect, and Capitec Bank has a national network.
The cost of running Capitec Bank increased by 25%
The infrastructure of a bank is very expensive. Strategically we are supporting
the cost of building a bank with our small loans business. The running cost of a
bank branch is 34% higher than the cost of running the same outlet as a micro
lending branch. In the coming year costs will again rise sharply. Gaining bank
customers will require significant expenditure on marketing.
Do affordable bank products exist?
The mass market is the market for basic, affordable bank products. Our savings
accounts have the lowest cost and pay the highest interest rates in South
Africa. An ATM withdrawal costs only R2, and we pay 10% interest on savings
accounts with a maximum balance of R25 000. Our debit card, which carries the
Maestro mark from MasterCard, gives our customers access to all Saswitch ATMs
and can be used for purchases at all linked shops. At Capitec Bank a debit order
costs only R2. We have few products, but those we have are the best and most
affordable of their kind. We have 18 104 savings customers. Our main aim for the
new year is to change the culture and the ability of the whole organisation to
that of a bank and to have 60 000 bank customers by year end.
Quality customers
Last year we were proud that our arrears were only 2,6%. This year the figure
has been nearly halved. At the end of February 2004 just 1,4% of payments which
should have been made in November were still outstanding. These arrears will be
written off after 180 days, but we believe that our losses due to poor payment
will be less than 1% after legal processes. We think it is remarkable that our
net bad debts (after recoveries) declined by R3 million compared to last year
although our turnover increased by R430 million.
Our real strength: high quality people
We"re building an enthusiastic and loyal workforce. We are creating an action-
oriented, customer-focused culture. We want to be more like a retailer than a
bank. During the year we appointed 545 new employees. Our operational staff
attended an average of 4 training courses per individual during the year. This
is expensive and disruptive because our branches are spread throughout the
country, but it is necessary to enable our people to move from micro lending to
banking.
We manage liquidity cautiously
Since year end we have signed an agreement with Futuregrowth for funding of R50
million for five years, half of which is guaranteed by USAid. In a big bank this
would be a small and routine transaction. For us it was an exciting first. Just
before that, in February, we also received deposits of R35 million. We are
slowly overcoming the legacy of the small bank crisis of two years ago, which
prevented us from obtaining term funding. At year end we had R160 million in
cash. We manage our liquidity cautiously.
Shareholders
Since year-end, about 6% of the shares in Capitec Bank were acquired by Arch
Equity. This investment company is a black controlled company after a
transaction with Desmond Lockey. We welcome Arch Equity and Desmond Lockey as
shareholders.
Board of directors
Michiel le Roux has retired as chief executive officer on 31 March. As a non-
executive director and shareholder he will remain involved in the development of
Capitec Bank. After the prescribed "cooling off" period of three years, we
intend inviting him to become chairman of the bank. Riaan Stassen has been
appointed as the chief executive officer. Nonhlanhla Mjoli-Mncube joined our
board during the year. We appreciate it and welcome her to Capitec Bank.
Modest dividend increase
Last year we warned that our dividend cover would increase. Despite a 48%
increase in profit per share, we are proposing a dividend of 20c per share. This
is 5% higher than last year"s and the dividend cover has improved to 3,4 times
from 2,4 times. In future we hope to deliver steady dividend growth with an
increase in dividend cover over time.
Risks and opportunities
Every year seems to be a critical year for Capitec Bank. We have achieved our
target of becoming a retail bank. In a year"s time we will know our customers"
reaction to our bank offer. We believe that the number of customers and our
business will continue to grow in the coming year.
On behalf of the board
Jannie Mouton Riaan Stassen Michiel le Roux
Chairman Chief executive officer Director
Stellenbosch 31 March 2004
Distribution to shareholders
The directors propose a dividend of 20 cents per share, subject to approval at
the shareholders meeting on 26 May 2004.
To comply with the requirements of STRATE, the following dates are applicable:
Last day to trade cum dividend Friday 4 June 2004
Trading ex dividend commences Monday 7 June 2004
Record date Friday 11 June 2004
Date of payment Monday 14 June 2004
Share certificates may not be dematerialised or rematerialised between Monday 7
June 2004 and Friday 11 June 2004, both days inclusive.
Group income statement
2004 2003
R"000 % R"000
Interest on loans advanced 393 177 22 323 144
Interest on cash and cash equivalents 5 555 71 3 253
Interest expense (3 518) 3 (3 402)
Net interest income 395 214 22 322 995
Net bad debts (28 791) (12) (32 818)
Income from lending activities 366 423 26 290 177
Other operating income 1 392 54
Non-banking gross profit (note 4) 4 057 - -
Turnover 92 206 - -
Cost of sales (88 149) - -
Income from operations 371 872 28 290 231
Operating expenses (300 143) 23 (243 088)
Non-banking operating expenses (note 4) (4 831) - -
Operating profit 66 898 42 47 143
Exceptional items (note 3) (1 993) (56)
Profit before tax 64 905 38 47 087
Tax (19 523) 14 (17 064)
Net profit attributable to ordinary 45 382 51 30 023
shareholders
Earnings per share
2004 2003
R"000 % R"000
Earnings per share (cents)
- Basic attributable 67,7 48 45,6
- Basic headline 70,2 53 46,0
- Diluted attributable (note 6) 63,1 42 44,3
- Diluted headline (note 6) 65,4 46 44,8
Number of shares ("000)
- Issued 68 743 9 63 190
- Weighted average 67 028 2 65 808
- Diluted (note 6) 71 868 6 67 709
Proposed dividend per share (cents) (note 5) 20,0 - 19,0
Reconciliation of attributable earnings to headline earnings
2004 2003
R"000 R"000
Net profit attributable to ordinary shareholders 45 382 30 023
Exceptional items after tax:
- Profit on disposal of foreign subsidiaries
(note 3) (357) (5 333)
- Impairment of goodwill on revaluation of tax
loss - 3 730
- Impairment of goodwill on acquisition (note 3,
4) 1 206 1 171
- Loss on disposal of other assets (note 3) 801 713
Headline earnings 47 032 30 304
Group cash flow statement
2004 2003
R"000 R"000
Cash flow from operating activities 100 400 50 041
Cash generated from operations 85 723 74 236
Increase in loans and advances (15 440) (34 681)
Increase in other liabilities, provisions, loans
and deposits 31 147 34 586
Tax paid (623) (5 101)
Dividends paid (note 5) (407) (18 999)
Cash flow from investment activities (41 528) (22 358)
Net investment in fixed assets (44 142) (31 111)
Disposal of subsidiaries 357 8 252
Decrease in other investing activities 2 257 501
Cash flow from financing activities
Share repurchases (note 6) (3 145) -
Increase in cash and cash equivalents 55 727 27 683
Cash and cash equivalents at beginning of period 104 076 76 393
Cash and cash equivalents at end of period 159 803 104 076
Group statement of changes in equity
2004 2003
R"000 R"000
Ordinary shareholders" funds at beginning of
the period 385 933 391 248
Change in accounting policy (note 2) 345 -
Restated balance at beginning of period 386 278 391 248
Share repurchases (note 6) (3 145) (16 339)
Net income for the period 45 382 30 023
Cash flow hedge (note 2) 45 -
Dividend paid (note 5) (407) (18 999)
Ordinary shareholders" funds at end of the period 428 153 385 933
Group balance sheet
2004 2003
R"000 R"000
Assets
Current assets
Cash and cash equivalents 159 803 104 076
Loans and advances 134 878 115 770
Inventory 9 141 -
Other receivables 11 255 5 663
Non-current assets
Group loans receivable - 4 700
Fixed assets 146 755 135 773
Deferred tax 48 652 68 448
Total assets 510 484 434 430
Liabilities
Current liabilities
Deposits 11 897 18 077
Other liabilities (non-interest bearing) 31 709 21 920
Provisions (non-interest bearing) 1 746 740
Non-current liabilities
Deposits 36 979 7 760
Total liabilities 82 331 48 497
Shareholders" equity
Share capital and premium 323 731 326 878
Retained earnings 103 677 59 055
Reserves 745 -
Total shareholders" equity 428 153 385 933
Total shareholders" equity and liabilities 510 484 434 430
Net asset value per share (cents) 623 611
Tangible net asset value per share (cents) 552 502
Share price (cents) 580 260
Segmental results
Wholesale
distribution
Banking (note 5) Total
R"000 R"000 R"000
2004
Revenues 400 124 92 206 492 330
Headline earnings 48 532 (1 500) 47 032
Assets 499 786 10 698 510 484
2003
Revenues 326 451 - 326 451
Headline earnings 30 304 - 30 304
Assets 434 430 - 434 430
COMMITMENTS
2004 2003
R"000 R"000
Guarantees
- Issued to banking institutions - 4 000
- Other 1 949 3 848
Capital commitments approved by the board
- Contracted for 16 446 12 530
- Not contracted for 39 991 38 632
Operating lease commitments
< 1 year 34 874 26 497
1 to 5 years 50 704 33 220
NOTES
1. Accounting policies
The accounting policies applied in the preparation of these summarised
consolidated financial statements conform to South African Statements of
Generally Accepted Accounting Practice and are consistent with the accounting
policies applied in the prior year, with the exception of the implementation of
AC 133. The balance sheet was analysed between current and non-current assets.
The leave pay provision has been reclassified from provisions to other
liabilities on the balance sheet. The Share Incentive Trust was consolidated
into the results of the group for the year. At the end of 2003 the trust did
not hold any shares in the Group and did not have material assets or liabilities
outside the Group.
The unmodified audit reports from PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 29 February 2004 and the summarised
financial results contained herein are available for inspection at the
registered offices of the company.
2. Effect of AC 133 on results
The effect of implementing AC 133 on the results for the period is limited due
to the short-term nature of the loan book.
Comparative figures are not restated and opening adjustments are accounted for
directly to opening retained earnings in terms of AC 133, which is applied
prospectively. Interest-free intergroup loans with a fixed maturity date were
revalued by R0,4 million at the beginning of the year. The general doubtful debt
provision of R1 million (R0,7 million after tax) was reclassified to statutory
provisioning reserve account, as AC 133 does not allow for any general debtors
provisions.
Profits on forward exchange contracts relating to cash flow hedges of R0,1
million (before tax) have been accounted for directly to equity and relate
mainly to the planned import of equipment and systems development work.
3. Exceptional items
Exceptional items include R0,4 million additional proceeds on the disposal of
subsidiaries, mainly relating to disposal of the Namibian arrears book, after
the company disposed of its Namibian subsidiaries during the previous financial
year. Fixed assets scrapped amounted to R1,1 million before tax and R0,6 million
was impaired against goodwill on the acquisition of Key Distributors, as noted
under 4. A goodwill impairment of R0,6 million relating to the acquisition of
Curerisk last year is also included in exceptional items, as the purchase price
increased in line with the higher collection rates of the acquired arrears book.
4. Acquisition of Key Distributors
The company acquired Key Distributors from PSG Group in the first half of the
financial year. Key Distributors is a wholesale distribution company and is
considered of strategic importance for market penetration in the provision of
loans to small businesses. Key Distributors is currently operating at a loss but
is expected to break even in the foreseeable future. Accordingly the goodwill on
acquisition of Key Distributors was impaired as stated in note 3.
5. Scrip dividend
The scrip dividend option offered in June 2003 was accepted by 97% of
shareholders.
6. Share options
The diluted number of shares and diluted earnings per share are calculated as if
all 7 859 925 outstanding options with an average strike price of 153 cents (8
079 205 in February 2003) were exercised at the average market price for the
period. The share repurchases related mainly to the settlement of options for
the share incentive scheme of R2,1 million, as well as shares held by the trust
and other options settled during the year.
No share options were granted to directors during the period under review.
Company secretary and registered office
Christian George van Schalkwyk
BComm, LLB, CA(SA)
10 Quantum Road
Techno Park
Stellenbosch 7600
(PO Box 12451, Die Boord, Stellenbosch 7613)
www.capitecbank.co.za
Transfer secretaries
Computershare Limited
Registration number: 2000/006082/06
Ground Floor
70 Marshall Street
Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Directors
JF Mouton (Chairman), CJ Borstlap*, AP du Plessis*, MS du P le Roux, Prof MC
Mehl, Ms NS Mjoli-Mncube, CA Otto, JG Solms, R Stassen*, Dr J van Zyl Smit
*Executive
Sponsor
PSG Capital Limited
(Registration number: 2002/017362/06)
Date: 31/03/2004 02:00:14 PM Produced by the JSE SENS Department
