| Mon 17 May 2004, 8:54 | | INTERIM FINANCIAL RESULTS |
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AFRICAN BANK INVESTMENTS LIMITED - INTERIM FINANCIAL RESULTS
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
(Share code: ABL)(ISIN code: ZAE000030060)
(`ABIL`)
Interim financial results for the 6 months ended 31 March 2004
Features
- Headline earnings per share of 69,2 cents (2003: 67,6 cents)
- Headline earnings of R326,9 million (2003: R331,6 million)Return on equity
of 27,4% (2003: 25,9%) and return on assets of 10,5% (2003: 10,3%)
- Interim dividend increased to 35 cents from 25 cents
- Free cash reserves of R723 million
- Increased sales and improved margins lift total revenues
- Credit performance and market conditions remain positive
- Cost reduction initiatives proving successful with further benefits
expected in second half
- Profit before tax up 16% from R522 million to R607 million
- R60 million in secondary tax on companies (STC) on special dividend
increases total tax charge from 37% to 47%
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 credit solutions to small, medium and micro enterprises (SMMEs). ABIL`s
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
The last six months has been a period of consistent and steady delivery on the
drivers of the business that are key to the group achieving its targeted and
sustained return on equity for shareholders. Headline earnings per share were
69,2 cents compared to 67,6 cents for the prior period. Return on equity
improved from 25,9% to 27,4%. Both these performance indicators were affected by
the expensing of a R60 million secondary tax on companies (STC) charge on the
special dividend paid in December 2003. The major drivers of these results were:
* Margins - The total yield on advances improved from 50,7% to 59,5%. This was
due to a further change in the mix of the portfolio towards retail debit order
loans as well as the low yielding pay down books continuing to decline. Margins
were enhanced by significant contributions from Credit Indemnity and Miners
Credit Guarantee. Total revenue increased 5% from R1 450 million to R1 517
million.
* Sales - Turnover increased by 34% over the prior period, leading to an 18%
increase in the lending books. This was offset by a 38% reduction in the
pay down books. While gross advances have been on a steady decline over the
last few reporting periods, the current period since September 2003 saw
gross interest-bearing advances (the economic base of the business)
increase by 5%. ABIL is confident that this is the turning point in the
asset growth cycle.
* Bad debts - The charge for bad debts was R238 million compared to R219
million for the prior period and reflects a stable state after the
volatility of the last few years. The credit environment is positive and
the rate of new NPLs emerging has accordingly fallen. Provision coverage
has been maintained at 74,4%.
* Operating costs - Expenditure fell by 6% from R543 million to R508 million
over the period. While the cost-to-income ratio improved from 37,4% to
33,5%, the cost-to-advances ratio increased from 19,0% to 19,9%. The group
is committed to bringing this ratio down to the 17% level over the next 12
months and a number of cost efficiency projects are under way. The main
benefit of these, coupled with emerging asset growth trends will be visible
during the second half of the year.
* Net financing costs - The average cost of funds fell from 14,3% to 13,0%
due to a favourable interest rate environment and the successful issuance
of the R1 billion ABL2 bond. This was partially offset by low returns on
surplus cash invested in the inter-bank market, and lower cash balances due
to the payment of the special dividend.
The above drivers combined to produce a 16% increase in profit before tax from
R522 million to R607 million.
* Taxation - The total taxation charge increased from 36,7% to 46,8% due
mainly to the additional STC charge on the special dividend. The taxation
charge for the second half is expected to revert to normal levels. The
impact of the additional STC charge was 12,5 cents per share.
Segmental earnings
6 months 6 months
% ended ended
R000 change 31 March 2004 31 March 2003
African Bank Retail 3 307 103 298 678
and Collections
Specialised Lending 77 115 580 65 392
Discontinued (15) (16 196) (14 132)
businesses
Group and 73 (1 158) (4 288)
consolidation
STC (457) (78 391) (14 075)
Total headline (1) 326 938 331 575
earnings
African Bank Retail and Collections produced solid results with headline
earnings of R307 million (2003: R299 million) as the profits made in the prior
year from the acquired Saambou PLB were more than offset by growth in organic
earnings generated on the lending books.
Specialised Lending produced significantly higher results with headline earnings
increasing by 77% for the period. This was mainly attributed to Credit Indemnity
which is benefiting from strong growth in its sales and increased term on new
products and a higher contribution from Miners Credit Guarantee. Miners Credit
Guarantee has been divisionalised into African Bank as African Bank Miners
Credit.
The discontinued businesses comprise: Gilt Edged Management Services, African
Contractor Finance and Quatro, all of which are being wound down after their
respective models failed to reach critical mass or acceptable returns. The
impact of these closures should be substantially out of the system by the year-
end.
CAPITAL AND DIVIDENDS
The ABIL board has declared an interim dividend of 35 cents per share. The group
has previously indicated that it will maintain a dividend cover of between 2,0
and 2,5 times. Given the outlook for the remainder of the year and the excess
capital being generated, this dividend is covered 2 times by earnings.
LOOKING AHEAD
ABIL is on track to achieve its objectives of a 30% return on equity and a 10%
return on assets for the full year to 30 September 2004. In order to achieve
this, the group anticipates certain trends in its key business drivers. Growth
in lending books from increased sales are expected to continue to outpace the
reduction in the pay down books, overall margins will moderately increase, bad
debts remain steady, and operating costs will further benefit from efficiency
strategies being implemented.
Over the longer-term, the sustainability of the targeted returns on equity will
be achieved through the following key strategic initiatives currently being
implemented:
* the smooth implementation of improved scorecards and further operating cost
efficiencies, in order to better differentiate pricing to our customers,
improve client retention and position the group for increased competition;
* development of new credit products and markets within our core competence
and under the leadership of dedicated units;
* enhanced collection processes and innovation in rehabilitation methods for
clients in financial distress;
* continued progress in the employment equity objectives at executive and
senior management levels and BEE shareholder participation; and
* continued focus on optimal capital levels.
ADVANCES, SALES AND CLIENTS
There are a number of contrasting trends within the ABIL advances portfolio and
accordingly, the gross advances continue to be classified into two main
portfolios:
* Lending books - These comprise the main lending activities of African Bank
Retail (up 13% year on year) and the books of the continuing businesses
within the Specialised Lending Division (up 42% year on year). In African
Bank Retail the debit order products and the Standard Bank JV continued to
grow strongly. The switch of focus to retail debit order products away from
payroll-based products continued. Increased sales and new longer-term
product offerings have resulted in a 40% increase in Credit Indemnity`s
book. Miners Credit Guarantee experienced robust sales growth with the
introduction of new products while the extension of the taxi
recapitalisation programme implementation date to September 2010 triggered
an upsurge in demand for taxi finance in African Bank Commercial Vehicle
Finance. Overall the lending books grew by 18% year on year.
* Pay down books - These comprise the 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 continued
to decline in the first six months of 2004 at expected rates. Quatro, the
franchise business lending to spaza shops, was reclassified under the pay
down books earlier in the year, after a decision was taken to close down
the business as it has failed to reach critical mass.
Gross interest-bearing advances decreased from R5 646 million in March 2003 to
R4 899 million in September 2003 as the overall book declined, and have since
grown to R5 136 million. The improvement was due to higher sales offsetting both
the rate of reduction in the pay down books, and the writing off of non-
performing loans on which interest had been suspended.
Gross advances for the period have remained steady compared to the previous six
months to 30 September 2003, however the composition of the advances continues
to shift towards higher margin business away from lower margin pay down advances
resulting in an overall lift in margins.
Gross Advances Portfolio Mix plotting points
Lending Books Pay down books
March 03 57 43
September 03 66 34
March 04 72 28
Sales for the six months to 31 March 2004 increased by 34% to R2 197 million,
compared to R1 644 million for the equivalent period last year. However, the
growth dynamics differed substantially between the different businesses in the
group.
In African Bank Retail, the number of loans increased by 32% and the average
size of loans by only 2%, as the sales strategy over the last year has been
primarily focused on new customer acquisition through new products and channels.
Recent changes to the underwriting model are expected to reveal slowly
increasing loan sizes as terms are extended and greater product differentiation
is introduced, particularly to repeat clients.
In Specialised Lending, growth was achieved primarily from increases in loans
size (38%), rather than in number of loans (-4%), as both Credit Indemnity and
Miners Credit Guarantee were successful in launching new longer-term products,
mainly to the better performing repeat customers.
Sales History plotting points
(R million)
African Bank Retail Specialised Lending
137 97
172 105
176 107
168 105
182 118
160 99
165 94
166 113
178 100
186 112
210 122
214 125
239 136
244 137
233 141
255 154
216 122
202 113
227 143
PORTFOLIO UNDERWRITING MARGIN
As anticipated, the overall yield on the advances book (being interest,
insurance and fees), increased in the past six months to 59,5%, compared to
55,4% in September 2003 and 50,7% in March 2003. The improvement was
predominantly achieved through higher sales and changes in the mix of products
in the portfolio and not through increased pricing. The change in yield is
explained by the following dynamics in the portfolio:
* Within African Bank Retail`s lending books, the higher yielding retail
debit order products currently contribute some 90% of monthly sales, which
has increased the retail vs. payroll mix from 51% in March 2003 to 68% of
the portfolio as at March 2004.
* The Specialised Lending division, which operates at higher yields has grown
strongly in the last year (up 42%), and has increased its percentage of the
total lending portfolio from 17% in March 2003 to 20% in March 2004.
* The pay down books, which have significantly lower yields continued to fall
from 43% of the overall portfolio to 28%.
* Insurance income has increased in line with sales growth in African Bank
Retail. Other non-interest income declined by R35,2 million (20%) compared
to the six months to 31 March 2003. Included in this decline was R17,3
million fee income relating to Theta Specialised Finance and Munnick,
Basson Dagama, which were sold in the second half of 2003, and R13,4
million relating to Standard Bank JV cost recoveries which were previously
included in other income and with effect from the second half of 2003 have
been set off against operating costs.
The group is investing a significant amount of time on the development of models
to provide better price differentiation to its clients. As the first stage of
the project, at African Bank Retail, it began introducing more differentiation
in the pricing of retail loans based on risk profiles in November 2003. The
retail loan pricing widened the interest rate differential by a further 9% to
27% per annum between the highest and lowest rates charged. Of retail loans
granted since then, 34% of the loan volume has been at a reduced rate, 30% of
the volume has remained at constant rates, and the remaining 36% of volume
increased to a higher interest rate, based on relative risk. The second stage of
the project comprises a new suite of scoring models, incorporating behavioural,
operational and individual risk information, and a new set of re-priced products
which will be available in the third quarter of 2004.
Credit Indemnity has already implemented these strategies over the past 12
months and the benefits of improved price targeting have been felt through a
substantial increase in sales without an unacceptable increase in risk.
While margins are expected to level off over the next 12 months as a result of
these changes, the group anticipates that it will be compensated for through
increased sales and from better priced products to its clients.
CHARGE FOR BAD AND DOUBTFUL ADVANCES
The charge for bad and doubtful advances, while remaining fairly flat in rand
terms, increased as a percentage of advances from 7,7% (March 2003) to 8,8%
(Sept 2003) to 9,3% in March 2004. This increase was the result of two trends:
* the lending books in Specialised Lending have become a more significant
portion of the total book. These books generally have higher bad debt
charges as a percentage of advances than the African Bank Retail business,
albeit they operate at higher margins;
* the proportion of the African Bank Retail book on which provisions are
raised has increased steadily whereas the Saambou PLB book which was
acquired with provisions (and on which little new provisions were raised),
declined.
The charge for bad and doubtful advances as percentage of margin has remained
steady at 19,3%.
Loans previously written off which subsequently become fully performing through
successful collections campaigns are reincorporated into the portfolio as
required by AC133. The net effect of the reinstatement in this period after any
provisions were raised was to increase net advances and reduce the bad debt
charge by R34,7 million.
NON-PERFORMING LOANS AND PROVISIONS
NPLs continued to fall steadily and decreased by R206 million from R2 625
million in September 2003 to R2 419 million in March 2004.
The decrease in NPLs and resultant decline in provisions was due to:
* a positive credit environment, which resulted in lower new non-performing
loans;
* write-offs against provisions of R434 million in the first six months of
2004; and
* increased cash collections.
The aggregated NPLs of 38,6% tend to obscure the underlying trends in the
portfolios. Splitting the NPLs into the ongoing lending books and the pay down
and/or discontinued businesses provides a clearer indication of the expected
steady state level of NPLs once the pay down books and the effects of the credit
bubble have dissipated. The NPLs as a percentage of advances in the lending
books of African Bank Retail were 27,4% (Sept 2003: 28,9%) and Specialised
Lending 12,8% (Sept 2003: 14,6%), declining in line with the trends indicated in
the vintage charts over recent reporting periods in which credit quality has
been improving consistently, and increasing advances.
By contrast, the pay down/discontinued business portfolios have NPLs as a
percentage of advances of 74,1% (Sept 2003: 70,6%) as the performing loans in
these portfolios decrease, leaving mainly collection portfolios. These
portfolios will continue to decline through a combination of collections and
write-offs over the course of the next year. The Standard Bank JV has no NPLs as
the credit policy is to write off NPLs immediately and to record the collections
thereafter on a cash recovery basis. The policy is presently being reviewed. The
difference in the relative level of NPLs in the African Bank Retail and
Specialised Lending books is mainly a function of the average term of loans.
Provisions reduced by R161 million from R1 961 million or 31,1% to R1 800
million or 28,7% of gross advances, in line with the reduction in NPLs.
Provision coverage of NPLs remained steady at 74,4% compared to 74,7% at
September 2003. Provision coverage increased in the discontinued businesses as
the portfolios fell to residual collections books and coverage in Specialised
Lending is higher due to strong growth in performing loans and the resultant
increase in the minimum portfolio provisions required on these books.
Other insurance coverage continued to reduce as the Saambou PLB loans matured
and the credit life cover on these loans lapsed.
VINTAGES plotting points
(More than two instalments missed)
Non-performing capital as % of original principal debt
Months on book
j03 f03 m03 a03 m03 j03 j03 a03 s03 o03 n03 d03
m3 0.01 0.00 0.04 0.08 0.11 0.03 0.04 0.02 0.06 0.05 0.00 0.16
m4 0.98 0.73 1.09 1.03 0.84 0.81 1.07 0.93 0.82 1.06 1.55
m5 2.26 1.9 2.48 1.9 1.87 2.31 2.44 2.35 2.26 2.74
m6 3.85 3.35 3.47 3.21 3.33 3.59 4.38 4.06 3.88
m7 5.25 4.33 4.81 4.71 4.67 5.38 5.86 5.73
m8 5.87 5.39 5.97 5.65 6.18 6.75 7.17
m9 6.83 6.52 6.75 6.71 7.42 7.83
m10 7.7 7.21 7.69 7.65 8.4
m11 8.23 8.23 8.61 8.46
m12 9.09 8.99 9.47
m13 9.47 9.61
m14 9.83
ABIL has focused for this reporting period on the vintage for sales written over
the last 15 months, which have missed more than two instalments (two+ month
vintage), in order to depict the recent credit trends in finer detail. The
two+month vintage is an earlier and thus more conservative indicator of risk,
due to the fact that only 60% to 70% of these loans tend to progress into NPL
status. As reflected in the chart, the initiatives introduced by African Bank
Retail to prudently open up risk are beginning to have an effect, given that the
higher sales and thus income more than compensates for the increase in risk
levels.
COLLECTIONS
Collection efforts during the six months continued to benefit through steadily
improving cash collection rates in all environments as collection processes
mature. Based on an analysis of the NPLs in African Bank Retail as at 30
September 2003 of R2 625,3 million, cumulative cash received on these loans in
the six months to 31 March 2004 amounted to R162,3 million or an annualised 14%
of the balance outstanding, slightly higher than the 13% for the 2003 financial
year. This rate of cash collections (adjusted to present values), implies an
average 30 months to collect the residual value of these NPLs.
The average collection rate on the Saambou PLB to 31 March 2004 was 66,5%, with
the latest monthly collection rate at 58,3%, still running ahead of original
projections of 55%. Group-wide recoveries of bad debts written off previously,
for the first six months, were steady at R36 million.
The division aims to establish a client rehabilitation centre to assist
distressed clients with over-indebtedness in the second half of the year and to
improve collections through the coordination and alignment of collection
activities on individual clients with multiple loans in the group.
CAPITAL ADEQUACY
ABIL operates in an environment which requires higher levels than the minimum
level of capital of 10% to risk weighted assets, as set by the Banks Act.
Capital is required to ensure that there is a sufficient risk cushion to protect
the balance sheet from shocks as
well as to provide a sufficient level of credit enhancement for the raising of
debt at competitive rates.
The capital adequacy for ABIL as at 31 March 2004 was 36,8% (September 2003:
44,5%).
ABIL has developed a methodology that is applied to its different asset classes
to obtain an optimal level of capital to be maintained. The model indicates that
the present optimal capital ratio is 29,9%, relative to the actual capital
adequacy of 36,8%, generating excess capital of R450 million. The group is
committed to bringing the capital ratio down towards the optimal level over the
medium term. The special dividend of 100 cents a share paid in December 2003 and
the steady reduction in the dividend cover on ordinary dividends, were the first
steps in the process.
ABIL continues to build up capital at a rate greater than can prudently be
utilised for organic growth. The opportunity to utilise excess capital for
acquisitions also remains limited at present. The capital adequacy and the
potential for a further reduction in capital will again be reviewed at year-end.
The transition from the current levels to the target range will be managed to
ensure smooth progress towards the target, with careful consideration of the
impact on funding and credit rating stability.
CREDIT RATING
CA-Ratings affirmed its domestic long-term rating for African Bank of zaA-
(indicating a `strong` ability to meet long-term obligations) and its short-term
rating to zaA1 (indicating a `very strong` ability to meet short-term
obligations) in May 2004.
CASH RESERVES
In addition to the R498 million in statutory and prudential cash reserves
(liquid and insurance prudential investments), the group has built up available
cash reserves of R723 million as at 31 March 2004, after paying the special
dividend, again underlining the strong cash generative capability of the group.
CREDIT LAW REVIEW
As we have previously reported, the regulatory framework governing credit
providers in South Africa is undergoing a fundamental review and this is
encompassed under the credit law review process. ABIL is actively engaging in
this process and is positive that once complete, a more robust and certain
regulatory framework will emerge which balances sustainable returns with real
consumer protection.
ABIL is strongly supportive of the drive by the Department of Trade and Industry
to revamp consumer credit legislation and establish a new rationalised and
uniform dispensation for a unified credit market. The Department is currently
reviewing the relevant acts, its shortcomings and international experience of
different credit policies, amongst others. The review is primarily focused on
the Usury Act, Credit Agreements Act, and the 1999 Exemption Notice under the
Usury Act.
Good progress has been made with the review process. The Department is committed
to follow an open and transparent process and has thus far published several
research documents on its website for comment by market participants. The
publications indicate a balanced view towards the credit industry. It is
anticipated that this process will take up to twelve months to complete.
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.
DECLARATION OF DIVIDEND
On 14 May 2004, the board of directors proposed and approved an interim dividend
No 7 of 35 cents per ordinary share.
Salient dates for dividend payments:
Last day to trade cum-dividend Friday, 4 June 2004
Shares commence trading ex-dividend Monday, 7 June 2004
Record date Friday, 11 June 2004
Dividend payment date Monday, 14 June 2004
Share certificates may not be dematerialised or rematerialised between Monday, 7
June 2004 and Friday, 11 June 2004.
On behalf of the board
Ashley Mabogoane, Chairman
Gordon Schachat, Executive Deputy Chairman
Leon Kirkinis, Chief Executive Officer
17 May 2004
Board of directors
AS Mabogoane (Chairman), G Schachat (Deputy Chairman)*, L Kirkinis (CEO)*, JA de
Ridder*, A Fourie*, DB Gibbon, BD Goba, AG Herselman*, JJ Kekane, SA Levitt, MLD
Marole*, R Naidoo, BJT Shongwe, TM Sokutu*, BPF Steele, GZ Steffens (German),
DFG Tembe (Mozambique), A Tugendhaft, DF Woollam* *Executive
Group Secretary: S Martin
Group income statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 March % 31 March 30 September
R000 2004 change 2003 2003
Revenue
Interest income on 1 230 651 7 1 151 969 2 295 519
advances
Net assurance income 141 316 20 117 904 246 804
Non-interest income 144 814 (20) 180 037 323 407
Total revenue 1 516 781 5 1 449 910 2 865 730
Charge for bad and (237 547) 8 (219 032) (444 935)
doubtful advances
Risk adjusted revenue 1 279 234 4 1 230 878 2 420 795
Other interest income 46 498 (25) 61 923 143 131
Interest expense (211 838) (8) (229 232) (463 685)
Operating costs (507 761) (6) (542 513) (1 036 241)
Net income from 606 133 16 521 056 1 064 000
operations
Share of associate 542 14 476 1 529
companies` income
Net income before 606 675 16 521 532 1 065 529
taxation
Indirect taxation: VAT (107 887) 190 (37 139) (84 947)
and STC
Taxation (175 854) 14 (154 514) (314 071)
Net income after 322 934 (2) 329 879 666 511
taxation
Minority interest 959 (121) (4 572) (6 609)
Net income attributable 323 893 0 325 307 659 902
to ordinary
shareholders
Headline earnings and
earnings per share
Net income attributable 323 893 0 325 307 659 902
to ordinary
shareholders
Adjustments:
Net goodwill amortised 3 607 6 557 17 691
Other capital items (562) (289) 2 466
Headline earnings 326 938 (1) 331 575 680 059
Weighted number of 472 240* 490 342 484 398*
shares in issue (000)
Fully diluted number of 491 946 493 296 486 816
shares in issue (000)
Headline earnings per 69,2 2 67,6 140,4
share (cents)
Basic earnings per 68,6 3 66,3 136,2
share (cents)
Fully diluted headline 66,5 (1) 67,2 139,7
earnings per share
(cents)
Declared dividends per
share (cents)
Interim 35 40 25 25
Final 31
Total ordinary 35 25 56
dividends
Special dividend - - 100
Total dividends 35 25 156
20 million shares were repurchased in May 2003 and subsequently cancelled.
Group balance sheet
Unaudited Unaudited Audited
31 March % 31 March 30 September
R000 2004 change 2003 2003
Assets
Fixed assets 162 126 (17) 194 171 193 719
Investments in 9 635 14 8 466 9 324
associates
Policyholders` 53 879 14 47 068 53 682
investments
Goodwill 17 187 103 8 448 20 463
Deferred tax asset 64 650 6 60 808 58 812
Net advances 4 506 689 (1) 4 560 254 4 399 746
Gross advances 6 271 706 (6) 6 662 472 6 314 097
Provisions (1 765 017) (16) (2 102 218) (1 914 351)
Other assets 110 948 (44) 196 502 109 735
Taxation 6 853 45 4 728 4 625
Statutory assets - bank 498 167 1 494 983 479 474
and insurance (Note 1)
Short-term deposits and 722 851 (11) 808 116 1 148 562
cash
Total assets 6 152 985 (4) 6 383 544 6 478 142
Liabilities and equity
Life fund reserve 84 408 7 79 112 80 326
Structured loans and 2 489 994 9 2 284 842 2 251 180
debentures
Liabilities to 694 274 (2) 711 510 884 485
depositors
Other liabilities 143 325 (40) 237 432 173 094
Deferred tax liability 10 576 >100 840 10 576
Taxation 149 085 5 142 222 95 335
Bank overdraft 2 379 (35) 3 641 150
Total liabilities 3 574 041 3 3 459 599 3 495 146
Ordinary shareholders` 2 383 951 (11) 2 680 418 2 788 751
funds
Outside shareholders` 3 582 (94) 55 366 4 541
funds
Secondary capital 191 411 2 188 161 189 704
Total equity 2 578 944 (12) 2 923 945 2 982 996
Total liabilities and 6 152 985 (4) 6 383 544 6 478 142
equity
Note 1: Insurance prudential cash reserves of R240 million have been
reclassified into statutory assets from short term deposits and cash in March
2003 to facilitate comparison with September 2003 and March 2004 numbers.
Cash flow statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 March 31 March 30 September
R000 2004 2003 2003
Cash generated from 935 228 806 213 1 666 944
operations
(Increase)/decrease in (391 122) 82 455 (22 467)
gross advances
Increase in working (30 982) (502 533) (473 769)
capital
Normal and indirect (238 057) (262 404) (504 427)
taxation paid
Shareholder payments (728 693) (84 381) (303 402)
and transactions
Cash (outflow)/inflow (52 232) 151 465 (11 661)
from investing
activities
Cash inflow from 50 310 38 193 179 049
financing activities
(Decrease)/increase in (455 548) 229 008 530 267
cash and cash
equivalents
Cash and cash 1 345 881 815 614 815 614
equivalents at the
beginning of the year
Cash and cash 890 333 1 044 622 1 345 881
equivalents at the end
of the period
Cash and cash
equivalents
Short-term deposits and 722 851 808 116 1 148 562
cash
Bank overdraft (2 379) (3 641) (150)
Statutory cash reserves 169 861 240 147 197 469
- Insurance
Total 890 333 1 044 622 1 345 881
Statement of changes in equity
Share Distributable Treasury
R000 capital reserves shares Total
Balance at 30 12 429 2 489 604 (68 511) 2 433 522
September 2002
Dividends paid (88 177) (88 177)
ABIL share trust 14 188 14 188
transactions (cost)*
Loss incurred on ABIL (4 422) (4 422)
share trust
Net income for the six 325 307 325 307
months
Balance at 31 March 12 429 2 726 734 (58 745) 2 680 418
2003
Dividends paid (117 889) (117 889)
ABIL share trust 23 661 23 661
transactions (cost)*
Loss incurred on ABIL (7 370) (7 370)
share trust
Treasury shares (124 664) (124 664)
acquired by subsidiary
Net income for the six 334 595 334 595
months
Balance at 30 12 429 2 943 440 (167 118) 2 788 751
September 2003
Dividends paid (623 589) (623 589)
Cancellation of (500) (124 164) 124 664 0
treasury shares
CGT on cancellation of (13 860) (13 860)
treasury shares
ABIL share trust (55 357) (55 357)
transactions (cost)*
Loss incurred on ABIL (35 887) (35 887)
share trust
Net income for the six 323 893 323 893
months
Balance at 31 March 11 929 2 505 720 (133 698) 2 383 951
2004
Shares purchased into the ABIL employee share trust less shares issued to
employees.
Advances analysis
% yoy March %
R000 growth 2004 growth
Lending books 18 4 493 827 9
African Bank Retail 13 3 594 552 6
Payroll - corporates and (26) 1 152 490 (21)
other
Retail debit order 49 2 212 968 26
Standard Bank joint 76 229 094 39
venture
Specialised Lending 42 899 275 19
Credit Indemnity 40 375 856 19
Miners Credit Guarantee 27 356 457 11
Commercial Vehicle 66 140 577 23
Finance
ABCommerce n/a 26 385 n/a
Pay down books (38) 1 777 879 (18)
African Bank Retail (39) 1 558 810 (19)
Persal (39) 355 206 (22)
Saambou PLB (39) 1 203 604 (18)
Specialised Lending (25) 219 069 (11)
Gilt Edged Management (33) 116 315 (14)
Services
African Contractor (14) 101 182 (8)
Finance
Quatro 10 1 572 2
Gross advances (6) 6 271 706 (1)
Less: Non-interest- 12 (1 135 361) (20)
bearing advances
Gross interest-bearing (9) 5 136 345 5
advances
Advances analysis
September % March
R000 2003 growth 2003
Lending books 4 136 191 8 3 813 175
African Bank Retail 3 381 307 6 3 180 622
Payroll - corporates and 1 454 763 (7) 1 567 449
other
Retail debit order 1 761 261 19 1 483 336
Standard Bank joint 165 283 27 129 837
venture
Specialised Lending 754 884 19 632 553
Credit Indemnity 315 641 18 267 553
Miners Credit Guarantee 319 836 14 280 207
Commercial Vehicle 114 399 35 84 793
Finance
ABCommerce 5 008 n/a 0
Pay down books 2 177 906 (24) 2 849 297
African Bank Retail 1 930 597 (24) 2 556 304
Persal 457 543 (21) 580 078
Saambou PLB 1 473 054 (25) 1 976 226
Specialised Lending 247 309 (16) 292 993
Gilt Edged Management 135 220 (22) 173 664
Services
African Contractor 110 546 (6) 117 906
Finance
Quatro 1 543 8 1 423
Gross advances 6 314 097 (5) 6 662 472
Less: Non-interest- (1 415 300) 39 (1 016 000)
bearing advances
Gross interest-bearing 4 898 797 (13) 5 646 472
advances
Advances and provisions analysis
Gross
advances NPLs
% of
gross
R million R million advances
Lending books 4 494 1 101 24,5
African Bank Retail 3 595 986 27,4
Payroll - corporates and 1 152 405 35,1
other
Retail debit order 2 213 581 26,3
Standard Bank joint 229 0 0,0
venture
Specialised Lending 899 115 12,8
Credit Indemnity 376 68 18,1
Miners Credit Guarantee 356 46 13,0
Commercial Vehicle 141 1 0,6
Finance
ABCommerce 26 0 0,0
Pay down books 1 778 1 318 74,1
African Bank Retail 1 559 1 135 72,8
Persal 355 252 70,8
Saambou PLB 1 204 883 73,4
Discontinued businesses 219 183 83,6
(GEMS, ACFC, Quatro)
Total 6 272 2 419 38,6
Advances and provisions analysis
Provision
Total provisions coverage
% of
gross
R million advances %
Lending books 856 19,1 77,7
African Bank Retail 738 20,5 74,8
Payroll - corporates and 299 26,0 73,9
other
Retail debit order 422 19,0 72,6
Standard Bank joint 17 7,4 n/a
venture
Specialised Lending 118 13,1 102,6
Credit Indemnity 66 17,5 96,7
Miners Credit Guarantee 43 12,0 92,6
Commercial Vehicle 9 6,5 >100
Finance
ABCommerce 0 1,0 n/a
Pay down books 944 53,1 71,6
African Bank Retail 789 50,6 69,5
Persal 173 48,7 68,8
Saambou PLB 616 51,2 69,8
Discontinued businesses 154 70,4 84,2
(GEMS, ACFC, Quatro)
Total 1 800 28,7 74,4
Asset quality analysis
31 March % 30 % 31 March
September
R million 2004 change 2003 change 2003
Advances
Performing 3 852 4 3 689 (5) 3 882
Non-performing 2 419 (8) 2 625 (6) 2 780
Total 6 272 (1) 6 314 (5) 6 662
Provisions and reserves
Portfolio provisions 34 12 30 (32) 45
Specific provisions 1 630 (9) 1 793 (8) 1 957
Stangen credit life 102 91 101
reserves
Total provisions 1 765 1 914 2 102
Other insurance coverage 35 47 88
Total provisions and 1 800 (8) 1 961 (10) 2 190
reserves
Ratios
NPLs as a % of total 38,6% 41,6% 41,7%
advances
Total provisions as % of
NPLs
(NPL cover) 74,4% 74,7% 78,8%
Total provisions and 28,7% 31,1% 32,9%
reserves as % of total
advances
I/S charge for bad debt 9,3% 8,8% 7,7%
as % of average gross
advances
Bad debt write-offs as % 13,7% 14,2% 12,2%
of average gross
advances
Bad debt recoveries as a 8,2% 10,8% 6,1%
% of write-offs
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)
Registered office Share transfer secretaries
59 16th Road, Midrand, 1685 Ultra Registrars (Pty) Limited
Private Bag X170, Midrand, 1685 11 Diagonal Street, Johannesburg, 2001
Telephone +27 11 256 9000 PO Box 4844, Johannesburg, 2000
Fax+27 11 256 9304 Telephone +27 11 834 2266
africanbank@ultrareg.co.za
This announcement, together with a financial presentation, is available on the
African Bank Investments Limited website at: http://www.africanbank.co.za
Return on equity plotting points
%
Target Return on equity
y01 31.6
y02 23.2
h1-03 25.9
h2-03 25.8
h2-03 27.4
Return on assets plotting points
%
Target Return on assets
y01 13.9
y02 8.9
h1-03 10.3
h2-03 10.8
h2-03 10.5
Dividends per share plotting points
Dividends per share Special dividends per share
p1-01 10
p2-01 15
p1-02 12
p2-02 18
p1-03 25
