| Wed 22 Sep 2004, 14:06 | | RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004 |
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CAPITEC - INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004 AND SPECIFIC
ISSUES FOR CASH
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
JSE share code: CPI ISIN code: ZAE000035861
Unaudited financial results for the six months ended 31 August 2004 and proposed
specific issues of shares for cash
- Profits up 72% to R29,6 million
- Profit margin of 2,7% on loans
- Number of savings accounts trebled to sixty thousand
- An empowerment deal with Arch Equity
Key financial indicators
Unaudited Audited
Six months ended Year ended
August August February
2004 2003 Change 2004
Rm Rm % Rm
- Earnings 29,6 17,2 72 45,3
- Headline earnings per share (cents) 43,5 27,2 60 70,1
- Dividend per share (cents) - - - 20,0
- Shareholders` funds 434 402 8 428
- Total assets 602 461 31 510
- Market capitalisation 507 272 86 398
- Loans advanced 1 102 915 20 1 904
- Bad debt % 1,3 1,6 (19) 1,4
Our view of the business
The best savings account in the country
The number of savings accounts trebled from 18 104 at the end of February to 60
856. This account pays 10% interest to savers, has the lowest cost of any
savings account and was recently found in a National Treasury and Reserve Bank
study to be the only savings account in the country to give savers a positive
return after costs.
192 bank branches
A further 44 branches were converted to the full bank platform and we now have
192 bank branches throughout South Africa. By the end of Februay 2005 we aim to
increase the number of bank branches by another 50. The number of ATMs was
increased from 75 to 132 and we plan to have 200 ATMs by year-end.
Sales growth and arrears
Loan volume grew by 20% as a result of the success of our new 3-month loan
product. Interest income improved significantly. Arrears management continued to
improve as a result of good administration and immediate follow-up of
outstanding customers. Bad debts (defined as net bad debts as a percentage of
payments due) dropped to a new low of 1,3%. This is the best figure in the
industry.
Remainder of the year
The focus for the remaining six months will be on converting existing loan
customers to full banking customers.
Increase in profits
Results to date exceeded expectations. Profits for the full year will not grow
at the same rate as during the first half of the year because we charge a
reduced interest rate to borrowers who bank with us. Success in converting loan
customers to become full banking customers will therefore inhibit our profit
growth. We expect our full year headline earnings per share to increase by
between 25% and 35% over last year. This forecast has not been reviewed and
reported on by our auditors.
Consumer Credit Bill
A new Consumer Credit Bill has been published. We support the principles of
honesty and transparency contained in the bill and are preparing to comment on
the detail of the proposed legislation. We are, however, concerned about the
proposal that potential price controls in the industry should be perpetuated and
the cost of implementation of the proposed rules. Capitec Bank has been the
leader in reducing the high cost of short-term loans and we will continue to
drive this cost down.
Black empowerment
The directors propose a specific issue for cash of 1 445 582 shares to Arch
Equity at 656,4 cents per share. Arch Equity is a black company that has
acquired 13,85% of our equity in the open market. This issue will increase its
stake in Capitec to a level exceeding 15%, strengthen the black empowerment
credentials of the group and increase compliance with the financial services
charter. The proposed issue price is Capitec`s weighted average share price over
the thirty trading days to 13 August 2004, when agreement in principle was
reached. The board has also invited the chief executive officer of Arch Equity,
Desmond Lockey, to join the board of Capitec. This appointment is subject to
regulatory approval and the proposed share issue is subject to Reserve Bank and
shareholder approval.
We also propose a specific issue for cash of 200 000 shares at 656,4 cents per
share to existing black non-executive directors. This issue is subject to
shareholder approval.
The company has an empowerment share scheme in terms of which employees are
assisted to acquire shares in the company. 124 employees have been helped to
acquire a total of 177 000 shares. This scheme continues.
Issue for cash to management
The directors propose a specific issue for cash of 1 445 582 shares at 761 cents
per share to 19 members of management (which includes two executive directors)
to enable them to increase their stake in the company. We value the commitment
and wish to retain the management expertise of employees who have invested in
Capitec and who are eager to increase their investment. The proposed issue price
is Capitec`s weighted average share price over the thirty trading days to 20
September 2004, when this transaction was formally approved. This proposal will
also be presented to shareholders for approval.
A circular containing details of the proposed specific issues of shares will be
sent to shareholders on 7 October 2004 and a general meeting will be held on 22
October 2004 to approve the proposed specific issues of shares. The transactions
will become effective when shareholder and regulatory approvals are obtained.
On behalf of the board
Jannie Mouton Riaan Stassen
Chairman Chief executive officer
Stellenbosch
22 September 2004
Group balance sheet
Unaudited Audited
August August February
2004 2003 2004
R`000 R`000 R`000
Assets
Current assets
Cash and cash equivalents 193 118 102 760 159 803
Loans and advances 184 209 132 338 134 878
Inventory 7 768 6 891 9 141
Other receivables 4 733 6 235 11 193
Group loans receivable - 2 170 -
Current tax assets - 92 62
Non-current assets
Loans and advances 10 000 - -
Group loans receivable - 665 -
Equipment 167 436 149 096 146 755
Deferred tax 35 073 60 293 48 652
Total assets 602 337 460 540 510 484
Liabilities
Current liabilities
Deposits 33 164 24 902 11 897
Trade and other payables (non-interest
bearing) 37 740 28 927 31 709
Current tax liabilities 29 - -
Provisions (non-interest bearing) 850 1 143 1 746
Non-current liabilities
Deposits 96 354 2 657 36 979
Total liabilities 168 137 57 629 82 331
Shareholders` equity
Share capital and premium 314 003 326 905 323 792
Reserves 728 478 745
Retained earnings 119 469 75 528 103 616
Total shareholders` funds 434 200 402 911 428 153
Total shareholders` funds and 602 337 460 540 510 484
liabilities
Net asset value per share (cents) 634 585 623
Tangible net asset value per share
(cents) 583 498 552
Share price (cents) 740 395 580
Group income statement
Unaudited Audited
Six months ended Year
ended
August August February
2004 2003 Change 2004
R`000 R`000 % R`000
Interest on loans advanced 244 851 184 419 33 393 177
Interest on cash and cash
Equivalents 4 404 3 597 22 5 555
Interest expense (6 157) (2 274) 171 (3 518)
Net interest income 243 098 185 742 31 395 214
Net impairment charge on loans
and advances (15 970) (14 593) 9 (28 791)
Income from lending activities 227 128 171 149 33 366 423
Fees and other income 2 964 236 1156 1 392
Exceptional income - 320 357
Non-banking gross profit 2 158 1 841 17 4 057
Sales 52 557 44 042 19 92 206
Cost of sales (50 399) (42 201) 19 (88 149)
Income from operations 232 250 173 546 34 372 229
Operating expenses (184 547) (145 006) 27 (300 204)
Non-banking expenses (2 595) (2 380) 9 (4 831)
Exceptional expenses (note 2) (196) (1 024) (81) (2 350)
Operating profit 44 912 25 136 79 64 844
Tax (15 326) (7 901) 94 (19 523)
Net profit attributable to
ordinary shareholders (note 3) 29 586 17 235 72 45 321
Earnings per share
Unaudited Audited
Six months ended Year
ended
August August February
2004 2003 Change 2004
R`000 R`000 % R`000
Earnings per share (cents)
- Basic attributable 43,3 26,3 65 67,7
- Basic headline 43,5 27,2 60 70,1
- Diluted attributable (note 3) 40,6 24,5 66 63,1
- Diluted headline (note 3) 40,7 25,3 61 65,4
Number of shares (`000)
- Issued net of treasury shares 68 483 68 837 (1) 68 743
- Weighted average 68 376 65 523 4 67 028
- Diluted (note 3) 72 946 70 283 4 71 868
Proposed dividend per share
(cents) - - - 20,0
Reconciliation of attributable earnings to headline earnings
Unaudited Audited
Six months ended Year ended
August August February
2004 2003 2004
R`000 R`000 R`000
Net profit attributable to ordinary
shareholders 29 586 17 235 45 321
Exceptional items after tax:
- Profit on disposal of foreign
Subsidiaries - (320) (357)
- Impairment of goodwill on acquisition - 600 1 206
- Loss on disposal of fixed assets
(note 2) 137 297 801
Headline earnings (note 3) 29 723 17 812 46 971
Group cash flow statement
Unaudited Audited
Six months ended Year ended
August August February
2004 2003 2004
R`000 R`000 R`000
Cash flow from operating activities 84 695 26 017 100 403
Cash flow from operations 74 906 28 202 85 725
Increase in loans and advances (61 495) (7 471) (15 440)
Increase in other liabilities, 86 673 6 316 31 148
provisions, loans and deposits
Tax paid (1 656) (623) (623)
Dividends paid (13 733) (407) (407)
Cash flow from investment activities (41 591) (27 333) (41 529)
Net investment in equipment (41 591) (27 324) (44 141)
Disposal of subsidiaries - 320 357
(Increase)/decrease in other investing
Activities - (329) 2 255
Cash flow from financing activities
Shares acquired (note 3) (9 789) - (3 147)
Increase/(decrease) in cash and cash
equivalents 33 315 (1 316) 55 727
Cash and cash equivalents at beginning
of period 159 803 104 076 104 076
Cash and cash equivalents at end of
period 193 118 102 760 159 803
Group statement of changes in equity
Unaudited Audited
Six months ended Year ended
August August February
2004 2003 2004
R`000 R`000 R`000
Ordinary shareholders` funds at
beginning of the period 428 153 385 933 385 933
Change in accounting policy - 345 345
Restated balance at beginning of period 428 153 386 278 386 278
Hedges - fair value (losses)/gains net
of tax (17) (222) 45
Net profit for the period 29 586 17 235 45 321
(Share purchases)/Value of employee
option services (note 3) (9 789) 27 (3 084)
Dividend paid (13 733) (407) (407)
Ordinary shareholders` funds at end of
the period 434 200 402 911 428 153
Segmental results
Wholesale
Banking distribution Total
R`000 R`000 R`000
Unaudited
Six months ended August 2004
Revenues 252 219 52 557 304 776
Headline earnings 30 760 (1 037) 29 723
Assets 591 397 10 940 602 337
Unaudited
Six months ended August 2003
Revenues 188 252 44 042 232 294
Headline earnings 18 351 (539) 17 812
Assets 452 615 7 925 460 540
Audited
Year ended February 2004
Revenues 400 124 92 206 492 330
Headline earnings 48 471 (1 500) 46 971
Assets 499 786 10 698 510 484
COMMITMENTS
Unaudited Audited
August August February
2004 2003 2004
R`000 R`000 R`000
Guarantees
- Issued to non-banking institutions 101 1 815 1 949
Capital commitments approved by the
board
- Contracted for 5 785 7 491 16 446
- Not contracted for 56 123 16 550 39 991
Operating lease commitments
< 1 year 36 434 27 351 34 874
1 to 5 years 59 033 31 189 50 704
> 5 years 1 651 - -
NOTES
1. Accounting policies
The interim consolidated financial statements are prepared in accordance with AC
127 - Interim Financial Reporting. The accounting policies applied in the
preparation of these interim consolidated financial statements conform to South
African Statements of Generally Accepted Accounting Practice and are consistent
with the accounting policies applied in the previous year, with the exception of
the implementation of IFRS 2 - share based payments.
The August 2003 results were restated as follows: The leave pay provision has
been reclassified from provisions to other liabilities on the balance sheet. The
general doubtful debt provision of R1,0 million (R0,7 million after tax) was
reclassified to statutory provisioning reserve account, as AC 133 does not allow
for any general debtors provisions.
2. Exceptional items
Exceptional items relate to the scrapping and disposal of fixed assets.
3. Share options
The diluted earnings per share and diluted number of shares are calculated as if
all outstanding options were exercised at the average market price for the
period.
The movement in the number of share options for the period was as follows:
Strike price (cents) 142 159 240 573 Total
Number of shares `000 `000 `000 `000 `000
Opening balance 6 351 756 753 - 7 860
Options issued * - - - 1 760 1 760
Options exercised (1 692) (172) - - (1 864)
Options lapsed (7) (9) - - (16)
Closing balance 4 652 575 753 1 760 7 740
* Issued to executive directors - 500 000
The shares acquired relate to the settlement of options for the share incentive
scheme, as well as treasury shares held by the trust.
The implementation of IFRS 2 - Share based payments reduced the earnings and
headline earnings for the period by R300 000 (R27 000 to August 2003 and R61 000
for the year ended February 2004).
4. Proposed specific issues of shares
The table below sets out the unaudited pro forma financial effects of the
specific issues. The unaudited pro forma financial effects have been prepared
for illustrative purposes only and because of their nature may not give a fair
reflection of the financial position nor the effect on future earnings after the
specific issues.
Before After Change
(cents) (cents) %
Net asset value per share 634,0 637,1 0,5
Net tangible asset value per share 582,8 588,1 0,9
Earnings per share
- Basic attributable 43,3 42,1 (2,8)
- Basic headline 43,5 42,3 (2,8)
- Diluted attributable 40,6 39,6 (2,5)
- Diluted headline 40,7 39,8 (2,2)
Number of shares (`000)
- In issue net of treasury shares 68 483 71 574
- Weighted average 68 376 71 467
- Diluted weighted average 72 946 76 037
Earnings per share is based on the following assumptions:
- the specific issues were effected on 1 March 2004
- a dividend of 20 cents per share was paid on the 3 091 164 shares issued
- STC at a rate of 12,5% was taken into account on the dividends paid
- interest was earned on the net cash at the Group`s marginal return on excess
funding (7,69%)
- a tax rate of 30% was applied
Net asset value per share and the net tangible asset value per share are based
on the following assumptions:
- the specific issues were effected on 31 August 2004
- proceeds of R21 802 479 was received in cash
Company secretary and registered office
Christian George van Schalkwyk
BComm, LLB, CA(SA)
10 Quantum Street
Technopark
Stellenbosch 7600
(PO Box 12451, Die Boord, Stellenbosch, 7613)
www.capitecbank.co.za
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
Registration number: 2004/003647/07
Seventh Floor
70 Marshall Street
Johannesburg 2001
(PO Box 61051, Marshalltown, 2107)
Directors
JF Mouton (Chairman), R Stassen (CEO)*, CJ Borstlap*, AP du Plessis*, MS du P le
Roux, Prof MC Mehl, Ms NS Mjoli-Mncube, CA Otto, JG Solms, Dr J van Zyl Smit
*Executive
Sponsor
PSG Capital Limited
(Registration number: 2002/017362/06)
Date: 22/09/2004 02:01:27 PM Produced by the JSE SENS Department
