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Mercantile - Unaudited Interim Results For The Six Months Ended 30 June 2005
Release Date: 29/07/2005 16:52:00 Code(s): MTL
Mercantile - Unaudited interim results for the six months ended 30 June 2005
MERCANTILE BANK HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1989/000164/06)
(`Mercantile` or `the Group`)
Share code: MTL. ISIN: ZAE000064721
HIGHLIGHTS
* Return to profitability
* Headline earnings per share of 1,1 cents versus comparable period loss per
share of 3,3 cents
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
Summarised Group Balance Sheet
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
ASSETS
Intangible assets 4 473 10 054 6 801
Property and equipment 80 145 83 550 85 028
Investment properties 720 800 770
Taxation 3 626 3 681 3 616
Other accounts receivable 27 680 75 787 33 148
Interest in associated companies 3 236 3 446 3 236
Other investments 2 940 3 439 3 556
Loans and advances 1 126 645 1 068 512 975 611
Derivative financial instruments 5 047 34 237 90 162
Negotiable securities 336 317 202 145 370 279
Cash and cash equivalents 1 381 925 873 684 1 148 861
Total assets 2 972 754 2 359 335 2 721 068
EQUITY AND LIABILITIES
Shareholders` equity 520 201 135 567 500 939
Share capital and share premium 1 208 032 866 607 1 208 642
Capital redemption reserve fund 3 788 3 788 3 788
General reserve 7 478 7 478 7 478
Property revaluation reserve 31 273 28 376 31 273
Available-for-sale reserve (1 573) (1 267) (955)
Share based payments reserve 444 - 123
General risk reserve 6 954 19 588 31 668
Accumulated loss (736 195) (789 003) (781 078)
Liabilities 2 452 553 2 223 768 2 220 129
Long-term liabilities - 3 626 -
Subordinated loan - 60 436 -
Deposits 2 290 844 2 050 143 2 112 569
Derivative financial instruments 95 653 28 938 35 210
Provisions 30 039 31 973 32 768
Other accounts payable 35 973 48 608 39 538
Taxation 44 44 44
Total equity and liabilities 2 972 754 2 359 335 2 721 068
Summarised Group Income Statement
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Interest income 117 331 91 143 192 138
Interest expense (54 142) (52 213) (107 036)
Net interest income before credit
losses 63 189 38 930 85 102
Net recovery of/(charge for) credit
losses 13 319 (5 335) (4 367)
Net interest income after credit
losses 76 508 33 595 80 735
Net profit on disposal of
investments 592 - 1 891
Non-interest income (1) 57 056 46,305 101,410
Net interest and non-interest income 134 156 79,900 184,036
Operating expenditure (1) (114 123) (108,077) (225,041)
Profit/(loss) before associated
companies 20 033 (28 177) (41 005)
Share of income from associated
companies - 495 768
Profit/(loss) before taxation and
exceptional items 20 033 (27 682) (40 237)
Impairments and provisions raised
and
write-off on release of CGD
guarantee - - (172 729)
Recovery of amounts previously
written off
in respect of the release of the
CGD guarantee 23 119 - -
Profit/(loss) before taxation 43 152 (27 682) (212 966)
Taxation (31) - (50)
Attributable profit/(loss) after
taxation 43 121 (27 682) (213 016)
Reconciliation between attributable
profit/(loss)
after taxation and headline
profit/(loss)
Attributable profit/(loss) after
taxation 43 121 (27 682) (213 016)
Adjustment for:
Realisation of available-for-sale
reserve on disposal of investments (614) - (60)
Profit/(loss) on disposal of
property
and equipment 51 (202) (680)
Headline profit/(loss) 42 558 (27 884) (213 756)
Group Contingent Liabilities and Commitments
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Guarantees and letters of credit 234 740 122 845 138 470
Irrevocable unutilised facilities 211 171 191 882 232 597
Conditional buy-back obligations 18 480 76 694 42 685
Operating lease commitments: 13 211 17 051 10 619
Due within one year 4 357 6 849 5 191
Due between one and five years 8 854 10 202 5 428
Total contingent liabilities and
commitments 477 602 408 472 424 371
Financial Statistics
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Number of ordinary shares in
issue:
- end of period (`000) 3 938 919 855 585 3 938 919
- weighted average (`000) 3 938 919 855 585 1 832 817
- weighted average - diluted
(`000) 3 939 280 855 585 1 832 825
Profit/(loss) per ordinary share
(cents) 1,1 (3,2) (11,6)
Headline profit/(loss) per
ordinary
share (cents) 1,1 (3,3) (11,7)
Diluted profit/(loss) per
ordinary share (cents) 1,1 (3,2) (11,6)
Diluted headline profit/(loss)
per ordinary
share (cents) 1,1 (3,3) (11,7)
Net asset value per ordinary
share (cents) 13,2 15,8 12,7
Summarised Group Cash Flow Statement
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Net cash inflow/(outflow) from
operating
activities 41 112 (26 951) (9 134)
Net cash inflow from operating
funds 193 000 272 703 46 964
Net cash outflow from investing
activities (1 048) (5 070) (6 774)
Net cash inflow from financing
activities - 58 072 542 875
Net cash inflow for the period 233 064 298 754 573 931
Cash and cash equivalents at
beginning
of period 1 148 861 574 930 574 930
Cash and cash equivalents at
end of period 1 381 925 873 684 1 148 861
Summarised Group Statement of Changes in Equity
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Balance at beginning of period 500 939 163 899 163 899
Transitional adjustments on
adoption of IFRS
Creation of credit risk
impairments (22 952) - -
Movements in reserves (8 524) (12 148) 3 263
Revaluation of owner-occupied
property - - 2 897
Net transfer (from)/to general
risk reserve (8 227) (11 623) 456
Share option expense 321 - 123
Net transfer to
available-for-sale reserve (618) (525) (213)
Movements in accumulated loss 51 348 (15 926) (8 000)
Profit/(loss) after taxation 43 121 (27 682) (213 016)
Net transfer from/(to) general
risk reserve 8 227 11 623 (456)
Transfer on subdivision of shares - - 205 340
Accumulated loss on consolidation
of share
incentive trust - 133 132
Movements in share capital and
premium (610) (258) 341 777
Issue of shares - - 555 000
Share issue expense - - (6 382)
Transfer to distributable reserve
on subdivision of shares - - (205 340)
Treasury shares on consolidation
of share incentive trust (610) (258) (1 501)
Balance at end of period 520 201 135 567 500 939
IFRS Reconciliation
Opening Closing Closing
Balance Balance Balance
1 January 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Changes in shareholders` equity
Balance as previously reported 500 939 135 473 500 939
Effect on reported results 65 94 65
- Depreciation on property and
equipment 188 94 188
- Share option expense (123) - (123)
Transitional adjustment
- Creation of credit risk
impairments (22 952) - -
Movement in reserves
- Decrease in property revaluation
reserve (188) - (188)
- Creation of share based payments
reserve 123 - 123
Restated shareholders` equity 477 987 135 567 500 939
Property and equipment
Balance as previously reported 85 028 83 456 85 028
Effect on reported results
- Depreciation on property and
equipment - 94 -
Restated property and equipment 85 028 83 550 85 028
Loans and advances
Balance as previously reported 975 611 1 068 512 975 611
Transitional adjustment
- Creation of credit risk
impairments (22 952) - -
Restated loans and advances 952 659 1 068 512 975 611
Summarised Group Segmental Information
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Unaudited Unaudited Unaudited
Restated Restated
Segment revenue: (2)
Retail banking 66 843 55 951 116 342
Treasury 13 417 10 630 27 759
Alliance banking, MBL credit card
and structured loans 19 773 21 274 41 790
Other services (3) 20 804 (2,125) 3,280
120 837 85,730 189,171
Profit/(loss) after tax: (2)
Retail banking (4) 38 399 28 329 61 941
Treasury (4) 2 335 131 (29 439)
Alliance banking, MBL credit card
and structured loans (4) 8 074 14 927 23 529
Other services (3) (5 687) (71 069) (269 235)
43 121 (27 682) (213 204)
(1) The foreign exchange and insurance broker commissions earned were
previously disclosed net of commissions paid. The commissions paid are now
disclosed separately as part of operating expenditure.
(June 2004: R2,6 million, December 2004: R5,3 million)
(2) The segmental results have been restated for the six months ended 30 June
2004 to reflect the current management structure of segments and thereby
reflect the information on a comparable basis.
(3) `Other services` includes support divisions, collections, specialised asset
finance, insurance brokers, inter-group eliminations, return on surplus capital
and IFRS adjustments.
(4) Excludes the allocation of attributable support costs.
Financial overview
The Group has achieved its primary objective of returning to profitability
during the first six months of the 2005 financial year with a headline profit
of R42,558 million.
The results achieved are largely attributable to:
an increase in funds profit generated by the recapitalisation in terms of the
rights offer, which was completed in September 2004 as well as interest
recovered on certain legacy debt
non-interest income growth of 23%, mainly in the areas of transactional
banking and foreign exchange services
cost containment in operating expenses - costs for the comparable six months
ended 30 June 2004 benefited from a write back in suspense account provisions
of R5,4m. Excluding this item, costs for the six months ended 30 June 2005,
increased by 0.6%
continued recovery of impaired and written off legacy debt
exceptional recoveries of R23,1 million being amounts impaired/written off in
2004 with the release of the CGD guarantees
growth in performing loans and advances of 28% year on year, and an ongoing
reduction in legacy debt through improved collection processes in place.
Accounting policies
The results for the six months ended 30 June 2005 have been prepared in
accordance with the International Financial Reporting Standards (IFRS), which
were adopted with effect from 1 January 2005. Certain accounting policies are
therefore not consistent with those applied in the annual financial statements
for the year ended 31 December 2004. The comparative results for the six months
ended 30 June 2004 and the year ended 31 December 2004 have been restated in
terms of the adoption of IFRS in these interim financial reporting statements.
The results have not been reviewed or reported on by the Group`s auditors.
Directorate
Shareholders are notified that Sharoda Rapeti has been appointed as a
Non-Executive Director of Mercantile with immediate effect.
There were no other changes to the Board of Directors during the period under
review.
Going concern
The financial statements have been prepared on the going concern basis.
Outlook
Whilst the level of recoveries achieved on legacy debt is not expected to be
repeated in the second half of the year, an ongoing write back of impairments
is anticipated. Expenditure on systems of approximately R8m is to be incurred
over the remaining six months, largely aimed at enhancing our Alliance banking
ser vice offering in order to generate increased fee income in future years.
Economic conditions remain favourable for the banking sector and the
improvement in the Group`s core performance is expected to continue.
J A S de Andrade Campos D J Brown
Chairman Chief Executive Officer
Sandton
29 July 2005
Directors: J A S de Andrade Campos* (Chairman),
D J Brown (Chief Executive Officer), G P de Kock, M J M Figueira* (Executive),
L Hyne, A M Osman**, A T Ikalafeng, K B Motshabi
Group Secretary: F Vicente Coelho* *Portuguese **Mozambican
Registered Office: Mercantile Bank
142 West Street
Sandown, 2196
Share Code: MTL.
ISIN: ZAE000064721
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd
8th Floor
70 Marshall Street
Johannesburg, 2001
Sponsor: Bridge Capital Services (Pty) Ltd,
1st Floor, Building 22A
The Woodlands, Woodlands Drive
Woodmead
Sandton, 2196
Sponsor
BRIDGE CAPITAL
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