| Wed 29 Mar 2006, 14:09 | | Capitec Bank Holdings Limited - Extracts From The |
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CPI
CPI
Capitec Bank Holdings Limited - Extracts From The Audited Financial Statements
For The Year Ended 28 February 2006
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
JSE share code: CPI ISIN code: ZAE000035861
EXTRACTS FROM THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
28 FEBRUARY 2006
- Headline earnings per share up 64%
- Proposed dividend per share up 50%
- ROE - 23%
- Number of savings accounts - 375 000
- Total bank branches - 253
- Moody"s investment grade rating - Baa1.za / Prime-2.za
February February Change February
2006 2005 % 2004
OPERATIONS
Number of branches 253 251 1 265
Number of employees 1 901 1 708 11 1 402
Number of ATMs 210 180 17 75
SALES
Loans
Value of loans advanced Rm 2 863 2 259 27 1 904
Number of loans advanced "000 2 650 2 486 7 2 617
Average loan amount R 1 080 909 19 728
Interest from loans
advanced Rm 768 534 44 393
Net loan impairment
expense Rm 96 39 146 29
Net impairment % of
repayments % 2.85 1.45 97 1.43
Deposits
Number of savings clients "000 375 143 162 18
Value of savings deposits Rm 314 74 324 4
Net fee income Rm 15 4 275 -
PROFITABILITY
Attributable earnings Rm 115 67 71 45
Headline earnings Rm 116 70 67 47
Total expenditure Rm 506 392 29 307
Cost to income ratio -
banking activities % 66 73 (10) 76
Return on equity % 23 16 44 12
Earnings per share
Attributable Cents 163 98 67 67
Headline Cents 165 101 64 70
Diluted attributable Cents 155 92 69 63
Diluted headline Cents 156 95 65 65
Proposed dividend per share Cents 45 30 50 20
ASSETS
Total assets Rm 1 251 805 55 512
Net loans and advances Rm 455 208 119 135
Cash and cash equivalents Rm 582 363 60 160
Capital expenditure Rm 72 84 (14) 44
LIABILITIES
Total liabilities Rm 687 332 107 86
Deposits Rm 595 281 112 49
EQUITY
Shareholders" funds Rm 564 473 19 426
Capital adequacy ratio % 56 84 (33) 98
Net asset value per share Cents 784 672 17 619
Share price at 28 February Cents 3 105 1 490 108 580
Market capitalisation at
28 February Rm 2 233 1 072 108 399
Number of share options
outstanding "000 5 841 6 753 (14) 7 860
Average share option
strike price Cents 648 271 139 153
Average share option time
to maturity Months 28 25 12 22
Charge on settlement of
share options Rm 31 16 94 2
Number of shares
At year end "000 71 928 70 442 2 68 743
Weighted average "000 70 555 68 860 2 67 028
Diluted weighted average "000 74 534 73 536 1 71 868
INSTANT GRATIFICATION
At Capitec Bank we believe a client comes to a bank to solve problems, not to
create paperwork. A client never leaves Capitec Bank with unfinished business.
When a client walks into a branch with her identity document and proof of
address, she walks out with an open and active account and with her new Global
One Gold Card in her pocket. If she is also shopping for a loan and has her
payslip and other documents available, the loan is approved (or declined), paid
into her new account and is immediately accessible. There is no waiting period
and she is not required to wait for the decision of a credit committee.
A client never fills in a form to open an account or to apply for a loan, or
even to make a deposit. Capturing information is our job. We do it from the
original documents and thereby minimise mistakes.
This is instant gratification on a scale unachievable even by a private bank.
FOCUS ON TECHNOLOGY
How do we achieve this? We focus relentlessly on basic banking products. The
best efforts of our top team go into designing products that satisfy the exact
needs of our clients. An example: the first thing most of our clients do when
they visit an ATM is to make a balance enquiry. Most of our competitors charge
R2 per enquiry. At our ATMs, the client"s balance appears on the screen
automatically, and it costs nothing.
Every service provided to a client must produce immediate results. For instance:
we capture a photograph of every client on the system and this photograph
appears on the screen with the account details whenever a consultant serves that
client. When a dormant account is reactivated, a new photograph is taken. The
business support centre in Bellville compares the old photograph with the new
one and authorises access to the account immediately. At Capitec this is
automatically assumed to be a real-time process.
As a result of this approach there is no administrative back room at a Capitec
Bank branch. There are no transactions to reconcile or to follow up: everything
is done once only. Incidentally, there is no branch manager"s office either,
because the branch manager works as a consultant and acts as the team leader.
THREE HUNDRED THOUSAND BANK CLIENTS
We have more than doubled the number of savings clients during the year to 374
700.The total value of retail deposits has increased fourfold to R314 million.
We expect continued growth. To be a serious player in the market for basic
banking, we aim for two million clients, so we still have a long way to go.
The growth in client numbers has not been as a result of growth in the number of
branches. At year end we had only two more branches than a year ago, but we are
in the process of adding 50 new branches.
We make our profit on our loan products. Five years ago we started with small,
one month loans. We have now added loans with a fixed term of up to twelve
months. The value of all loans made during the year increased by 27% to R2,9
billion. The value of one month loans has declined slightly and all our growth
has been derived from the three, six and twelve month loans. Because of the
longer average term of our loans, our net loan book has increased from R208
million a year ago to R455 million.
PROFIT
We earned R115 million for the year. Our return on equity increased to 23% from
16% last year, which is pleasing. Our profit increased by 71% and for the third
consecutive year our attributable earnings increased by 50% or more. Bear in
mind, however, that we came off a low base of R30 million three years ago and
that conditions are currently very favourable.
We are still building an organisation, so we invested heavily in training and
systems. We spent R18 million on training during the past year, an unheard of
10% of our salary bill. Our total expenditure increased by 29%. This trend will
continue in the new year, when sales and marketing expenses will grow
significantly. Our model requires efficiency, but is not cheap and we are
building to serve large numbers of clients. Even so, our cost as a percentage of
income declined to 66% (from 73%).
DIVIDEND
The directors propose a 50% increase in dividend to 45c per share, subject to
shareholders" approval at the AGM on Wednesday, 24 May 2006 at Spier, Lynedoch
Road, Stellenbosch. Last year the dividend was 30c per share. As a growing
company we need to conserve our capital for further growth, but at the same time
we wish our shareholders to share in the company"s success. With a dividend
cover of 3,7 times we think we are achieving the right balance between these two
goals. This cover has increased slightly from last year.
The following dates apply:
Last day to trade cum dividend - Friday 2 June 2006
Trading ex dividend commences - Monday 5 June 2006
Record date - Friday 9 June 2006
Date of payment - Monday 12 June 2006
Share certificates may not be dematerialised or rematerialised between Monday, 5
June 2006 and Friday, 9 June 2006, both days inclusive.
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 balances up to R10 000. We are the only bank that offers the small
investor more interest than the big investor. Our international gold card, which
carries the Maestro mark from MasterCard, gives our clients access to all South
African ATMs and can be used for purchases and cash withdrawals at all major
retail groups in South Africa. We don"t offer foreign currency or cheque
accounts, although our cards operate internationally and we accept cheques as
deposits. At Capitec Bank a debit order costs only R2. We have few products, but
those we have are the best and cheapest of their kind.
THE SCOURGE OF A BANK: BAD DEBTS
We have extensive experience of short-term loans. When we make a one or three
month loan, we make a provision for the expected loss over the term of that
loan: 1,2% for one month and 2,6% for three month loans. This rate is adjusted
from time to time to accurately reflect our actual experience. All arrears are
provided for and all short-term debt older than 90 days is written off.
Managing the six and twelve month loans is more complicated. We track the
repayment history of each type of loan separately for each month and provide for
expected write-offs. If the actual payment performance of a particular loan
category for a given month deviates from the expected performance, we
immediately increase (or, in the case of good news, decrease) the provisions for
that loan category. These products are less than a year old and our expected
repayment rates are based on industry norms, adjusted for our initial
experience. The biggest number of defaults occurs in the early stages of a
longer term loan, so the provision against our term loans is large. We expect
the payment performance of term loans to improve as we gain more experience in
managing them.
NATIONAL INVESTMENT GRADE RATING
The bank has been assigned Baa1.za/Prime-2.za national scale issuer ratings by
Moody"s Investors Service.
ANOTHER GOOD YEAR AHEAD?
The National Credit Act was passed by parliament during the year. The act
regulates the consumer lending industry, requires registration of lenders and
proposes sensible ways of protecting borrowers, such as transparency of terms.
It also empowers the minister of trade and industry to issue regulations
limiting lending rates. We support the principles of act, but are opposed to
price caps in a competitive market. We have been a leader in reducing the high
rates charged to borrowers. The solution to high rates is a reduction in the
high cost of making small loans, which we achieve through technology and
increased throughput. We are in discussion with the department to try and ensure
that the new regulations are realistic and not utopian. We expect the new act
and regulations not to be implemented immediately. They will therefore probably
have a modest impact on the new financial year, but will obviously be crucial
for the future of the bank.
In the new financial year we will be launching a campaign to double the number
of clients who deposit their salaries with us. A mobile sales force has been set
up to visit employers and enrol clients at their place of employment. We are
also planning to add about 50 new outlets. As always, we remain careful in
planning and aggressive in execution.
We believe that we are creating a business model with international potential.
After five years our foundations in South Africa are well established and we
have started looking at the potential in other countries.
We budget for an increase in headline earnings per share of 20%. This budget has
not been reviewed or reported on by our auditors. Our bank is going through a
continuous revolution and, as with all revolutions, real risks remain.
On behalf of the board
Jannie Mouton
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
29 March 2006
GROUP BALANCE SHEET
Audited Audited
February February
2006 2005
R"000 R"000
ASSETS
Current assets
Cash and cash equivalents 582 293 362 873
Investments at fair value 7 149 16 842
Loans and advances 443 504 197 483
Inventory 11 800 8 635
Other receivables 7 077 8 020
Non-current assets
Loans and advances 11 157 10 414
Equipment 133 956 114 381
Intangible assets - banking system 47 688 62 032
Deferred tax 6 648 24 534
Total assets 1 251 272 805 214
LIABILITIES
Current liabilities
Deposits at amortised cost 337 067 84 001
Deposits held at fair value 2 149 2 185
Trade and other payables (non-interest
bearing) 63 696 45 700
Current tax liabilities 22 493 38
Provisions (non-interest bearing) 300 1 000
Non-current liabilities
Lease escalation accrual 5 971 4 363
Deposits at amortised cost 200 827 138 411
Deposits held at fair value 54 953 56 098
Total liabilities 687 456 331 796
SHAREHOLDERS" EQUITY
Share capital and premium 347 865 330 341
Reserves 710 700
Retained earnings 215 241 142 377
Total shareholders" funds 563 816 473 418
Total shareholders" funds and liabilities 1 251 272 805 214
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2006 2005
R"000 R"000
Interest on loans advanced 767 624 533 905
Interest on cash and cash equivalents 16 278 10 077
Interest expense (40 079) (16 890)
Net interest income 743 823 527 092
Net impairment charge on loans and
advances (95 625) (39 249)
Income from lending activities 648 198 487 843
Net fee income 14 942 4 423
Fee income 44 314 11 338
Fee expense (29 372) (6 915)
Dividend income 1 015 75
Net movement in financial instruments
held at fair value 1 430 (6 001)
Other income 4 6
Non-banking gross profit 6 563 4 464
Non-banking sales 131 368 118 039
Non-banking cost of sales (124 805) (113 575)
Income from operations 672 152 490 810
Banking operating expenses (500 074) (386 589)
Non-banking expenses (5 965) (5 172)
Operating profit 166 113 99 049
Tax (50 832) (31 670)
Net profit attributable to ordinary
shareholders 115 281 67 379
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
Ended Ended
February February
2006 2005
R"000 R"000
Net profit attributable to ordinary
shareholders 115 281 67 379
Exceptional items after tax:
- Loss on disposal of fixed
assets 1 111 2 132
Headline earnings 116 392 69 511
GROUP CASH FLOW STATEMENT
Audited Audited
Year Year
Ended Ended
February February
2006 2005
R"000 R"000
Cash flow from operating activities 294 042 315 354
Cash flow from operations 291 614 165 910
Increase in loans and advances (308 745) (74 934)
Increase in other liabilities,
provisions, and deposits 335 050 239 747
Tax paid (2 560) (1 639)
Dividend paid (21 317) (13 730)
Cash flow from investment activities (61 523) (100 666)
Net investment in equipment (71 502) (83 921)
Decrease / (Increase) in other investing
activities 9 979 (16 745)
Cash flow from financing activities (13 099) (11 618)
Shares issued - 21 450
Shares acquired and options settled (13 099) (33 068)
Increase in cash and cash equivalents 219 420 203 070
Cash and cash equivalents at beginning
of period 362 873 159 803
Cash and cash equivalents at end of
period 582 293 362 873
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
ended ended
February February
2006 2005
R"000 R"000
Ordinary shareholders" funds at
beginning of period 473 418 428 171
Change in accounting policy (note 2) - (2 507)
Restated balance at beginning of period 473 418 425 664
Hedges - fair value (losses) / gains net
of tax - (45)
Net profit for the period 115 281 67 379
Shares issued - 21 450
Loss on settlement of share options net
of share based staff costs (29 021) (14 598)
Tax on settlement of share options 7 931 4 700
Loss on odd-lot offer - (415)
Shares utilized / (purchases) 17 524 (16 987)
Dividend paid (21 317) (13 730)
Ordinary shareholders" funds at end of
period 563 816 473 418
SEGMENTAL RESULTS
Wholesale
Banking Distribution Total
R"000 R"000 R"000
Audited
Year ended February 2006
Revenues 829 235 131 368 960 603
Headline earnings 116 860 (468) 116 392
Assets 1 237 114 14 158 1 251 272
Audited
Year ended February 2005
Revenues 555 401 118 039 673 440
Headline earnings 71 466 (1 955) 69 511
Assets 793 272 11 942 805 214
COMMITMENTS
Audited Audited
February February
2006 2005
R"000 R"000
Guarantees
- Non-banking institutions 10 206 1 976
Capital commitments approved by the
board
- Contracted for 3 927 2 514
- Not contracted for 79 985 81 261
Operating lease commitments
< 1 year 47 378 41 174
1 to 5 years 118 850 69 344
> 5 years 4 203 6 104
NOTES
1. IMPLEMENTATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The group implemented IFRS during the year under review, the effective date of
transition being 1 March 2004. In preparing these summarised audited
consolidated financial statements in accordance with IFRS 1 (First Time Adoption
of IFRS), the group has applied the mandatory exceptions and elected the
exemption relating to business combinations (IFRS 3). The group early-adopted
the standard on share based payments (IFRS 2) for the year ended 28 February
2005, resulting in no additional IFRS 2 adjustments with the adoption of IFRS 1.
The conversion to IFRS did not result in any material adjustments to profit and
loss or equity and no additional disclosure as stated in IFRS 1 and IAS 34 on
first time adoption is required. The accounting policies applied conform to
IFRS.
The unmodified audit reports from PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 28 February 2006 and the summarised
audited consolidated financial statements contained herein are available for
inspection at the registered offices of the company.
2. ACCOUNTING FOR OPERATING LEASES
The group changed from accounting for operating leases on the contractual basis
to the straight-line basis during the period as required in the SAICA Circular
7/2005 released in July 2005. The impact on results for the period (mainly on
property rentals) and the restated prior periods were as follows:
Reduction Increase Reduction Increase
in net in in in lease
profit deferred retained escalation
after tax tax asset income accrual
R"000 R"000 R"000 R"000
Year to February 2006 1 185 1 732 4 239 5 971
Year to February 2005 547 1 309 3 054 4 363
Prior to February 2004 2 507 1 075 2 507 3 582
www.capitecbank.co.za
REGISTERED OFFICE
10 Quantum Road, Techno Park, Stellenbosch 7600, PO Box 12451, Die Boord,
Stellenbosch 7613
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited (Registration number:
2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001, PO Box 61051, Marshalltown
2107
COMPANY SECRETARY
Christian George van Schalkwyk, BComm, LLB, CA(SA)
DIRECTORS
JF Mouton (Chairman), R Stassen (CEO)*, AP du Plessis (CFO)*, MS du P le Roux, D
Lockey, 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)
ANNUAL GENERAL MEETING
Wednesday, 24 May 2006 at 12:00, The Spier Conference Centre, Spier, Lynedoch
Road, Stellenbosch, 7600
Date: 29/03/2006 02:09:49 PM Produced by the JSE SENS Department
