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ABL ABLP
ABL
African Bank Investments Limited - Unaudited Interim Results For The Six Months
Ended 31 March 2006
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)
(Preference share code: ABLP) (ISIN: ZAE000065215)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
Features
* Headline earnings of R498 million (H1 2005: R412 million) or 100,3 cents (H1
2005: 87,5 cents) per share.
* Return on equity of 49,1% (H1 2005: 33,7%) and return on assets of 12,7% (H1
2005: 11,3%).
* Interim ordinary dividend declared of 80 cents (H1 2005: 52 cents).
* Sales grew 26% to R3,2 billion, resulting in a 25% increase in the lending
books to R6,4 billion.
* Price reduction strategies have driven higher volumes, resulting in total
revenue growing by 17%.
* Bad debt charge increased by 18% to R301 million (H1 2005: R255 million), in
line with revenue growth.
* Non-performing loans steady at R1,8 billion.
* Operating costs increased by R95 million to R578 million (H1 2005: R483
million), including an R88 million charge for IFRS 2: Share-based payments.
Overview
A continued high level of consumer confidence in the market, coupled with a
positive response from clients to the group"s new pricing models and sales
initiatives rolled out over the last year, created favourable conditions for the
group to deliver its operating performance over the interim period. Headline
earnings increased by 21% to R498 million (H1 2005: R412 million), while the
dilution effect of the group"s BEE programme resulted in headline earnings per
share increasing by 15% to 100,3 cents per share (H1 2005: 87,5 cents).
Dividends per share of 80 cents have been declared, up 54% on the 52 cents for
H1 2005. Return on assets was 12,7% (H1 2005: 11,3%) and return on equity 49,1%
(H1 2005: 33,7%), aided by increased capital gearing from 3,0 to 3,9 times. The
group generated economic profit of
R348 million, a 48% increase over the prior period.
ABIL communicated its intention to move towards a growth and innovation
orientation during 2005. It initiated and implemented various growth strategies
during the course of the previous financial year, which included the
repositioning of the group"s distribution footprint, the integration and
streamlining of different businesses within the group to reduce costs, and the
rollout of an entire new pricing suite in August 2005. The latter was designed
to more accurately price our products by risk segment, reducing price cross-
subsidisation and thereby bringing down the cost of credit for lower risk
clients. The results of the new pricing strategies have started to reflect
during the current reporting period.
Operational performance
The major drivers of the results for the six months to 31 March 2006 were:
* SALES - Turnover increased to R3,2 billion (H1 2005: R2,5 billion), growing
the lending books by R1,3 billion.
* YIELDS - The overall yield on advances at 54,8%, while higher than the 52,2%
in March 2005, has started reducing from the 57,0% for the six months to
September 2005 as a result of the rollout of the lower-priced products. The
group"s anticipated sales volume increase as a result of the price reductions
has been exceeded and this has given further impetus to the group to continue to
drive down the price of its products.
* BAD DEBTS - The charge for bad debt increased by R46 million to R301 million
or 8,7% of advances (H1 2005: 8,3%) on the back of the gradual opening up of
risk and a larger advances book. NPL coverage was 69,6%, up from September 2005
(68,0%) due to IFRS changes to impairment provisions. Write-offs of R279 million
were significantly lower than the R694 million for H1 2005.
* OPERATING COSTS - Expenditure increased by 20% to R578 million (H1 2005: R483
million). This included an R88 million charge under IFRS 2 for staff incentive
schemes. The remaining expenditure base of R490 million was largely flat on a
comparable basis.
The above drivers combined to produce a 19% increase in net income from
operations from R705 million to R836 million.
* SALE OF COMMERCIAL VEHICLE FINANCE DIVISION (CVF) - A R45 million profit less
a R7 million charge for capital gains tax was realised from the previously
announced sale of the CVF division.
* TAXATION - The all-in tax rate was lower at 39,2% (H1 2005: 41,6%). In
addition to the standard corporate tax rate of 29%, the group paid R65 million
in STC on dividends (H1 2005: R66 million) and R28 million in indirect taxes (H1
2005: R25 million).
Looking ahead
Over the last few reporting periods, the group has been preparing for an
increasingly regulated and competitive industry. The group remains committed to
its vision of unlocking access to credit through risk innovation while driving
down the cost of credit for its clients. There are three major thrusts to
achieve the group"s growth strategy:
* To increase the customer base by both attracting new clients to the group and
improving the retention of existing clients.
* Improving the distribution footprint, product design and functionality, in
order to provide better client service and utility of our products.
* Further refining the segmental pricing model, as well as driving down overall
prices in order to make the business more competitive and increase the demand
for and affordability of unsecured credit.
The group will be focusing on the following for the remainder of the 2006
financial year:
* To continue to test the relationship between price, volume and risk inherent
in our business model. Using the risk-based pricing model, the group believes
that it can responsibly grow credit extension by implementing appropriate
changes in pricing and measuring the rate at which incremental volume (and
therefore cost absorption) benefits exceed incremental risk increases. In
addition, the continued reduction in price cross-subsidisation should further
entrench the group"s market leadership.
* Innovating new products, notably the credit card initiative.
* Being ready to adopt the National Credit Act ahead of its implementation, in
order to minimise business and client disruption.
Due to the strong sales environment, the group has increased its targeted sales
growth range for 2006 from the 15% - 20% previously stated range, to 18% - 22%.
In addition, the targeted lending book growth of 10% - 15% has been increased to
18% - 22%.
ABIL is confident that it will achieve its stated financial objectives for the
2006 financial year, but more importantly, will use the high return on equity
the group is currently achieving to strengthen the competitive position and
growth prospects of the group for subsequent financial periods through further
risk discovery and price reductions on its products.
Regulation
The National Credit Act was promulgated and the draft regulations published for
public comment early in 2006. The effective date of implementation for the act
has not been published yet. Latest indications are that the administrative
provisions of the act, such as the appointment of a regulator and a tribunal and
registration of credit providers and counsellors may become effective in June
and September 2006, and that substantive provisions such as price caps may
become effective from June 2007.
Changes to board of directors
ABIL announced on 16 February 2006 that the following directors resigned from
the board: Bhekisisa Shongwe, Steven Levitt, Jacob Kekane, Angus Herselman,
Johan de Ridder and Dawn Marole. Their resignations were as a result of
directors reaching term limits and a restructuring of the board to optimal size.
The roles of the executives involved remain unchanged. The changes took effect
from the annual general meeting on 25 April 2006. ABIL wishes to thank all these
directors for their time, effort and dedication in support of the group.
Dividend declaration
Preference dividend declaration
On 12 May 2006, the board of directors proposed and approved dividend No 3 of
361 cents per preference share. The dividend was calculated using the following
parameters:
Average prime rate for the period 10,50%
Coupon rate as percentage of prime 69%
Number of days 150
Salient dates for dividend payments
Last day to trade cum dividend Friday, 2 June 2006
Shares commence trading ex-dividend Monday, 5 June 2006
Record date Friday, 9 June 2006
Dividend payment date 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.
Interim dividend declaration
On 12 May 2006, the board of directors proposed and approved an interim dividend
No 11 of 80 cents per ordinary share.
Salient dates for dividend payments
Last day to trade cum dividend Thursday, 8 June 2006
Shares commence trading ex-dividend Friday, 9 June 2006
Record date Thursday, 15 June 2006
Dividend payment date Monday, 19 June 2006
Share certificates may not be dematerialised or rematerialised between Friday, 9
June 2006 and Thursday, 15 June 2006, both days inclusive.
On behalf of the board
Ashley Mabogoane Gordon Schachat Leon Kirkinis
Chairman Executive Deputy Chairman Chief Executive Officer
15 May 2006
Accounting policies
These results have for the first time been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the
International Accounting Standards Board (IASB) and interpretations issued by
IFRIC. The transition from South African GAAP to IFRS was implemented in
accordance with IFRS 1, and comparatives have been restated where appropriate.
The material impacts of the changes to IFRS on the previously stated accounting
policies of ABIL are as follows:
(1) Share-based payments. The group has adopted IFRS 2 in these results and the
effect is a charge to the income statement for the cost of equity-settled and
cash-settled equity instruments granted to employees under the group"s long-term
incentives plans.
(2) Income recognition. The group has implemented IAS 18 in these results and
the effect of the change is to defer the whole of the administration fees
charged on the origination of loans and to recognise the fee using the effective
rate method, ie as an interest rate over the life of the loan.
(3) Impairment provisions. The group has implemented the revised IAS 39 in these
results, which necessitates a higher provision for impaired loans, as the
discount rate used to present value future expected cash flows is now based on
the original effective rate and ignores the expected credit spread priced into
the loans.
IFRS effect on previously published results
The net effect to date of the implementation of IFRS on previously reported
numbers has been as follows:
Reconciliation of changes in attributable income
Attributable earnings
For the For the
12 months to 6 months to
30 Sep 31 Mar
R million 2005 2005
As previously reported 941 424
Adjustments for:
Reversal of 2005 LTIP accrual - SA GAAP 36
Change for options - IFRS 2 (35) (12)
Change for cash-settled equity incentive
instrument - IFRS 2 1
As reported under IFRS 943 412
Note: The above adjustments are shown on an after-tax basis.
Reconciliation of changes to net asset value
Ordinary shares
Share Treasury
capital shares and
and Retained IFRS 2 share
R million premium income reserve trust Total
Balance at 1 October
2004 as previously
reported 11 2 684 0 (55) 2 640
Charge for options -
IFRS 2 (14) 14 0
Balance at 1 October
2004 as reported
under IFRS 11 2 670 14 (55) 2 640
Balance at 31 March
2005
as previously reported 11 2 541 0 (178) 2 374
Charge for options -
IFRS 2 (26) 26 0
Balance at 31 March
2005
as reported under IFRS 11 2 515 26 (178) 2 374
Balance at 30 September
2005 as previously
reported 12 2 264 0 (65) 2 211
Reversal of 2005 LTIP
accrual - SA GAAP 36 36
Charge for options -
IFRS 2 (49) 49 0
Charge for cash-settled
equity instruments -
IFRS 2 1 (126) (125)
Balance at 30 September
2005 as reported
under IFRS 12 2 252 (77) (65) 2 122
Prospective adjustments
- 1 October 2005
Revenue recognition -
IAS 18 (57) (57)
Credit impairments -
IAS 39 (58) (58)
Balance at 1 October
2005 as reported
under IFRS 12 2 137 (77) (65) 2 007
Group income statement
for the six months ended 31 March 2006
IFRS IFRS
Unaudited restated restated
6 months 6 months 12 months
to to to
31 Mar % 31 Mar 30 Sep
R million 2006 change 2005 2005
Revenue
Interest income on advances 1 526 15 1 324 2 752
Net assurance income 166 (4) 173 357
Non-interest income 198 69 117 274
Total revenue 1 890 17 1 614 3 383
Charge for bad and doubtful
advances (301) (18) (255) (488)
Risk-adjusted revenue 1 589 17 1 359 2 895
Other interest income 52 (40) 87 156
Interest expense (227) 12 (258) (492)
Operating costs (578) (20) (483) (951)
Net income from operations 836 19 705 1 608
Profit on sale of Commercial
Vehicle
Finance division 45 0 0
Share of associate company"s
income 0 0 1
Net income before taxation 881 25 705 1 609
Indirect taxation: VAT and RSC (28) (12) (25) (50)
Direct taxation: STC (65) 2 (66) (140)
Direct taxation: SA normal (252) (25) (202) (476)
Net income after taxation 536 30 412 943
Minority interest 0 0 0
Attributable earnings 536 30 412 943
Reconciliation of headline
earnings and per share
statistics
Attributable earnings 536 30 412 943
Adjusted for:
Goodwill impaired 0 0 14
Profit on sale of Commercial
Vehicle Finance division
(net of tax) (38) 0 0
Other capital items 0 0 (1)
Headline earnings 498 21 412 956
Number of shares in issue (net
of treasury) (million) 496,8 466,7 495,1
Weighted number of shares in
issue (million) 496,5 470,7 470,6
Fully diluted number of shares
in issue (million) 497,1 496,5 472,4
Headline earnings per share
(cents) 100,3 15 87,5 203,2
Fully diluted headline earnings
per share (cents) 100,2 21 83,0 202,4
Attributable earnings per share
(cents) 107,9 23 87,5 200,4
Fully diluted attributable
earnings per share (cents) 107,8 30 83,0 199,6
Declared dividends per ordinary
share
Ordinary dividends per share
(cents)
Interim - declared (cents) 80 54 52 52
Final (cents) 0 0 70
Total ordinary dividends 80 52 122
(cents)
Special (cents) 0 70 100
Total ordinary and special
dividends (cents) 80 122 222
Group balance sheet
as at 31 March 2006
IFRS IFRS
Unaudited restated restated
31 Mar % 31 Mar % 30 Sep
R million 2006 change 2005 change 2005
Assets
Fixed assets 103 (17) 124 11 112
Investment in associate 0 (100) 10 (9) 11
Policyholders" 65 8 60 (5) 63
investments
Goodwill 0 (100) 14 0
Deferred tax asset 127 429 24 (74) 93
Net advances 5 572 18 4 728 (10) 5 282
Gross advances 7 002 16 6 045 (6) 6 454
Deferred administration
fees (181) 484 (31) (44) (55)
Impairment provisions (1 249) (3) (1 286) 15 (1 117)
Other assets 32 (68) 100 59 63
Taxation 14 180 5 (76) 21
Statutory assets - bank
and insurance 489 (5) 514 (1) 517
Short-term deposits and
cash 1 311 (8) 1 421 24 1 147
Total assets 7 713 10 7 000 (4) 7 309
Liabilities and equity
Life fund reserve 96 10 87 (8) 95
Subordinated debentures 199 2 195 (1) 197
Long-term loans and bonds 3 423 20 2 843 (12) 3 245
Short-term money market
funding 1 025 53 671 4 644
Other liabilities 440 82 242 (43) 426
Taxation 28 (73) 105 21 87
Total liabilities 5 211 26 4 143 (12) 4 694
Ordinary shareholders"
equity 2 019 (15) 2 374 12 2 122
Preference shareholders"
equity 483 0 483 0 483
Minority shareholders"
interest 0 0 (100) 10
Total equity (capital and
reserves) 2 502 (12) 2 857 9 2 615
Total liabilities and
equity 7 713 10 7 000 (4) 7 309
Group cash flow statement
for the six months ended 31 March 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Mar 31 Mar 30 Sep
R million 2006 2005 2005
Cash generated from operations 1 246 1 105 2 382
Increase in gross advances (1 086) (610) (1 367)
Decrease in working capital 3 159 274
Indirect and direct taxation paid (364) (369) (800)
Ordinary shareholders" payments and
transactions (498) (548) (1 127)
Preference shareholders" payments
and transactions (18) 483 475
Cash inflow/(outflow) from ABIL
Employee
Share Trust transactions 15 (143) (235)
Cash inflow/(outflow) from investing
activities 212 (39) (208)
Cash inflow/(outflow) from financing
activities 561 (552) (175)
Increase/(decrease) in cash and cash
equivalents 71 (514) (781)
Cash and cash equivalents at the
beginning of the year 1 390 2 171 2 171
Cash and cash equivalents at the end
of the year 1 461 1 657 1 390
Made up as follows:
Short-term deposits and cash 1 311 1 421 1 147
Statutory assets - bank and 150 236 243
insurance
1 461 1 657 1 390
Advances analysis
% year- As at As at
on-year 31 Mar 31 Mar
R million growth 2006 2005
Lending books 25 6 420 5 135
African Bank - retail products 46 4 832 3 319
- payroll products (37) 531 847
Miners Credit 49 663 444
Standard Bank JV 34 394 295
Commercial Vehicle Finance (100) 0 230
Pay down books (36) 582 910
Gross advances 16 7 002 6 045
Asset quality analysis
% 31 Mar 31 Mar
R million change 2006 2005
Advances
Performing 23 5 207 4 239
Non-performing (1) 1 795 1 806
Total advances 16 7 002 6 045
Group statement of changes in equity
for the six months ended 31 March 2006
Ordinary shares
Share Preference
capital share
and capital and
R million premium Reserves premium Total
Balance at 30 September 2004
(IFRS restated) 11 2 629 0 2 640
Issue of shares 0 0 500 500
Share issue expenses 0 0 (17) (17)
Dividends paid 0 (525) 0 (525)
Shares purchased into the
ABIL Employee
Share Trust 0 (100) 0 (100)
Loss incurred on ABIL Share
Trust shares 0 (43) 0 (43)
Treasury shares acquired 0 (22) 0 (22)
Attributable earnings 0 424 0 424
Balance at 31 March 2005
(IFRS restated) 11 2 363 483 2 857
Issue of shares 1 0 0 1
Share issue expenses 0 0 0 0
Dividends paid 0 (582) (8) (590)
Shares purchased into the
ABIL Employee
Share Trust 0 113 0 113
Loss incurred on ABIL Share
Trust shares 0 (205) 0 (205)
Treasury shares acquired (net
of dividends) 0 1 0 1
Attributable earnings 0 509 8 517
IFRS 2 adjustment (SA GAAP
accrual reversal) 0 36 0 36
IFRS 2 adjustments (employee
share options) 0 (125) 0 (125)
Balance at 30 September 2005
(IFRS restated) 12 2 110 483 2 605
IFRS (IAS 18) adjustments to
current year opening
distributable reserves
(administration fees) 0 (57) 0 (57)
IFRS (IAS 39) adjustments to
current year opening
distributable reserves
(impairments) 0 (58) 0 (58)
Cancellation of shares as a
result of odd-lot offer 0 (14) 0 (14)
Dividends paid 0 (498) (18) (516)
Movement in treasury shares
and losses incurred in
the ABIL Employee Share Trust 0 24 0 24
IFRS 2 reserve transactions
(employee share options) 0 (18) 0 (18)
Attributable earnings 0 518 18 536
Balance at 31 March 2006
(unaudited) 12 2 007 483 2 502
Registered office
59 16th Road, Midrand, 1685
Private Bag X170, Midrand, 1685
Telephone +27 11 256 9000
Fax +27 11 256 9304
Share transfer secretaries
Ultra Registrars (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Telephone +27 11 834 2266
africanbank@ultrareg.co.za
Board of directors
AS Mabogoane (Chairman), G Schachat (Deputy Chairman)*, L Kirkinis (CEO)*, A
Fourie*, DB Gibbon, BD Goba, R Naidoo, TM Sokutu*, BPF Steele,
GZ Steffens (German), DFG Tembe (Mozambique), A Tugendhaft, DF Woollam *
* Executive
Group Secretary
S Martin
For a full analysis of the above results, refer to
http://www.africanbank.co.za
Date: 15/05/2006 07:02:52 AM Produced by the JSE SENS Department
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