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INTERIM RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 1998
STANDARD BANK INVESTMENT CORPORATION LIMITED
(REGISTRATION NUMBER 69/17128/06)
- ATTRIBUTABLE EARNINGS UP 18 PER CENT
- TOTAL ASSETS UP 15 PER CENT
- INTERIM DIVIDEND 16 CENTS PER SHARE
COMMENT
EARNINGS AND DIVIDEND
THE GROUP ACHIEVED SATISFACTORY RESULTS FOR THE PERIOD IN AN OPERATING
ENVIRONMENT CHARACTERISED IN THE LATTER MONTHS BY EXTREME VOLATILITY IN
FINANCIAL MARKETS, A SIZEABLE DECLINE IN THE EXTERNAL VALUE OF THE RAND AND
SIGNIFICANTLY HIGHER INTEREST RATES.
ATTRIBUTABLE EARNINGS FOR THE PERIOD OF R995 MILLION WERE 18 PER CENT HIGHER
THAN THE PREVIOUS PERIOD, WITH HEADLINE EARNINGS AND HEADLINE EARNINGS PER
SHARE BOTH 19 PER CENT UP.
NET INTEREST INCOME OF R2 725 MILLION, BEFORE PROVISION FOR CREDIT LOSSES, WAS
16 PER CENT HIGHER. THE NET INTEREST MARGIN ON TOTAL ASSETS OF 3,77 PER CENT
WAS MARGINALLY LOWER THAN THE PREVIOUS YEAR'S 3,94 PER CENT, DUE TO THE
INTEREST RATE FLUCTUATIONS IN MAY AND JUNE CAUSED BY THE SHARP RISE IN THE REPO
RATE AND IN THE COST OF THE MARGINAL LENDING FACILITY. THE PROVISION FOR CREDIT
LOSSES OF R628 MILLION WAS 18 PER CENT HIGHER, PARTLY IN RECOGNITION OF THE
HARDSHIPS THAT COULD BE CAUSED TO BOTH CORPORATE AND PERSONAL CUSTOMERS IN THE
EVENT THAT HIGH REAL RATES OF INTEREST PROVE NECESSARY FOR AN EXTENDED PERIOD
OF TIME. THE CREDIT PROVISION AS A PERCENTAGE OF LOANS AND ADVANCES, WAS 0,59
PER CENT COMPARED WITH 0,57 PER CENT FOR THE CORRESPONDING SIX MONTHS OF 1997.
NON-INTEREST INCOME OF R2 453 MILLION WAS 23 PER CENT UP AND NOW COMPRISES 47
PER CENT OF TOTAL INCOME COMPARED WITH 46 PER CENT FOR THE PREVIOUS PERIOD.
FEES AND COMMISSION AND OTHER INCOME WERE 25 PER CENT HIGHER DUE MAINLY TO AN
INCREASE IN TRANSACTIONAL VOLUMES AND PROFIT ON THE SALE OF INVESTMENTS.
TRADING INCOME INCREASED BY 17 PER CENT.
OPERATING EXPENSES FOR THE PERIOD WERE 19 PER CENT HIGHER. COSTS INCURRED IN
OFFSHORE OPERATIONS WERE AFFECTED BY THE EXPANSION OF ACTIVITIES AND ALSO, IN
RAND TERMS, BY THE DECLINE IN THE VALUE OF THE CURRENCY. COSTS INCURRED LOCALLY
WERE 16 PER CENT UP. THE RATIO OF OPERATING COSTS TO TOTAL INCOME DECLINED ONLY
MODERATELY FROM 63,9 PER CENT TO 63,7 PER CENT, BUT THE GROUP REMAINS ON COURSE
TO ACHIEVE THE TARGETED REDUCTION IN THIS RATIO.
INCOME FROM ASSOCIATES, WHICH INCLUDES EARNINGS FROM LIBERTY LIFE AS WELL AS
FROM CERTAIN BANKING ASSOCIATES IN AFRICA, WAS 16 PER CENT HIGHER. THE BASIS OF
ACCOUNTING FOR EARNINGS FROM THE GROUP'S INVESTMENT IN LIBERTY LIFE IS
CONSISTENT WITH PAST YEARS AND DOES NOT INCLUDE UNREALISED GAINS ON INVESTMENTS
EXCEPTIONAL INCOME FOR THE PERIOD WAS MAINLY THE NET RESULT OF PROFIT REALISED
ON THE SALE OF AN INVESTMENT, OFFSET TO AN EXTENT BY THE WRITE OFF OF GOODWILL
THAT AROSE ON THE ACQUISITION OF A 60 PER CENT SHAREHOLDING IN BARCLAYS BANK
SWAZILAND.
IN ACCORDANCE WITH THE GROUP'S ESTABLISHED POLICY OF DECLARING AN INTERIM
DIVIDEND OF ONE THIRD OF THE PREVIOUS YEAR'S TOTAL DIVIDEND, A DIVIDEND OF 16
CENTS PER ORDINARY SHARE (1997: 13,6 CENTS) HAS BEEN DECLARED TO SHAREHOLDERS.
BALANCE SHEET
TOTAL ASSETS AT THE HALF YEAR OF R149,9 BILLION WERE 15 PER CENT HIGHER THAN AT
JUNE 1997, BUT ONLY 7 PER CENT UP ON DECEMBER 1997 IN EVIDENCE OF THE SLOWDOWN
IN ECONOMIC ACTIVITY OVER THE PERIOD. TOTAL LOANS AND ADVANCES OF R106,6
BILLION WERE 15 PER CENT UP, WITH GOOD GROWTH IN HOME LOANS AND CORPORATE
ADVANCES. INSTALMENT SALES CONTINUED TO BE AFFECTED BY THE DIFFICULT TRADING
CONDITIONS IN THE MOTOR VEHICLE INDUSTRY AND POSTED A GROWTH OF 5 PER CENT.
CARD DEBTORS WERE 14 PER CENT HIGHER.
THE GROUP'S CAPITAL BASE AT 11,9 PER CENT OF RISK WEIGHTED ASSETS REMAINS WELL
ABOVE THE STATUTORY REQUIREMENT OF 8 PER CENT, WITH TIER ONE CAPITAL AT 9,9 PER
CENT.
YEAR 2000 COMPLIANCE
THE GROUP WILL SUBSTANTIALLY ACHIEVE YEAR 2000 COMPLIANCE THROUGHOUT ALL
BUSINESS OPERATIONS BY DECEMBER 1998. DETAILED ACTION PLANS THAT REQUIRE THE
TESTING, AND UPGRADING WHERE NECESSARY, OF BOTH COMPUTER HARDWARE AND SOFTWARE
SYSTEMS, AND LIAISON WITH THIRD PARTIES MATERIAL TO THE GROUP'S BUSINESS, HAVE
BEEN FORMULATED AND ARE IN PROGRESS. THE BOARD AND THE AUDIT COMMITTEE ARE
KEPT REGULARLY INFORMED OF DEVELOPMENTS IN THIS REGARD. BASED ON ASSESSMENTS TO
DATE AND SUBJECT TO COMPLIANCE BY MATERIAL ENTITIES WITH WHOM THE GROUP
TRANSACTS, IT IS NOT EXPECTED THAT THE YEAR 2000 WILL HAVE A MATERIALLY ADVERSE
EFFECT ON THE GROUP'S BUSINESS OR FINANCIAL RESULTS.
THE ESTIMATED TOTAL COST TO BE INCURRED IN ACHIEVING YEAR 2000 COMPLIANCE IS
R160 MILLION WITH R50 MILLION, INCURRED UP 30 JUNE 1998.
PROSPECTS
THE RECENT VOLATILITY IN FINANCIAL MARKETS IS EXPECTED TO CONTINUE INTO THE
SECOND HALF OF THE YEAR. THIS, COUPLED WITH HIGH REAL RATES OF INTEREST AND THE
INHIBITING EFFECT OF THESE ON ECONOMIC ACTIVITY, WILL HAVE AN EFFECT ON ASSET
GROWTH AND ON EARNINGS. NEVERTHELESS, THE GROUP'S BROAD SPREAD OF ACTIVITIES,
BOTH LOCALLY AND OFFSHORE, SHOULD ENSURE SATISFACTORY GROWTH IN EARNINGS FOR
THE FULL YEAR.
C B STRAUSS, CHAIRMAN
M H VOSLOO, GROUP CHIEF EXECUTIVE
DECLARATION OF DIVIDEND NO. 58
NOTICE IS HEREBY GIVEN THAT AN INTERIM ORDINARY DIVIDEND NO. 58 OF 16 CENTS PER
ORDINARY SHARE HAS BEEN DECLARED PAYABLE ON 18 SEPTEMBER 1998 TO SHAREHOLDERS
REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON 21 AUGUST
1998. THE REGISTER OF MEMBERS WILL BE CLOSED FROM 22 AUGUST 1998 TO 30 AUGUST
1998, BOTH DATES INCLUSIVE.
WHERE APPLICABLE, DIVIDENDS WILL BE TRANSFERRED ELECTRONICALLY TO SHAREHOLDERS'
BANK ACCOUNTS ON OR ABOUT DUE DATE. IN THE ABSENCE OF SUITABLE MANDATES,
DIVIDEND CHEQUES WILL BE POSTED TO SHAREHOLDERS.
BY ORDER OF THE BOARD
K D CURR
GROUP SECRETARY
4 AUGUST 1998
CONSOLIDATED INCOME STATEMENT
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SIX MONTHS ENDED YEAR ENDED
30 JUNE 30 JUNE 31 DECEMBER
% 1998 1997 1997
CHANGE R MILLION R MILLION R MILLION
UNAUDITED UNAUDITED AUDITED
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INTEREST INCOME 10 9847 8958 18616
INTEREST EXPENSE 8 7122 6605 13521
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NET INTEREST INCOME BEFORE
PROVISION FOR CREDIT LOSSES 16 2725 2353 5095
PROVISION FOR CREDIT LOSSES 18 628 534 1072
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NET INTEREST INCOME 15 2097 1819 4023
NON-INTEREST INCOME 23 2453 1993 4248
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TOTAL INCOME 19 4550 3812 8271
EMPLOYEE COMPENSATION AND
BENEFITS 17 1743 1488 3123
OTHER OPERATING EXPENSES 20 1553 1291 2798
OPERATING EXPENSES 19 3296 2779 5921
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OPERATING PROFIT 21 1254 1033 2350
EXCEPTIONAL ITEMS 1 8 93
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INCOME BEFORE TAXATION 21 1255 1041 2443
TAXATION 25 402 321 683
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INCOME AFTER TAXATION 18 853 720 1760
SHARE OF INCOME FROM
ASSOCIATED UNDERTAKINGS 16 146 126 246
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NET INCOME 18 999 846 2006
ATTRIBUTABLE TO
-OUTSIDE SHAREHOLDERS 4 4 3
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-ORDINARY SHAREHOLDERS 18 995 842 2003
ORDINARY DIVIDEND 18 193 164 594
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RETAINED SURPLUS 802 678 1409
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HEADLINE EARNINGS
NET INCOME ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 18 995 842 2003
ADJUSTED FOR EXCEPTIONAL ITEMS:
-GOODWILL WRITTEN OFF 32 0 0
-NET SURPLUS ON SALE OF SUBSIDIARY
UNDERTAKINGS, INVESTMENTS AND
PROPERTY (33) (8) (93)
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19 994 834 1910
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FINANCIAL STATISTICS
SHARES IN ISSUE
NUMBER OF ORDINARY SHARES IN ISSUE
- END OF PERIOD (MILLIONS) 1,206 1,204 1,205
- WEIGHTED AVERAGE (MILLIONS) 1,206 1,203 1,204
EARNINGS
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) 19 82,4 69,3 158,6
EARNINGS PER ORDINARY SHARE (CENTS) 18 82,5 70,0 166,4
DIVIDEND PER ORDINARY SHARE (CENTS) 18 16,0 13,6 49,3
NET ASSET VALUE PER ORDINARY
SHARE (CENTS) 23 932,0 758,8 844,0
EFFECTIVE TAXATION RATE (PER CENT) 32 31 29
FINANCIAL PERFORMANCE
RETURN ON AVERAGE ORDINARY
SHAREHOLDERS' FUNDS (PER CENT)* 18,6 19,1 20,7
RETURN ON AVERAGE TOTAL
ASSETS (PER CENT)* 1,4 1,3 1,5
OPERATING COSTS TO TOTAL
INCOME (PER CENT) 63,7 63,9 63,4
CAPITAL ADEQUACY
CAPITAL RATIO RELATIVE TO 8 PER
CENT BANKS ACT REQUIREMENT
-PRIMARY CAPITAL 9,9 9,1 9,4
-TOTAL CAPITAL 11,9 11,8 11,9
*CALCULATION BASED ON HEADLINE EARNINGS
CONSOLIDATED BALANCE SHEET
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30 JUNE 30 JUNE 31 DECEMBER
1998 1997 1997
R MILLION R MILLION R MILLION
UNAUDITED UNAUDITED AUDITED
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ASSETS
CASH AND SHORT-TERM FUNDS 18419 15033 15839
INVESTMENT AND TRADING SECURITIES 6477 6602 5859
LOANS AND ADVANCES 106555 92973 101853
OTHER ASSETS 13136 10360 10921
INTEREST IN ASSOCIATED UNDERTAKINGS 2389 2020 2253
FIXED ASSETS 2543 2594 2602
CUSTOMERS' ACCEPTANCE LIABILITIES 349 540 532
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TOTAL ASSETS 149868 130122 139859
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LIABILITIES
DEPOSIT AND CURRENT ACCOUNTS 126501 110575 119050
OTHER CREDITORS AND PROVISIONS 11210 9100 9426
DEBENTURES 525 708 620
ACCEPTANCES OUTSTANDING 349 540 532
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TOTAL LIABILITIES 138585 120923 129628
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SHAREHOLDERS' FUNDS
SHARE CAPITAL 129 128 128
SHARE PREMIUM 1639 1622 1630
RESERVES 9480 7394 8419
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TOTAL SHAREHOLDERS' FUNDS 11248 9144 10177
OUTSIDE SHAREHOLDERS' INTEREST 35 55 54
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TOTAL LIABILITIES AND
SHAREHOLDERS' FUNDS 149868 130122 139859
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DERIVATIVE BALANCES WERE PREVIOUSLY GROSSED UP AND REFLECTED AT THE GROSSED UP
AMOUNTS IN ASSETS AND LIABILITIES AS APPROPRIATE. THIS METHOD OF DISCLOSURE IS
AT VARIANCE WITH THE PRACTICE FOLLOWED IN THE LOCAL INDUSTRY AND HAS BEEN
CHANGED TO ACCORD WITH LOCAL PRACTICE AND INCLUDE ONLY THE NET BALANCES IN
ASSETS AND LIABILITIES.
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
CONTINGENT LIABILITIES
-LETTERS OF CREDIT 2099 2059 2113
-GUARANTEES 11244 9575 12123
CAPITAL EXPENDITURE
-INCURRED 181 217 518
-CONTRACTED 132 108 100
-AUTHORISED BUT NOT YET CONTRACTED 108 25 7
SHAREHOLDERS' FUNDS
ADJUSTED FOR INCREASE IN MARKET VALUE
OVER THE CARRYING VALUE OF ASSOCIATED
UNDERTAKINGS AND OVER THE BOOK VALUE OF
INVESTMENTS AND PROPERTY. 14203 12316 13571
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
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SIX MONTHS ENDED YEAR ENDED
30 JUNE 30 JUNE 31 DECEMBER
1998 1997 1997
R MILLION R MILLION R MILLION
UNAUDITED UNAUDITED AUDITED
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CASH INFLOW FROM OPERATING
ACTIVITIES 2021 1725 3726
NET DECREASE IN OPERATING FUNDS 1190 2513 1677
TAXATION PAID (305) (276) (537)
NET CASH USED IN INVESTING ACTIVITIES (69) (150) (112)
NET CASH USED IN FINANCING ACTIVITIES (429) (333) (506)
EFFECTS OF EXCHANGE RATE CHANGES ON
CASH AND SHORT-TERM FUNDS 172 29 66
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NET INCREASE IN CASH AND SHORT-TERM
FUNDS 2580 3508 4314
CASH AND SHORT-TERM FUNDS AT BEGINNING
OF PERIOD 15839 11525 11525
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CASH AND SHORT-TERM FUNDS AT END
OF PERIOD 18419 15033 15839
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