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ABL/ABLP - African Bank Investments Limited - Reviewed results for the year

Release Date: 21/11/2011 07:32
Code(s): ABL ABLP
Wrap Text

ABL/ABLP - African Bank Investments Limited - Reviewed results for the year ended 30 September 2011 and cash dividend declarations African Bank Investments Limited (Registration Number 1946/021193/06) (Incorporated in the Republic of South Africa) (Registered bank controlling company) Ordinary Share Code: ABL ISIN: ZAE000030060 Preference Share Code: ABLP ISIN: ZAE000065215 ("ABIL" or "the Company" or "the group") REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2011 AND CASH DIVIDEND DECLARATIONS Features - ABIL achieved a return on equity of 18,4% for the year to 30 September 2011 (2010: 15,6%) and an economic profit, after charging for its cost of equity, of R494 million (2010: R78 million). - Headline earnings increased by 24% to R2 339 million (2010: R1 890 million), as did headline earnings per share to 291,0 cents (2010: 235,1 cents). - A final ordinary dividend per share of 100 cents (2010: 100 cents) was declared, bringing the total dividend for the year to 185 cents per share (2010: 185 cents). A final preference dividend per share of 310 cents were declared (2010: 336 cents), resulting in a full year preference dividend of 620 cents per share (2010: 691 cents). - The Banking business unit grew headline earnings by 24% to R2 302 million (Pro forma* 2010: R1 863 million), benefiting from substantial sales and advances growth, a slower reduction in yield than in recent years, and steady asset quality. Return on equity improved from 19,7% in 2010 to 22,9%. - The Retail business unit`s headline earnings were R190 million (Pro forma* 2010: R130 million), supported by modest increase in sales, firm margins and operating leverage from more efficient operations. EHL generated a return on equity of 6,9% (2010: 4,8%). Financial results The group`s financial performance in the year ended 30 September 2011 was driven by a variety of new credit and retail product offerings and increased access through a range of new channels. High levels of commitment, energy and innovation from our staff culminated in robust growth despite a modest trading environment. The performance was augmented by the value creation between African Bank and EHL, specifically through the substantial increase in African Bank`s footprint. Strategic initiatives ABIL`s strategic vision is premised on strong growth over the medium term that ultimately translates into better value for customers. That vision will only become a reality through the continued commitment, energy and passion of our people, and their engagement and development is therefore central to the execution of this vision. The group has over the past year identified a host of aspects to focus on as the foundation for our growth aspirations. These include our people strategies, more refined customer segmentation, the role of technology into the future, a more scalable operating model; the key financial drivers and their interrelationships; capital and funding; and a redefined customer value proposition. Each of these aspects have been evaluated for scalability and potential for innovation and a variety of initiatives are in the process of being implemented across the organisation to realise these opportunities. With an eye on retaining the group`s predominant credit focus, building on the current scope of the business, and recognising the evolution of our customers` needs and expectations, a revised, more competitive customer value proposition was introduced in the business during 2011. The revised proposition not only extended both the target market and the product scope of the business, but also included a deepening of the credit relationship with our customers over the long term. A new customer interface that encapsulates many of the aspects of the revised proposition has recently been rolled out in pilot mode and will be fully implemented post the peak trading period. African Bank`s people journey built on the momentum gained in the previous year, with the rollout of a values programme, intensive engagement through a multitude a different channels and a strong focus on people issues. The implementation of the revised customer value proposition culminated in the launch of several new products, extended trading hours, improved access through its physical infrastructure as well as web and mobile channels. Loan sizes were also increased to accommodate larger purchases. The acceleration of value creation from the African Bank/EHL relationship has been a key strategic focus area. This imperative involves the maximization of credit volumes and revenues from the EHL network. The key components of the drive are products, such as Ezi*Cash (cash top-up) and Ezi*Loan (credit only) and access, through African Bank kiosks and carve- out branches within EHL stores. In the current year, the group generated R1,7 billion in loan sales (excluding furniture credit) through distribution that did not exist for the Bank twelve months ago. The current performance suggests further opportunity of a substantial size over the next two years. New customer acquisition has also been a key focus for the group. ABIL added 612 000 new clients during the year, a 26% increase on 2010. The Interest Buster, credit card and consolidation loan products were particularly effective in attracting new customers to the group. The rollout of kiosks and carve-outs in the EHL footprint also increased the Bank`s presence in new geographic areas. EHL continued its efforts of upgrading and re-engineering processes across the organisation to ultimately offer better quality product ranges and service to customers. The rollout of the first distribution centre has already manifested in improved availability of product ranges and quicker turnaround times for customers. The division also did substantial work on the development of new and exclusive products and ranges and the formulation of key strategic relationships that will provide EHL with more differentiated product offerings and guaranteed supply going forward. Competition in the unsecured lending arena has intensified over the past two years. Industry data suggests that the substantial growth in the market over the past year did not stem predominantly from more credit being extended to the same group of (potentially over extended) customers. Loans in the middle to higher income bands and debt consolidation have been significant areas of growth, while the expansion in the number of new customers in the transactional banking environment has led to an influx of newly banked customers who now also have access to credit as a result of becoming `banked`. The recent much stricter underwriting environment for secured credit has also meant that many more customers, who may not have been part of this market segment before, now seek to fulfil their needs through unsecured credit. Experience has shown us that whenever there is a rapid acceleration of credit supply in our market, inevitably customers will become overextended. At present there is ample evidence that customer payment profiles appear slightly better than they have been over the past two years, yet there are pockets of declining payment profiles and increasing debt burdens. However, underwriting is inherently skewed towards the history, and therefore it is critical to apply sound judgment. Accordingly, during 2011 an additional business rule limiting the size of total debt servicing as a percentage of income was introduced and further enhancements to this, and other related business rules, will be considered as trends emerge. ABIL constantly recalibrates its score cards to take cognisance of emerging risk. In terms of its growth segments, it adjusts its criteria for niche opportunity in a deliberate and calculated way, rather than a through a general relaxation of credit criteria. We will be pursuing growth in the next year with a specific focus on quality of extended credit and a controlled mix of sales, rather than volumes and will not hesitate to pull back our sales should the environment necessitate it. We believe that a passionate and motivated workforce can generate a momentum in the business that surpasses a difficult trading environment and intense competition. By allowing our people to understand and contribute to our vision and step up to the new challenges, we are building an organisation that will remain at the forefront of innovation and value creation for all our stakeholders. Dividends The group sets dividend cover on a twelve month rolling basis. At the end of the previous financial year, ABIL indicated it would be increasing its dividend cover to a minimum of 1,5 times in the 2011 financial year. Consistent with this guidance, ABIL has declared a final dividend of 100 cents per ordinary share, resulting in a total ordinary dividend for the year of 185 cents per share. The payout ratio was 64% and the ordinary dividend cover was 1,6 times. The group has also declared a final preference dividend of 310 cents per share, bringing the total preference dividend for the year to 620 cents per share. In order to support the targeted growth in advances, the group expects the dividend cover to rise to between 1,8-2,0 times in the 2012 financial year. However as the anticipated improvement in RoE gathers momentum over the short to medium term, the group will re-evaluate its dividend cover, in order to ensure an optimal balance between a competitive customer value proposition and a sustainable business model. Ordinary shares Preference shares Share code ABL ABLP ISIN ZAE000030060 ZAE000065215 Dividend number 22 14 Dividends per share 100 cents 310 cents (cash dividends) Declaration date Monday, Monday, 21 November 2011 21 November 2011
Last date to trade Thursday, Thursday, cum-dividend 8 December 2011 8 December 2011 Shares commence trading Friday, Friday, ex-dividend 9 December 2011 9 December 2011 Record date Thursday, Thursday, 15 December 2011 15 December 2011 Dividend payment date Monday, Monday, 19 December 2011 19 December 2011
Share certificates may not be dematerialised or rematerialised between Friday, 9 December 2011 and Thursday, 15 December 2011, both dates inclusive. Changes to the board ABIL continually strives to improve its corporate governance processes and as part of this objective, implemented an approved term limit policy in respect of its non-executive directors a few years ago. In terms of the policy, the chairman`s service tenure is limited to a maximum of ten years and other non-executive directors to a maximum of eight years in total. During the period under review two of ABIL`s non-executive directors, David Braidwood Gibbon and Ashley "Oshy" Tugendhaft reached their term limit and retired from the boards of both ABIL and African Bank Limited with effect from 30 September 2011. Mpho Nkeli also resigned from the boards of African Bank Investments Limited and African Bank Limited with effect from 25 January 2011 due to other commitments. The boards of ABIL and African Bank Limited express their sincere appreciation to Mpho, David and Oshy for the contribution that they made to the success of the group over the period of their tenure. The board announced the appointment of three non-executive directors during the reporting period. Advocate Mojankunyane Gumbi was appointed as an independent non-executive director to the boards of African Bank Investments Limited and African Bank Limited with effect from 1 March 2011. Ntombi Langa-Royds and Jack Koolen were appointed as independent non- executive directors to the same boards from 15 March 2011. Jack Koolen was also appointed to the board of Ellerine Holdings Limited from that date. The changes to the board have necessitated changes to the membership of the sub-committees of the board, details of which are as follows: Previous constitution New constitution Group audit committee David Gibbon (Chairman) Sam Sithole (Chairman) Nic Adams Nic Adams Johnny Symmonds Johnny Symmonds Sam Sithole Group risk and capital management committee Nic Adams (Chairman) Nic Adams (Chairman) Sam Sithole Johnny Symmonds Johnny Symmonds Mojanku Gumbi Oshy Tugendhaft Jack Koolen Group remuneration and transformation committee Mpho Nkeli (Chairperson) Ntombi Langa-Royds (Chairperson) Mutle Mogase Mutle Mogase Oshy Tugendhaft Mojanku Gumbi Directors affairs committee Oshy Tugendhaft (Chairman) Mutle Mogase (Chairman) David Gibbon Sam Sithole Nic Adams Nic Adams Mutle Mogase Mojanku Gumbi Mpho Nkeli Ntombi Langa-Royds Yashmita Mistry resigned as company secretary to ABIL with effect from 31 March 2011. Mdu Luthuli was appointed as company secretary from 11 July 2011. Looking ahead While it is expected that the subdued economic environment will continue in 2012, the group is confident of its prospects for the next financial year. The Bank should continue to benefit from the substantially greater distribution base that was achieved this year and the number of new products and initiatives in development. The EHL group similarly, has a number of innovations and product enhancements that are expected to impact positively on growth. Above all, we believe that our continued focus on the development of our people will accelerate the energy and the momentum that manifested this year. Review report The accompanying financial information of the group has been reviewed by the group`s independent auditors, Deloitte & Touche. The review was conducted in accordance with ISRE 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity". An unmodified report has been issued. The full review report is available for inspection at the Company`s registered office. Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the group`s auditors. Group accounting policies and basis of preparation The preparation of these group consolidated financial statements was supervised by the Chief Financial Officer, Nithia Nalliah CA (SA). These condensed group consolidated financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards and AC 500 Standards as issued by the Accounting Practices Board and the information required by International Accounting Standard (IAS) 34 `Interim Financial Reporting`, the South African Companies Act (Act 71 of 2008) and the Listing Requirements of the JSE Limited. The group has adopted the following new and amended standards and interpretations during the financial year: - IFRIC 19 - Extinguishing of Financial Liabilities with Equity Instruments - IFRS 2 - Group cash-settled share-based payment transactions - IAS 32 (amended) - Financial Instruments Puttable at Fair Value and Classification of rights issues. The accounting policies and their application are - In compliance with International Financial Reporting Standards and interpretations issued by the International Financial Reporting Interpretations Committee of the International Accounting Standards Board; and - Consistent with those used for the group`s 2010 annual financial statements except for changes in disclosure of the operating segments. Restatement of comparative balances The following changes for reclassification of claims and composition of operating segments have resulted in restatements of comparative balances in compliance with IFRS: - Claims paid on life and product insurance have been reclassified out of net assurance income and are separately disclosed on the face of the income statement. This is merely a reclassification with no impact on the financial results of ABIL. - Following the purchase of Ellerines Financial Services by African Bank Limited, the composition of the group`s operating segments has changed from Banking, Ellerines Retail and Ellerines Financial Services to the Banking and Retail business units only. * The references to pro formas relate to divisions of ABIL and do not affect the results or financial position of ABIL and therefore do not need to be audited or reviewed. On behalf of the board Mutle Mogase, Chairman Gordon Schachat, Executive deputy chairman Leon Kirkinis, Chief executive officer 21 November 2011 Group income statement for the year ended 30 September 2011 Reviewed Restated R million % change 2011 2010 Gross margin on retail business 6 2 083 1 974 Interest income on advances 23 7 308 5 950 Assurance income 28 2 962 2 309 Non-interest income 18 2 930 2 491 Income from operations 20 15 283 12 724 Charge for bad and doubtful advances 34 (3 596) (2 693) Claims paid (2) (612) (626) Risk-adjusted income from operations 18 11 075 9 405 Product insurance claims (18) (68) (83) Other interest and investment income (13) 339 390 Interest expense 20 (2 850) (2 383) Operating costs 10 (4 931) (4 481) Indirect taxation: VAT >100 (67) (20) Profit from operations 24 3 498 2 828 Capital items (97) 1 34 Profit before taxation 22 3 499 2 862 Direct taxation: STC 3 (151) (147) Direct taxation: Normal 26 (977) (773) Profit for the year 22 2 371 1 942 Reconciliation of headline earnings and per share statistics % change Reviewed Audited 2011 2010 Profit for the year (basic earnings) 22 2 371 1 942 Preference shareholders (11) (32) (36) Basic earnings attributable to 23 2 339 1 906 ordinary shareholders Adjustments for non-headline items: Capital items (100) 0 (19) Tax thereon (100) 0 3 Headline earnings 24 2 339 1 890 Number of shares in issue (net of 803,7 803,7 treasury) Weighted number of shares in issue 803,7 803,7 Fully diluted number of shares in 803,8 803,8 issue Basic earnings per share 23 291,0 237,2 Fully diluted basic earnings per share 23 291,0 237,1 Headline earnings per share 24 291,0 235,2 Fully diluted headline earnings per 24 291,0 235,1 share Group statement of comprehensive income for the year ended 30 September 2011 Reviewed Audited R million % change 2011 2010 Profit for the year 22 2 371 1 942 Other comprehensive income after tax Exchange differences on translating >(100) 5 (11) foreign operations Movement in cash flow hedge reserve (99) (2) (195) IFRS 2 reserve transactions (employee >(100) (6) 8 incentives) Shares purchased into the ABIL (100) 0 1 Employee Share Trust less shares issued to employees (cost) ABIL Share Trust shares less dividends (100) 0 1 received Other comprehensive income for the >100 (3) (196) year Total comprehensive income for the 36 2 368 1 746 year SEGMENTAL ANALYSIS The ABIL business is currently being managed in terms of two segments, the Banking and Retail business units. The segment income from operations and profit after taxation are disclosed below. Group segmental analysis for the year ended 30 September 2011 Segment income Intersegment income from operations from operations Reviewed Restated Reviewed Restated
R million 2011 2010 2011 2010 Banking unit 12 354 9 911 0 0 Retail unit 3 051 2 896 122 83 Consolidation (122) (83) 0 0 adjustments Group 15 283 12 724 122 83 Segment profit after taxation
Reviewed Restated R million 2011 2010 Banking unit 2 334 1 899 Retail unit 190 146 Consolidation (153) (103) adjustments Group 2 371 1 942 Condensed group statement of financial position as at 30 September 2011 % change Reviewed Audited R million 2011 2010 Assets Short-term deposits and cash (6) 3 198 3 410 Statutory assets - bank and 54 2 775 1 806 insurance Inventories 4 885 851 Other assets >100 872 321 Taxation (87) 13 97 Net advances 38 35 099 25 360 Deferred tax asset 14 465 409 Assets held for sale (100) 0 5 Policyholders` investments (93) 1 15 Property and equipment 37 852 622 Intangible assets (9) 761 834 Goodwill 0 5 472 5 472 Total assets 29 50 393 39 202 Liabilities and equity Short-term funding 61 1 666 1 038 Other liabilities 15 2 013 1 743 Taxation >100 72 33 Deferred tax liability (42) 229 392 Life fund reserve (93) 1 14 Bonds and other long-term funding 42 29 672 20 877 Subordinated bonds 25 2 775 2 226 Total liabilities 38 36 428 26 323 Ordinary shareholders` equity 7 13 246 12 396 Preference shareholders` equity 49 719 483 Total equity (capital and 8 13 965 12 879 reserves) Total liabilities and equity 29 50 393 39 202 Condensed group statement of changes in equity for the year ended 30 September 2011 Ordinary shares R million Share Share-
capital based and Retained payment premium earnings reserve Other Balance at 30 September 2009 9 151 2 436 597 (10) (audited) Dividends paid 0 (1 488) 0 0 Transfer to share-based 0 (208) 208 0 payment reserve Transfer from insurance 0 25 0 (25) contingency reserve Total comprehensive income 0 1 907 8 (205) for the year Balance at 30 September 2010 9 151 2 672 813 (240) (audited) Dividends paid 0 (1 488) 0 0 Issue of preference shares 0 0 0 0 Loss incurred on group 0 1 0 0 employees acquiring ABIL Share Trust shares less dividends received Shares purchased into the 0 0 0 1 ABIL Employee Share Trust less shares issued to employees (cost) Transfer from share-based 0 726 (726) 0 payment reserve Transfer from insurance 0 13 0 (13) contingency reserve Total comprehensive income 0 2 339 (6) 3 for the year Balance at 30 September 2011 9 151 4 263 81 (249) (reviewed) R million Preference share capital and
premium Total Balance at 30 September 2009 483 12 657 (audited) Dividends paid (36) (1 524) Transfer to share-based 0 0 payment reserve Transfer from insurance 0 0 contingency reserve Total comprehensive income 36 1 746 for the year Balance at 30 September 2010 483 12 879 (audited) Dividends paid (32) (1 520) Issue of preference shares 236 236 Loss incurred on group 0 1 employees acquiring ABIL Share Trust shares less dividends received Shares purchased into the 0 1 ABIL Employee Share Trust less shares issued to employees (cost) Transfer from share-based 0 0 payment reserve Transfer from insurance 0 0 contingency reserve Total comprehensive income 32 2 368 for the year Balance at 30 September 2011 719 13 965 (reviewed) Notes Reviewed Audited
1. Treasury shares 30 Sept 2011 30 Sept 2010 Treasury shares at cost R million 11 12 Number of shares held million 0,5 0,5 Average cost per share Rand 23,24 25,14 2. Number of ordinary shares at 30 September 2011 Total Weighted Diluted Number of shares in issue at 804 175 200 804 175 200 804 175 200 the beginning of the year Treasury shares on hand (473 415) (474 686) (474 686) Dilution as a result of 0 0 65 838 outstanding options 803 701 785 803 700 514 803 766 352
Group statement of cash flows as at 30 September 2011 Reviewed Audited R million 2011 2010 Cash generated from operations 7 746 5 698 Cash received from lending and insurance 18 329 15 662 activities and cash reserves Recoveries on advances previously written off 213 103 Cash paid to funders, staff, suppliers and (10 796) (10 067) insurance beneficiaries Increase in gross advances (13 605) (7 658) (Increase)/decrease in working capital (398) 205 Increase in inventories (34) (103) (Increase)/decrease in other assets (577) 8 Increase in other liabilities 213 300 Indirect and direct taxation paid (1 288) (794) Cash inflow from equity accounted incentive 2 2 transactions Cash outflow from operating activities (7 543) (2 547) Cash outflow from investing activities (1 252) (493) Acquisition of property and equipment (to (483) (277) maintain operations) Acquisition of joint venture advances book 0 (19) Disposal of property and equipment 80 240 Disposal of investment 1 0 Disposal of option 0 15 Other investing activities (850) (452) Cash inflow from financing activities 8 688 2 760 Cash inflow from funding activities 9 972 4 284 Issue of preference shares 236 0 Preference shareholders` payments and (32) (36) transactions Ordinary shareholders` payments and (1 488) (1 488) transactions Decrease in cash and cash equivalents (107) (280) Cash and cash equivalents at the beginning of 3 716 3 996 the period Cash and cash equivalents at the end of the 3 609 3 716 period Made up as follows: Short-term deposits and cash 3 198 3 410 Statutory cash reserves - insurance 411 306 3 609 3 716 Board of directors Non-executive: MC Mogase (Chairman) N Adams Advocate MF Gumbi J Koolen N Langa-Royds S Sithole* RJ Symmonds Executive: G Schachat (Deputy Chairman) L Kirkinis (CEO) A Fourie N Nalliah TM Sokutu *Zimbabwean Company Secretary: MM Luthuli African Bank Investments Limited Registered office 59 16th Road Midrand, 1685 Share transfer secretaries Link Market Services South Africa (Pty) Ltd 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein PO Box 4844, Johannesburg, 2000 Telephone +27 11 630 0800 Telefax:+27 86 674 4381 For a more detailed discussion of ABIL`s results and outlook for 2012, please refer to the investor relations section on our website, at www.abil.co.za Midrand 21 November 2011 Sponsor RAND MERCHANT BANK (A division of Firstrand Bank Limited) Date: 21/11/2011 07:32:52 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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