Wrap Text
TRADING UPDATE FOR THE THIRD QUARTER ENDED 30 JUNE 2012, RETIREMENT OF DIRECTOR AND INVESTOR DAY
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registered Bank controlling company)
(Registration number 1946/021193/06)
(Ordinary share code: ABL) (ISIN: ZAE000030060)
(Preference share code: ABLP) (ISIN: ZAE000065215)
(“ABIL” or “the group”)
AFRICAN BANK LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank)
(Registration number 1975/002526/06)
Company code: BIABL
(“African Bank”)
TRADING UPDATE FOR THE THIRD QUARTER ENDED 30 JUNE 2012,
RETIREMENT OF DIRECTOR AND INVESTOR DAY
ABIL issues quarterly updates in order to provide investors with
timely insights into strategic and operational performance trends.
These updates should be viewed as guidance on trading conditions,
rather than an indication of profitability.
ABIL experienced a continuation of the performance achieved in the
first half of the year, albeit seasonally adjusted - robust
targeted credit growth in selected market segments and slow growth
in merchandise sales, the latter offset to an extent by
operational efficiencies at the Retail unit. The group indicated
previously that there were signs of risk emergence in certain
segments of the portfolio and that it had implemented corrective
action in response to these trends. Given evolving market
dynamics, further risk amelioration measures have been applied.
ABIL continues to balance risk and return in granting credit
within its overall business model.
From a macro perspective, slowing economic growth prompted the
South African Reserve Bank to reduce interest rates for the first
time since November 2010 to help stimulate growth. Subdued
consumer spend was particularly evident in the retail environment
where sales volumes slowed notably in the most recent quarter. The
unsecured credit market continued to show strong growth, albeit at
lower levels than the peak trading period of the last quarter of
2011. Competition in the credit and retail environments remained
intense.
Operationally and strategically, ABIL continued to make progress
towards its medium term goals during this quarter. Given current
market conditions, the group expects sales growth to moderate in
the last quarter of the financial year.
Banking unit
Credit disbursements for the nine months ended June 2012 were
R19,5 billion, a 26% increase relative to the previous comparable
period. The EHL-based kiosks and carve-outs contributed positively
to sales, as did new products and high commitment levels from our
staff. This was countered to an extent by strategies to reduce
risk in certain segments of the target market. The latter had the
effect of reducing approval rates from 75% in June 2011 to 69% by
June 2012.
The average loan size for the nine months to June 2012 was R12
420, an increase of 24% relative to the prior period. Average term
increased from 45 to 47 months.
Gross advances grew by 27% to R50,5 billion on a year-to-date
basis or 36% year-on-year, on the back of the higher sales and
extended term. African Bank’s loan advances grew by 35%, the
credit card portfolios increased by 47%, while EHL advances grew
by 33% year-on-year. Total income yield declined marginally from
the interim results level, as expected. Fee income continued to be
impacted by a shift in the sales mix towards internal
consolidation loans on which no initiation fees are charged.
Operating costs remained elevated although the monthly run rate
started to decline. The optimisation of the expanded operations of
African Bank has gained momentum over the past three months.
Credit quality continued to be satisfactory. Non-performing loans
(NPLs) as a percentage of advances increased marginally to 28%, as
the high sales of the past eighteen months started to mature. NPL
coverage remained steady relative to the interim period and was
slightly higher than at September 2011. Vintages continued to
track in the middle of historical ranges and in line with
expectations.
The delivery of credit volumes and revenues through the EHL
network continued to make good progress. For the nine months, EHL
stores generated R2,7 billion of additional credit sales over and
above furniture credit, relative to R1 billion for the comparative
period last year. The distribution model is constantly being
refined to incorporate new learnings from the different types of
outlets.
Capital and Liquidity
African Bank increased the size of the Basel 3 entry-level Tier II
capital issued during the period to R1 billion. It also issued an
inaugural three year, fixed rate senior unsecured Swiss bond of
CHF150 million, equivalent to ZAR1,263 billion in July 2012. With
71 new investors, the issue has further diversified African Bank’s
funding base and broadened its investor universe. It is the first
ever CHF issuance by a bank in Africa, and augmented a successful
period of fundraising for the group.
Retail unit
EHL recorded merchandise sales of R3,7 billion for the nine months
to 30 June 2012, a 3,4% increase relative to the previous
comparative period. Comparable sales (on a square metre basis)
were 6,9% higher than last year. Sales in the third quarter were
impacted by the tough trading conditions and risk measures
implemented in the credit environment which continued to reduce
offer rates. The furniture sector experienced further deflation
although the level was lower, at 1,8%.
Cash sales of R1,4 billion were 7% higher than the prior year.
Credit sales amounted to R2,3 billion, marginally higher than the
comparable period in 2011. The credit sales mix at 62,9% was below
last year’s 64,1%, as a result of the lower offer rates and more
stringent credit criteria. The decline in the credit sales mix
trend was especially prevalent in Beares and Geen & Richards and
more recently in the balance of the portfolio.
Merchandise sales growth per
brand
Y-on-Y Comparable
sales sales
growth growth
% %
Ellerines 5,5 10,2
Beares (1,0) (2,1)
Furniture
7,4 16,2
City
Geen &
(1,6) (1,7)
Richards
Wetherlys (4,8) 5,4
Dial-a-Bed 1,3 1,5
Rest of
12,6 13,2
Africa
EHL Group 3,4 6,9
Productivity measurements continued to improve on the back of the
increased sales, albeit at a slower pace. As of June 2012, EHL
closed a net 3 stores, and square metres continued to decrease as
a result of the store closures and reduced store sizes. Year-to-
date stock turn was marginally better than in 2011.
Gross margins remained firm over the period, and higher than the
comparative period, while operating expenses growth slowed
further, assisted by lower property and lease costs, depreciation
and advertising and marketing savings. The positive leverage
achieved through cost efficiencies and improved margins continued
to drive profitability despite slow sales growth.
The information provided in this update is not an earnings
forecast and has not been reviewed and reported on by the group’s
external auditors.
Directorate
Gordon Schachat, executive deputy chairman of ABIL, African Bank
and Ellerine Holdings Limited will retire from these boards with
effect from 30 September 2012. Gordon was a co-founder of ABIL,
and the group and its boards express their sincere appreciation
and gratitude to Gordon for the immense contribution that he has
made to the development and success of ABIL since 1994.
INVESTOR DAY
ABIL will hold a mini investor day and conference call on Monday,
6 August 2012 for interested parties. The presentations covering
the investor day will be available for download on www.abil.co.za
The presentations will cover the South African credit environment
and trends.
Date: Monday, 6 August 2012
Time: 14:00 for 14:30
Venue: African Bank, 59 Sixteenth Road, Midrand
Time Topic Speaker Title
14:30 - Quarterly trading Leon ABIL CEO
15:00 update Kirkinis
15:00 - Unsecured lending Charles African Bank
16:00 environment and Chemel Executive: Sales,
market trends distribution,
marketing and
product
16:00 - Bureau Data Analytics Rene Head: Decision
17:00 Insights – African Swanepoel science and
Bank client credit data
indebtedness and management
credit trends Pankaj Executive:
Talwar Customer
relationship
management
Website The quarterly trading update will be released on
disclosure SENS and simultaneously published on
www.abil.co.za on Monday, 6 August 2012 from
08:00.
All presentations will be available on the ABIL
website.
Webcast Live audio cast of the presentations via a link
on ABIL's website www.abil.co.za
Conference Access numbers for participants dialling from
call their country:
Live call 48 hour playback
South Africa & Code 2134#South Africa &
Other Other
Toll 011 535 3600 011 305 2030
USA USA
Toll-free 1 800 860 1 412 317 0088
2442
UK
UK 0 808 234 6771
Toll-free 0 800 917
7042
Queries: Investor Relations on 27 11 564 7068 or
investor.relations@africanbank.co.za
On behalf of the board
Midrand
6 August 2012
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 06/08/2012 07:05:00 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.
Sharenet Sites 
