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Reviewed financial results for the year ended 30 September 2013 and cash dividend declaration announcement
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(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")
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2013 AND CASH DIVIDEND DECLARATION ANNOUNCEMENT
2013 financial perspective
- Return on equity of 2,9% (2012: 24,3%)
- Headline earnings declined by 88% to R365 million (2012: R3,0 billion)
- HEPS declined by 88% to 45,1 cents (2012: 378,2 cents)
- Ordinary DPS declined by 85% to 30 cents (2012: 195 cents)
- Banking unit gross advances grew by 11% to R59,0 billion (2012: R53,0 billion)
- Economic loss of R1,5 billion (2012: economic profit: R1,2 billion)
Overview
Financial year 2013 was a particularly tough year for the ABIL group. Economic conditions in South Africa continued to be challenging during the past financial year,
characterised by lower consumer confidence, pressure on disposable incomes, higher levels of indebtedness and labour market unrest in certain industries. These
conditions led to lower demand for credit products and durable merchandise, lower collections and concomitantly increasing arrears. The latter also the result of
a portfolio of lower quality loans originated during 2012 prior to the implementation of substantial risk reduction measures as
discussed below.
In our third quarter trading update in August 2012, we commented that there were signs of risk emergence and accordingly took certain pre-emptive risk reduction
measures with approval rates falling from 75% in June 2011 to 70% a year later. The events of the past year have proven that we did not act boldly enough at the time,
and as a consequence have had to come out with a number of negative announcements which has led to a perceived loss of credibility. However, the experience of this
year provides valuable lessons for the future.
Accordingly, ABIL management took decisive and material actions during the latter part of 2013 to address the group's performance and future prospects through
initiatives that included:
- improving the yield/risk relationship through lower offer rates, smaller loan sizes for higher risk customers and more sophisticated risk based pricing;
- further enhancements to collection activities;
- significantly increasing provisions for credit losses;
- increasing the level of write-offs; and
- material actions to strengthen the capital base.
ABIL also undertook a review of the strategic fit of the Retail unit with the aim of disposing of EHL and strategically repositioning the business into a larger
retail group.
The financial year 2013 results were largely negatively impacted by the trading conditions described above and were further impacted by exceptional non-cash items, including:
- a change in the loan impairment provisioning methodology;
- a change in accounting policy to account for the insurance Incurred But Not Reported claims (IBNR) on balance sheet;
- the write-off of goodwill;
- changes to the write-off policy;
- a charge for the long term share incentive programme (LTIP); and
- an increase in the credit IBNR portfolio provision.
The changes in the loan impairment provisioning methodology and accounting policy for the insurance IBNR resulted in a restatement of the comparative numbers. The
opening retained earnings and statement of financial position for financial year 2012 were restated.
The resultant positives of the increase in the impairment provision coverage, the improvement in the remaining quality of impaired loans, together with the business
changes already implemented and the strategic focus for 2014 and beyond, will create a solid underpin for improved results into the future. The continuation of the
economic headwinds in the short to medium term will provide challenges which we recognise and incorporate in setting our targets.
Financial performance
Headline earnings and headline earnings per share decreased by 88% to R365 million (2012: R3,0 billion) and 45,1 cents (2012: 378,2 cents) respectively. ABIL's return
on equity decreased to 2,9% for financial year 2013 (2012: 24,3%) and return on average tangible equity decreased to 6,8% (2012: 50,0%). The group generated an
economic loss of R1,5 billion (2012: economic profit of R1,2 billion) after a charge for the cost of equity. A final ordinary dividend per share of 5 cents
(2012: 110 cents) was declared, bringing the total ordinary dividend for the year to 30 cents per share (2012: 195 cents).
The Banking unit produced a return on equity of 6,4% (2012: 28,7%) and a return on average tangible equity of 9,5% (2012: 47,8%). Headline earnings reduced by 77% to
R654 million (2012: R2,9 billion) and generated an economic loss of R879 million (2012: economic profit R1,4 billion). The Bank was negatively impacted by lower
disbursements and advances growth, as well as deteriorating asset quality with commensurate higher credit impairment charges and credit life insurance claims.
Positive features of the Banking unit's results included interest yields that have begun to stabilise, low operating cost growth (excluding the charge for the
incentive scheme), cost of funds that continues to decline as a percentage of advances and cash generated from operations which increased to R11,0 billion from R9,6 billion
in financial year 2012.
The Retail unit generated a headline earnings loss of R284 million (2012: profit of R249 million). This result was driven by a significant decline in sales due to a
difficult economic environment and exacerbated by a severe cutback in credit granted while carrying approximately R100 million in once-off duplicate supply chain
costs. The results were further impacted by a few accounting adjustments as discussed under the overview section. Positive features of the results included low
operating cost growth despite the duplicate costs, lower inventory levels and firm margins notwithstanding the loss of volume based discounts. The Retail unit
generated a negative return on sales of 7,0% (2012: positive 5,2%), a negative return on equity of 10,1% (2012: positive 9,2%) and a negative return on average
tangible equity of 38,0% (2012: positive 52,5%). The unit generated an economic loss of R706 million (2012: R141 million).
Emerging trends in better quality business written in 2013
The group reduced its exposure to riskier customer segments during the course of financial year 2013 and significantly curtailed its credit risk appetite further
from June 2013, resulting in a reduction and re-pricing of new business in the riskier segments of its customer base. This has had an expected negative impact on
the volume of new business written, with the relative positive impact of the new business still being masked by the risk emergence of business written pre financial
year 2013. The group believes that the steps taken in order to restore the yield/risk relationship will result in improved profitability of the business over the
medium to longer term. The positive emerging risk trends are more fully discussed in the asset quality section of this report.
Rights offer
After a thorough review, ABIL's board of directors concluded that ABIL's capital base needed to be strengthened in anticipation of the new Basel III phased capital
requirements and to provide additional confidence with regard to the various factors discussed above. The group further believes that it is appropriate to increase
the capital buffer available by raising capital through the rights offer to absorb credit losses at the levels currently being experienced, and to proactively
strengthen the capital base, all of which will provide ABIL with the financial flexibility it needs to support its business' growth prospects.
The board of directors also approved an increase in the target capital ranges with effect from 1 January 2014, post the anticipated successful conclusion of the rights
issue in December 2013.
Target capital adequacy ranges
% 2013 2014 onwards
Tier 1 capital ratio 19 - 20 >20
Total capital ratio 26 - 27 >30
The size of the rights issue has been set at R5,5 billion and is expected to be completed during December 2013 and will result in a pro forma Tier 1 capital adequacy
ratio of 25,5% as at 30 September 2013.
Dividends and dividend cover
ABIL has declared a final gross cash dividend of 5 cents (4,25 cents net of dividend withholding tax) per ordinary share, resulting in a total dividend for the year
ended 30 September 2013 of 30 cents per ordinary share (2012: 195 cents).
The rights offer shares that are applied for in the rights offer will not participate in the dividend.
Given the group's capital requirements and growth aspirations, the group is of the view that ABIL should be able to maintain a dividend cover of 2,5 - 3,5 times
headline earnings over the forthcoming financial years.
The group has also declared a final gross cash preference share dividend of 308 cents per share (261,80 cents net of dividend withholding tax), resulting in a total
dividend for the year ended 30 September 2013 of 630 cents per share. (2012: 668 cents).
DIRECTORATE
Sam Sithole resigned as an independent non-executive director of ABIL and African Bank with effect from 13 September 2013. On 16 September 2013 the board appointed
Morris Mthombeni as an independent non-executive director of ABIL and African Bank. He has also been appointed to the Group Audit Committee.
Looking ahead
The South African economy and operating environment in which both the credit and retail businesses operate continue to prove challenging with little respite expected
in the next financial year. ABIL's response to address the challenges is beginning to produce the desired results and should provide a solid underpin for a recovery
into the latter part of financial year 2014 and beyond, barring significant additional economic headwinds.
The actions taken by ABIL during financial year 2013 are expected to position the group positively for sustainable growth and returns over the medium to longer term.
The revised conservative write-off criteria of impaired loans will provide the potential for higher recoveries in future years, while the higher capital adequacy,
NPL coverage and enhanced asset quality ratios will strengthen the balance sheet. The rights offer will strengthen ABIL's and African Bank's capital adequacy ratios
and provide a foundation to grow advances while comfortably meeting the changing regulatory requirements in terms of Basel III. The risk reduction measures implemented
by the group and the increased focus on collections have begun to gradually improve collection success rates and the growth in new NPLs has started to slow, which
bodes well for an improvement in asset quality going forward.
ABIL remains confident of its ability to entrench its position as the market leader in a larger, more competitive and fast changing unsecured credit market and the
steps undertaken during calendar year 2013 have positioned the group to take advantage of the significant opportunities available to it.
On behalf of the board
Mutle Mogase Leon Kirkinis
Chairman Chief executive officer
Condensed consolidated segmental income statement for the financial year ended 30 September 2013
30 September 2013 (Reviewed) 30 September 2012 (Restated)
Consolidation Consolidation
R million % change ABIL group Banking unit Retail unit adjustments ABIL group Banking unit Retail unit adjustments
Gross margin on retail business (17) 1 770 - 1 770 - 2 134 - 2 134 -
Interest income on advances 21 11 964 11 859 105 - 9 919 9 823 96 -
Assurance income 27 4 862 4 426 436 - 3 828 3 401 427 -
Non-interest income 1 3 337 3 058 384 (105) 3 291 3 018 479 (206)
Income from operations 14 21 933 19 343 2 695 (105) 19 172 16 242 3 136 (206)
Credit impairment charge 89 (9 155) (9 096) (59) (4 842) (4 815) (27) -
Credit life insurance claims 86 (1 609) (1 585) (1) (23) (867) (862) 6 (11)
Risk-adjusted income from operations (17) 11 169 8 662 2 635 (128) 13 463 10 565 3 115 (217)
Product insurance claims (8) (55) - (55) - (60) - (60) -
Other interest and investment income 79 393 378 71 (56) 219 324 74 (179)
Interest expense 24 (4 564) (4 509) (105) 50 (3 680) (3 771) (84) 175
Operating costs 12 (6 124) (3 331) (2 929) 136 (5 467) (2 957) (2 727) 217
Indirect taxation: VAT >100 (168) (160) - (8) (72) (72) - -
Profit from operations (85) 651 1 040 (383) (6) 4 403 4 089 318 (4)
Capital items >100 (4 641) (4 000) (39) (602) (6) - (6) -
(Loss)/profit before taxation (>100) (3 990) (2 960) (422) (608) 4 397 4 089 312 (4)
Direct taxation: STC (100) - - - - (82) (2) - (80)
Direct taxation: Normal (83) (209) (304) 94 1 (1 225) (1 154) (72) 1
(Loss)/profit for the year (>100) (4 199) (3 264) (328) (607) 3 090 2 933 240 (83)
Reconciliation of headline earnings
(Loss)/profit for the year
(basic earnings) (>100) (4 199) (3 264) (328) (607) 3 090 2 933 240 (83)
Preference shareholders 44 (88) (88) - - (61) (61) - -
Basic (loss)/earnings attributable to
ordinary shareholders (>100) (4 287) (3 352) (328) (607) 3 029 2 872 240 (83)
Adjustment for non-headline items: >100 4 652 4 006 44 602 12 3 9 -
Gross* >100 4 656 4 008 46 602 17 4 13 -
Tax thereon (20) (4) (2) (2) - (5) (1) (4) -
Headline earnings (88) 365 654 (284) (5) 3 041 2 875 249 (83)
Earnings per share (cents)
Basic (loss)/earnings per share (>100) (528,9) 376,7
Headline earnings per share (88) 45,1 378,2
Intersegment revenues included in income from operations are for Retail unit only and amount to R105 million (2012: R206 million).
* Non-headline items include impairment of goodwill R4 641 million and loss on disposal of property and equipment R15 million (2012: impairment of trademarks R6 million and loss on disposal of property
and equipment R11 million).
Condensed consolidated segmental statement of financial position as at 30 September 2013
30 September 2013 (Reviewed) 30 September 2012 (Restated)
Consolidation Consolidation
R million % change ABIL group Banking unit Retail unit adjustments ABIL group Banking unit Retail unit adjustments
Assets
Short term deposits and cash 9 3 091 3 770 173 (852) 2 845 3 169 92 (416)
Statutory assets - bank and insurance 21 5 233 4 384 729 120 4 322 3 533 605 184
Inventories (16) 731 - 731 - 871 - 871 -
Other assets >100 3 894 3 676 181 37 1 535 1 196 411 (72)
Other assets - intragroup - - 651 121 (772) - 526 184 (710)
Taxation 34 520 490 30 - 389 362 27 -
Net advances 13 50 276 49 910 366 - 44 683 44 800 363 (480)
Deferred tax asset 30 1 012 279 730 3 780 325 453 2
Property and equipment 12 1 077 453 636 (12) 965 491 480 (6)
Intangible assets (8) 801 131 670 - 870 136 734 -
Goodwill (85) 831 - 716 115 5 472 4 000 755 717
Total assets 8 67 466 63 744 5 083 (1 361) 62 732 58 538 4 975 (781)
Liabilities and equity
Short term funding 75 8 034 7 513 521 - 4 587 4 111 476 -
Short term funding - intragroup - - 121 493 (614) - 184 459 (643)
Other liabilities 20 2 996 1 506 1 529 (39) 2 488 1 292 1 748 (552)
Other liabilities - intragroup - - 33 49 (82) - 66 - (66)
Taxation (68) 7 1 6 - 21 - 15 6
Deferred tax liability (8) 199 11 188 - 216 7 216 (7)
Bonds and other long term funding 13 42 065 41 990 75 - 37 320 37 300 20 -
Subordinated bonds 14 4 361 4 361 - - 3 831 3 831 - -
Total liabilities 19 57 662 55 536 2 861 (735) 48 463 46 791 2 934 (1 262)
Ordinary shareholders' equity (34) 8 674 7 078 2 222 (626) 13 139 10 617 2 041 481
Preference shareholders' equity - 1 130 1 130 - - 1 130 1 130 - -
Total equity (capital and reserves) (31) 9 804 8 208 2 222 (626) 14 269 11 747 2 041 481
Total liabilities and equity 8 67 466 63 744 5 083 (1 361) 62 732 58 538 4 975 (781)
Condensed consolidated statement of comprehensive income for the financial year ended 30 September 2013
Reviewed Restated
R million % change 2013 2012
(Loss)/profit for the year (>100) (4 199) 3 090
Other comprehensive income comprising items that are or may
be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations (>100) 9 (4)
Movement in cash flow hedge reserve (>100) 609 (200)
IFRS 2 reserve transactions (employee incentives) (>100) 3 (7)
Total other comprehensive income/(loss) for the year, net of tax (>100) 621 (211)
Total comprehensive (loss)/income for the year (>100) (3 578) 2 879
Condensed consolidated statement of cash flows for the financial year ended 30 September 2013
Reviewed Restated
R million 2013 2012
Cash generated from operations 11 024 9 558
Cash received from lending and insurance activities and cash reserves 24 377 21 917
Recoveries on advances previously written off 380 300
Cash paid to funders, staff, suppliers and insurance beneficiaries (13 733) (12 659)
Increase in gross advances (14 913) (16 274)
Decrease/(increase) in working capital 1 171 (327)
Decrease in inventories 140 14
Decrease/(increase) in other assets 695 (421)
Increase in other liabilities 336 80
Indirect and direct taxation paid (1 011) (1 486)
Cash inflow from equity accounted incentive transactions - 14
Cash outflow from operating activities (3 729) (8 515)
Cash outflow from investing activities (1 004) (1 304)
Acquisition of property and equipment (to maintain operations) (285) (456)
Acquisition of intangible assets (to maintain operations) (54) (112)
Disposal of property and equipment 61 31
Other investing activities (726) (767)
Cash inflow from financing activities 5 164 10 487
Cash inflow from funding activities 6 051 11 625
Issue of preference shares - 411
Preference shareholders' payments and transactions (88) (61)
Ordinary shareholders' payments and transactions (799) (1 488)
Increase in cash and cash equivalents 431 668
Cash and cash equivalents at the beginning of the year 4 035 3 367
Cash and cash equivalents at the end of the year 4 466 4 035
Made up as follows:
Short term deposits and cash 3 091 2 845
Statutory cash reserves - insurance 1 375 1 190
4 466 4 035
Condensed consolidated statement of changes in equity for the financial year ended 30 September 2013
Ordinary shares
Preference
Share Share- Ordinary share
capital based share- capital
and Distributable payment holders' and
R million premium reserves reserves Other equity premium Total
Balance at 30 September 2011 (Restated) 9 151 2 812 81 (249) 11 795 719 12 514
Dividends paid - (1 488) - - (1 488) (61) (1 549)
Issue of preference shares - - - - - 411 411
Profit on group employees acquiring ABIL Share Trust
shares less dividend received - 3 - - 3 - 3
Shares purchased into the ABIL Employee Share Trust less
share issued to employees (cost) - - - 11 11 - 11
Transfer from share-based payment reserve - 77 (77) - - - -
Transfer to insurance contingency reserve - (4) - 4 - - -
Total comprehensive income for the year - 3 029 (7) (204) 2 818 61 2 879
Balance at 30 September 2012 (Restated) 9 151 4 429 (3) (438) 13 139 1 130 14 269
Dividends paid - (799) - - (799) (88) (887)
Shares issued in terms of the scrip distribution 289 (289) - - - - -
Transfer from insurance contingency reserve - 9 - (9) - - -
Total comprehensive loss for the year - (4 287) 3 618 (3 666) 88 (3 578)
Balance at 30 September 2013 (Reviewed) 9 440 (937) - 171 8 674 1 130 9 804
Note
Number of ordinary shares at 30 September 2013 Total Weighted
Number of shares in issue at the beginning of the year 804 175 200 804 175 200
Shares issued during the year 11 636 339 6 367 602
815 811 539 810 542 802
NOTES TO THE REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AUDITORS' REVIEW REPORT
The accompanying financial information of which consist of condensed consolidated segmental income statement, condensed consolidated segmental statement of financial
position, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of cash
flows and accompanying notes to the condensed consolidated financial statements have 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". A review is substantially
less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable Deloitte & Touche to obtain assurance
that they would become aware of all significant matters that might be identified in an audit. An unmodified report has been issued. The full review report is available
for inspection at the Company's registered office. Any other information contained herein or reference to future financial performance included in this announcement,
has not been reviewed or reported on by the group's auditors.
Basis of preparation
The preparation of this group condensed financial information was supervised by the chief financial officer, Nithia Nalliah CA (SA).
This condensed group financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of the
International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board, Interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) of the IASB, IAS 34 "Interim Financial Reporting", the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the requirements of the Companies Act of South Africa
(Act 71 of 2008) as well as the Listing Requirements of the JSE Limited.
The group has adopted the following standards and interpretations during the financial year, which did not have material impact on the reported results:
- IAS 1 - Presentation of items of other comprehensive income.
- IAS 12 - Measurement of deferred tax asset.
Apart from the change in policy as noted below all the other accounting policies and their application are consistent with those used for the group's 2012 annual
financial statements.
Restatements of comparative balances
Change in the loan impairment provisioning methodology
In terms of the NCA, once a credit agreement goes into arrears, a credit provider cannot raise interest, fees and charges in excess of the total outstanding amount of
the balance determined at the time that the first arrears occurred. ABIL has applied this requirement consistently across all its portfolios when defaulting loans
reach the "in duplum" threshold (threshold loans).
For the purposes of calculating the impairment provisions against the non-performing and written off loans on a portfolio basis, accounting standard IAS 39 does not
have an alternative treatment for situations where no interest and fees are permitted to be charged and requires the application of the effective interest rate of the
loans at origination for purposes of the present value calculation. ABIL historically applied a lower weighted average effective interest rate to calculate the present
value of impaired loans, taking into consideration the fact that no interest or fees are being charged on the threshold loans. As a result of the growth in the
threshold loans over time, the difference between the two provisioning methodologies has cumulatively become material for the financial year 2013. The group has
therefore changed its provisioning methodology to discount all forecast cash flows at the original effective interest rates.
The impact of the restatement on the statement of financial position is a decrease in net advances as at 30 September 2013 of R2,2 billion (September 2012: R1,3
billion) with a reduction in retained earnings of R1,6 billion (September 2012: R958 million) after accounting for current and deferred tax of R609 million
(September 2012: R372 million). The September 2013 income statement impact is an increase in credit impairment charge by R844 million (September 2012: decrease of
R355 million) and decrease in tax of R236 million (September 2012: increase of R100 million) resulting in an decrease in profit after tax of R608 million
(September 2012: increase of R255 million).
It is important to note that forecast cash flows remain unchanged, and therefore this adjustment will reverse to the extent that those cash flows are received.
The change will continue to have an impact in the future on new threshold loans.
Change to ABIL's IBNR accounting policy
The insurance subsidiaries' credit life insurance policies are taken up by African Bank customers when an African Bank loan is sold. These policies cover the African
Bank customers for various risks such as retrenchment, death and disability. These policies are monthly policies and if a customer defaults on their African Bank loan
instalments they also default on the insurance premiums.
The accounting standards do not require the IBNR on credit life claims to be provided for within policyholder liabilities if the IBNR is offset against future income in the
calculation of the statutory reserves. The calculation of the statutory reserves gives rise to a negative reserve (ie asset) which is the value of future insurance
premiums after an allowance for unexpired insurance risk. In terms of the ABIL accounting policy the insurance subsidiaries have not recognised this asset which amounted
to approximately R1.8 billion at 30 September 2013.
ABIL is of the view that it is a fairer presentation of the financial position of the group if the IBNR on credit life claims is accounted for as policyholder
liabilities. Thus the accounting policy has been changed.
The impact of the restatement on the statement of financial position is an increase in other liabilities as at 30 September 2013 of R550 million (September 2012 R287
million) with a reduction in retained earnings of R396 million (September 2012 R206 million) after accounting for current and deferred tax of R154 million
(September 2012 R81 million). The September 2013 income statement impact is an increase in credit life insurance claims of R264 million (September 2012 a decrease of
R45 million) and a reduction of tax of R74 million (September 2012 increase of R13 million) resulting in a decrease in profit after tax of R190 million
(September 2012 increase R32 million).
Reclassification of comparative balances
The following changes for reclassification of collateral deposits and software have resulted in changes to comparative balances.
Certain collateral deposits were previously disclosed as part of cash and cash equivalents. In accordance with IFRS and group accounting policies, such deposits should
have been classified as part of other assets. The deposits have accordingly been reclassified in previously reported financial periods from cash to other assets.
Software was previously disclosed as part of property and equipment. In accordance with IFRS and group accounting policies, software should rather have been classified
as intangible assets. The software has accordingly been reclassified in previously reported financial periods from property and equipment to intangible assets.
The reclassifications had no impact on the group's and reserves, profit and loss and or capital adequacy ratios.
Changes to the SENS announcement of 1 November 2013, relating to ABIL's 11 month results to 31 August 2013
The September 2012 statement of financial position as reported in the SENS announcement of 1 November 2013, has been updated through reclassification mainly between
deferred taxation and current taxation as follows:
R million 2012 (As per SENS on 1 November 2013) Reclassification 2012 (post reclassification)
Taxation (asset) 27 362 389
Deferred tax asset 1 215 (435) 780
Taxation (liabilities) (94) 73 (21)
Total 1 148 0 1 148
The reclassifications are due to changes to the tax treatment of the change in loan provisioning methodology and change in policy of accounting for IBNR.
Other matters
After the annual goodwill impairment assessment, the group impaired the goodwill arising on the EHL acquisition amounting to R641 million and African Bank goodwill of
R4.0 billion as the goodwill carrying value exceeded the recoverable value.
During the reporting period the group issued bonds amounting to R8 billion. During the reporting period bonds amounting to R2.8 billion were redeemed by the group.
In June 2013 ABIL provided financial assistance to Eyomhlaba Investment Holdings Limited and Hlumisa Investment Holdings Limited ("the BEE companies") in a form of a
cash deposit amounting to R120 million. In the event of the default conditions being met the preference shareholders of the BEE companies have a right to exercise a
put option by selling ABIL preference shares at their original cost amounting to R120 million.
The default conditions are determined as the earlier of the following:
The failure to make any scheduled payment by the BEE company to the preference shareholders on the scheduled date; or
The date on which the asset cover (as defined in the memoranda of incorporation of the BEE companies) decrease to two times or below.
In the event of the put option being exercised, preference shares held by ABIL will be subordinated to the preference shareholders.
Events after the reporting period
Subsequent to the reporting date, African Bank has reached a settlement with the National Credit Regulator in respect of the proposed fine referred to the National
Credit Tribunal. African Bank has agreed to pay a settlement amount of R20 million as full and final settlement. This has been taken into account in the results
for the year ended 30 September 2013. Apart from the above, the directors are not aware of any material events occurring between the reporting date and the date of
authorisation of these reviewed condensed consolidated financial statements as defined in IAS 10 - Events after the reporting period.
Dividend declaration
Ordinary dividend
Ordinary shareholders are advised that the board of directors has declared a final gross cash dividend of
5 cents per ordinary share (4,25 cents net of dividend withholding tax) for the 12 months to 30 September 2013 (the cash dividend). No secondary tax on companies
(STC) credits were utilised as part of the ordinary cash dividend declaration. The cash dividend will be paid out of profits of the group.
Rights offer shares that are applied for in the rights offer will not participate in the dividend.
Timetable for ordinary shares
Share code ABL
ISIN ZAE000030060
Company registration number 1946/021193/06
Company tax reference number 9850164717
Dividend number 26
Gross cash dividend per share 5 cents
Net dividend amount represented as cents per share 4,25000 cents
Issued share capital as at declaration date 815 811 539
Declaration date Monday, 11 November 2013
Last date to trade cum dividend Friday, 29 November 2013
Shares commence trading ex dividend Monday, 2 December 2013
Record date Friday, 6 December 2013
Dividend payment date Monday, 9 December 2013
Tax implications
The cash dividend is likely to have tax implications for both resident and non-resident shareholders. Shareholders are therefore encouraged to consult their professional
tax advisers should they be in any doubt as to the appropriate action to take.
In terms of the Income Tax Act, the cash dividend will, unless exempt, be subject to dividend withholding tax (DWT) that was introduced with effect from 1 April 2012,
South African resident shareholders that are liable for DWT, will be subject to DWT at a rate of 15% of the cash dividend and this amount will be withheld from the
cash dividend. Non-resident shareholders may be subject to DWT at a rate of less than 15%
depending on their country of residence and the applicability of any double tax treaty between South Africa and their country of residence.
Preference dividend
Preference shareholders are advised that the board of directors has declared a final gross cash dividend of 308 cents per ordinary share (261,8 cents net of dividend
withholding tax) bringing the total preference share dividend for the year to 630 cents per share. The dividends have been declared from income reserves and no secondary
tax on company credit has been used.
A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt from the tax.
Timetable for preference shares
Share code ABLP
ISIN ZAE000065215
Company registration number 1946/021193/06
Company tax reference number 9850164717
Dividend number 18
Gross cash dividend per share 308 cents
Net dividend amount represented as cents per share 261,80000 cents
Issued share capital as at declaration date 13 523 029
Declaration date Monday, 11 November 2013
Last date to trade cum dividend Friday, 29 November 2013
Shares commence trading ex dividend Monday, 2 December 2013
Record date Friday, 6 December 2013
Dividend payment date Monday, 9 December 2013
Share certificates may not be dematerialised or rematerialised between Monday, 2 December 2013 and Friday, 6 December 2013 both dates inclusive.
Midrand
11 November 2013
Sponsor
Rand Merchant Bank Limited (A division of FirstRand Bank Limited)
Board of directors
Non-executive: MC Mogase (Chairman), N Adams, Advocate MF Gumbi, JDMG Koolen#, NB Langa-Royds, M Mthombeni, RJ Symmonds
Executive: L Kirkinis (CEO), A Fourie, N Nalliah, TM Sokutu
#Dutch
Company Secretary: L Goliath
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)
Registered office
59 16th Road, Midrand, South Africa, 1685
Private Bag X170, Midrand, South Africa, 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 11 713 0800
Telefax: +27 86 674 4381
www.abil.co.za
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