Wrap Text
Unaudited Consolidated Interim Results for the Six Months ended 31 August 2014
FINBOND GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: “FGL” ISIN: ZAE00013895
(“Finbond” or “the Company” or “the Group")
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2014
Executive Overview
The directors are pleased to present the financial results of the
Finbond Group for the six months ended 31 August 2014.
During the six months under review, Finbond delivered another set of
solid results increasing Net Profit After Tax by 45.7%, Headline
Earnings by 44.1%, Total Assets by 45.7%, Deposits by 68.8% and total
active customers by 62.5%. These good results were achieved in
difficult and challenging market conditions.
We made further good progress with regards to the realization of our
vision “to be the leading emerging market community Bank in South
Africa improving the quality of life of our clients by offering them
access to unique value and solution based savings, credit,
transactional and insurance solutions tailored around depositor and
borrower requirements that empower, develop and uplift our clients.”
This included a number of achievements and significant developments
for Finbond:
* Operating profit from continuing operations increased by 50.1% to
R 24.7 million (Aug 2013: R16.5 million).
* Profit for the period attributable to owners of the company
increased 45.7% to R 20.2 million (Aug 2013: R13.8 million).
* Earnings before interest, taxation, depreciation and amortization
(EBITDA) increased 61.4% to R62.7 million (Aug 2013: R38.8
million).
* Revenue from continuing operations increased 45.5% to R194.1
million (Aug 2013: R133.4 million).
* Basic earnings per share increased 44.9% to 3.3c (Aug 2013: 2.3c).
* Headline earnings per share increased 44.1% to 3.3c (Aug 2013:
2.3c).
* Cost to income ratio improved to 57% (Aug 2013: 63%).
* Total assets increased 46.3% to R1.2 billion (Aug 2013: R826.6
million).
* Value of loans advanced increased by 37.7% to R351.6 million (Aug
2013: R255.4 million).
* Cash, cash equivalents and liquid investments increased by 51.5% to
R499.8 million (Aug 2013: R333.1 million).
* Gross loans and advances increased by 58% to R372.1 million (Aug
2013: R235.5 million).
* Cash received from customers increased by 51.7% to R494.8 million
(Aug 2013: R326.1 million)
* Increased fixed term retail deposits by 68.8% to R830.7 million
(Aug 2013: R492.1 million).
* Branch Network increased by 102 branches to 281 branches (Aug 2013:
179).
* Successfully completed the development and testing of the Finbond
Debit Card, Internet Banking and Transactional Banking products
that will be rolled out to clients in the fourth quarter of the
current financial year
Finbond continues to manage for the long term and to invest in
people, training, information technology, banking systems, compliance
systems as well as in enhanced collection strategies and systems, in
order to build a sustainable, professional business.
We remain focused on executing the Group’s five year strategy and top
business priorities namely optimal capital utilization, earnings
growth, conservative risk management, strict upfront credit scoring,
good quality sales, effective collections, cost containment,
expanding bank product ranges, diversifying income streams, consumer
education and training and development of staff members. This enabled
us to achieve overall strong operational results despite the current
difficult and challenging business environment.
Finbond Group Limited
Finbond Group Limited, with its 866 staff members and 281 branches,
specializes in the design and delivery of unique value and solution
based savings, credit, transactional and insurance solutions tailored
around depositor and borrower requirements rather than
institutionalized policies and practices. We exist to improve and
transform the lives and livelihoods of our clients by availing them
of modern inclusive banking products and services that benefit and
empower them.
Finbond Group Limited conducts its business through four divisions
focused on:
1. Short and Medium Term Micro Credit Products; and
2. Investment and Savings Products;
3. Transactional Banking Products
4. Insurance Products
Micro Credit, Transactional and Insurance Solutions are offered
nationally to the under banked and underserved emerging banking
market actively seeking credit and banking solutions, but remaining
largely unattended and underserviced due to the traditional banks
concentration on the higher income brackets of the population.
Our Investment and Savings products, which offer a superior above
average rate of return, are offered nationally to investors and
pensioners looking for guaranteed higher fixed income in the current
environment of depressed low yields.
Micro Credit Portfolio
The overall gross loan book reflected strong positive growth of 58%
ending the six month period at R372.1 million (Aug 2013: R235.5
million).
Total segment revenue from Finbond’s Micro Finance activities, made
up of interest, fee and insurance income (portfolio yield) increased
48% to R181.6 million (Aug 2013: R122.7 million).
During the period under review Finbond offered 1 month – 24 month
micro loans from R100 - R20,000 with an average loan size of R1,621
and an average tenure of 3.5 months. Given the short term nature of
Finbond’s products, Finbond’s loan portfolio is cash flow generative
and a good source of internally generated liquidity. The whole loan
portfolio turns nearly 3.5 times a year. This is a key differentiator
from longer term lenders. By way of example: If a longer term
lender’s average tenure is 36 months with a book size of R372
million, that lender will collect R124 million cash per year and R372
million over three years. Finbond’s book of R372 million will turn
3.5 times resulting in collections of approximately R1.3 billion in
cash per year and more than R3.9 billion in cash over three years.
For the six months ended August 2014 Finbond granted R351.6 million
worth of loans and received cash payments of R494.8 million from
customers. Cash receipts from the loan book increased by 52% while
cash granted increased 38% while the gross loan book increased by
58%. This points to both good Asset Quality in the loan portfolio
and the cash generative nature of the loan book which is to some
extent self funding.
Finbond’s average loan period is significantly shorter than our
larger competitors and our average loan size significantly smaller.
Given this conservative approach, Finbond does not have any exposure
to the 36 – 84 month, R30,000 – R180,000 long term unsecured lending
market elsewhere in the banking sector that saw disproportionate
growth over the past 24 - 42 months and that caused significantly
increased write offs and bad debts, for those other lenders exposed
to these loans. In Finbond’s experience shorter term loans offer
lower risk as consumers are more likely to pay them back as opposed
to longer term loans.
Furthermore, Finbond’s micro credit portfolio is also not exposed to
any concentration risk and does not have any significant exposure to
any specific employer or industry.
Strict Upfront Credit Scoring
Over the past six months Finbond continued to apply strict upfront
credit scoring and affordability criteria. The credit scores on the
various products are monitored on a monthly basis and detailed
affordability calculations are also performed prior to extending any
loans in order to determine whether clients can in fact afford the
loan repayments. In line with our conservative approach additional
expense buffers are included in all affordability assessments.
Finbond’s lending practices have been consistently conservative over
the past number of years. While other micro-lenders in the market may
have doubled or tripled debtors books two and three years ago,
Finbond did not. In fact two and three years ago Finbond saw very
conservative growth in the loan portfolio. Finbond did not have
liberal lending polices two and three years ago that now require
adjustment.
Finbond has been consistently conservative and rejection or decline
rates remain higher than that of our major competitors even after
their recent tightening of lending criteria. Rejection rates stood at
between 36% and 58% for our 3 – 6 month product range and 82% - 94%
for our 12 – 24 month product range at the end of August 2014.
Bad Debts
Conservative lending practices, strict upfront credit scoring
supported by robust collection strategies and processes ensured
better than industry bad debts.
Finbond’s Net Impairment Loss Ratio improved to 12.1% (Aug 2013:
13.6%) this financial year. Finbond’s Net Impairment as a percentage
of expected instalments amounted to 5.8% (Aug 2013: 5.3%) and Net
Impairment as a percentage of cash received (which is more
conservative than instalments due) stood at 7.8% at the end of August
2014 (Aug 2013: 6%). The best measurement of arrears and impairments
on the short term products is against instalments due and not
outstanding balances, because a large part of a short term loan is
repaid before month-end/year-end and is therefore not reflected on
the balance sheet. Computations based on the outstanding balance
therefore distort this ratio on short term products.
Loan loss reserve, also referred to as the risk coverage ratio
(impairment provision/Portfolio at Risk 90 days in arrears plus) is
more conservative at 97.7% (Aug 2013: 97%), which is an indication of
a financial institution’s ability to cope with estimated loan losses.
The write off vintages show that Finbond’s 1 to 6 month product range
write offs range between 6% and 12% and for the 12 – 24 month product
range it ranges between 1% and 8%.
Collection rates averaged 82% of expected receipts for the six months
ended 31 August 2014 (Aug 2013: 81%), following an improving trend
which ended at 85% for the month of August 2014.
Liquidity Profile
Finbond’s liquidity position at the end of August 2014 reflects
R100.5 million cash in bank (Aug 2013: R134.3 million). Cash, cash
equivalents and liquid investments increased by 50.1% to R499.8
million (Aug 2013: R333.1 million).
Cash Received (including capital repaid, fees and interest) as a
percentage of Cash Granted for the period of March 2014 to August
2014 averaged 141%.
By the end of August 2014 the deposit book had grown to R830.7
million. The average deposit size is R327,770, the average term 27.6
months and the average interest rate is 9.2%.
Finbond is not exposed to the uncertainty that accompanies the use of
corporate call deposits as a funding mechanism since Finbond only
accepts 6 – 72 month fixed and indefinite term deposits. Given the
long term nature of Finbond’s liabilities (fixed term deposits with
average term of 27.6 months) and short term nature of its assets
(short term micro loans with an average term of 3.5 months), Finbond
possesses a low risk liquidity structure with a positive liquidity
mismatch.
Finbond funds itself through approximately 2,500 individual fixed
long term deposits, resulting in a smooth debt maturity profile with
no (0%) dependence on large funders or the debt capital markets and
no concentration risk.
Capital Position
Finbond follows a conservative approach to capital management and
holds a level of capital which supports its business while also
growing its capital base ahead of business requirements.
Finbond’s Capital position remains strong. Finbond Mutual Bank is
well above its minimum regulatory capital requirements with an excess
of R126.5 million over and above the R250 million required by the
Registrar of Banks and an excess of R269.4 million over and above the
normal DI 400 required minimum for mutual banks.
Although Finbond as a Mutual Bank is not subject to the Basel III
requirements, Finbond already complies with and significantly exceeds
all Basel III requirements set for 2018 and 2019. As at 31 August
2014 Finbond’s:
• liquidity coverage ratio % was 283% [183% more than required from
2019]
• net stable funding ratio % was 506% [406% more than required from
2018]
• capital adequacy ratio % was 34% [24% more than required from 2018].
Increasing Footprint
Finbond currently operates through 281 branches in South Africa of
which 86 are located in Gauteng, 56 in KwaZulu Natal, 57 in the
Western Cape, 45 in the Eastern Cape and 37 in the Free State and
North West.
During the period under review we increased our branch network by 80
branches and intend to increase it by between 40 - 60 branches per
year for the next five years.
Providing Inclusive Financial Services
An exciting landscape is emerging in the banking arena, where there
is a large, untapped market consisting of a significant portion of
the adult population in South Africa who are actively seeking
banking, savings and credit solutions, yet remain largely unattended
and underserviced. Achieving sustainable and inclusive development in
the banking sector goes hand-in-hand with improving access to
financial services, particularly for the poor and vulnerable.
These nationally distributed prospective customers represent earnings
potential for banks, but constitute the unbanked, under banked and
underserviced. These consumers need access to banking for savings,
loans and transactions, but are not effectively serviced by the major
retail banks. These unbanked and underserviced consumers are not
excluded from the banking sector by choice. An important reason for
their predicament is that most banks do not offer products tailored
to their specific needs. Many of these consumers are also located in
rural areas where the traditional banks do not have a foot print or
are busy leaving due to the fact that they cannot operate profitably
in the small towns in South Africa. In effect, this vulnerable
section of society has been excluded by the traditional South African
banks’ inability to understand their requirements and an
unwillingness to adopt innovative models to serve them. It is
important that the products are downsized without being downgraded to
match the unbanked, under banked and underserviced population’s
smaller requirements. Since the unbanked and underserviced have
remained largely unaddressed by traditional financial institutions,
they will not hesitate to choose newer players for basic banking
services such as payment and deposit transactions.
Irrespective of where in South Africa they might be located, this
unbanked section of society has similar needs for financial services.
In addition to savings, loans, transactions and investments, the
unbanked need flexibility, simplicity, speed, small product sizes
when it comes to loans, low-balance savings accounts; proximity and
ease of access and basic financial education. With these needs
addressed, these unbanked millions in South Africa constitute an
enormous opportunity for a new bank such as Finbond, armed with
inclusive unique value and solution based ethical finance solutions
tailored around borrower requirements to socially and economically
empower, provide dignity, transform the livelihoods and expand
opportunities to the poor.
Finbond is well positioned and able to provide much needed, inclusive
Banking services and products to the vulnerable, unbanked, under
banked and previously disadvantaged in line with the principles set
out in Treasuries National Policy Document, i.e. “A safer financial
sector to serve South Africa better”, with regards to financial
inclusion and promoting access to financial services.
Growing Market Share
Given that we are growing from a small base we can keep on growing
for a long time despite the current difficult environment in the
unsecured lending market.
Finbond is well positioned for the implementation of its strategic
growth plans to provide inclusive financial and banking services in
South Africa and has significant growth opportunities over the next
five to ten years.
Strategic Initiatives
Strategic initiatives under way include:
• Rolling out Finbond Mutual Bank, transactional bank accounts and
savings accounts to all our micro credit clients;
• Rolling out a Mastercard Debit Card product to all our micro
credit clients;
• Rolling out an Internet and Cell Phone Banking Products and
Applications
• Growing market share through the increased sale of short and
medium term products, specifically the 30 days, 90 days, 6
months and 12 – 24 months products;
• Further refining, developing and improving all information
technology systems and process in all divisions;
• Investigating the possibility to convert from a Mutual Bank to a
Commercial Community Bank in order to offer clients a wider
range of banking products and services.
• Selective strategic acquisitions.
Prospects
The challenging macro-economic environment as well as the adverse
market conditions in the markets within which Finbond operates, are
not expected to abate in the short and medium term. However, we
remain confident that we have the required resources, and depth at
Executive Management and Board level to successfully confront and
overcome these various challenges.
We remain positive about our prospects for the future due to
Finbond’s:
• Improvement achieved in earnings and profitability despite
difficult market conditions;
• Improvement achieved in cash generated from operating
activities;
• Management expertise and Board guidance;
• Strong Cash Flow;
• Strong Liquidity and surplus cash position;
• Uniquely positioned 281 Branch Network;
• Superior Asset Quality;
• Access to funding;
• Conservative Risk Management; and
• Growth potential in the underserviced lower end of the banking
market.
Finbond’s strong capital position, significant surplus cash, robust
liquidity and funding profile together with its conservative approach
to risk management, position the business well both in adverse market
conditions and as markets improve.
References to future financial performance included anywhere in this
announcement have not been reviewed or reported on by the group’s
external auditors.
Dividend
No interim dividend has been declared.
Finbond Group
Limited
For the six months
ended 31 August 2014
Figures in Rand Interim unaudited Interim Growth Full year audited
31 August 2014 unaudited 31 % 28 Feb 2014
August 2013
STATEMENT OF
FINANCIAL POSITION
Figures in Rand
Assets
Cash and cash
equivalents 100,476,330 134,268,784 -25% 86,759,771
Other financial
assets 399,367,693 198,821,143 101% 413,720,500
Loans and other
advances to
customers 261,177,516 163,929,529 59% 210,988,685
Other receivables 26,358,380 10,949,156 141% 18,132,659
Current tax
receivable 2,037,476 - 0% 3,759,606
Property, plant and
equipment 31,907,951 18,821,344 70% 22,567,979
Investment property 244,817,655 238,571,174 3% 242,620,028
Goodwill 115,313,353 61,262,303 88% 62,596,218
Deferred tax 23,168,153 - 0% 24,701,780
Total Assets 1,204,624,507 826,623,433 46% 1,085,847,226
Equity and
liabilities
Equity
Equity Attributable
to Equity Holders of
Parent
Share capital &
premium 205,234,112 235,995,237 -13% 225,952,568
Reserves 6,272,731 1,531,543 310% 4,875,698
Accumulated profit 107,213,294 76,226,497 41% 99,598,394
Equity attributable
to owners of the
Company 318,720,137 313,753,277 2% 330,426,660
Non-controlling
interest (824,052) (824,052) 0% (824,052)
Total equity 317,896,085 312,929,225 2% 329,602,608
Liabilities
Trade and other
payables 16,699,857 13,197,075 27% 20,100,205
Deposits received
from customers 830,710,397 492,094,546 69% 695,902,092
Current tax payable 3,337 2,314,594 -100% 8,726
Finance lease
obligation 1,355,239 257,719 426% 1,327,599
Other financial
liabilities 11,919 8,272 44% -
Deferred tax 37,947,673 5,822,002 552% 38,905,996
Total liabilities 886,728,422 513,694,208 73% 756,244,618
Total equity and
liabilities 1,204,624,507 826,623,433 46% 1,085,847,226
STATEMENT OF
COMPREHENSIVE INCOME
For the six months
ended 31 August 2014
Interim
Interim unaudited unaudited 31 Growth Full year audited
Figures in Rand 31 August 2014 August 2013 % 28 Feb 2014
Interest income 69,103,421 38,427,197 80% 93,018,672
Interest expense (35,288,939) (16,271,026) 117% (44,286,052)
Net interest income 33,814,482 22,156,170 53% 48,732,620
Fee income 75,653,426 61,130,667 24% 112,731,141
Management fee
income 13,724,599 10,673,179 29% 20,736,996
Other microfinance
income 20,673,757 12,415,667 67% 28,499,859
Operating profit
from Cell captive
arrangement 16,151,926 10,679,184 51% 22,804,330
Fair value
adjustments (1,206,085) 55,973 -2255% 4,957,526
Net commission
expense (1,401,675) (1,503,869) -7% (2,374,768)
Net impairment
charge on loans and
advances (23,697,326) (14,496,713) 63% (24,940,770)
Operating expenses (109,001,329) (84,648,876) 29% (164,294,444)
Profit before
taxation 24,711,775 16,461,382 50% 46,852,490
Taxation (4,551,546) (2,627,546) 73% (9,934,869)
Total profit and
comprehensive income
for the year 20,160,229 13,833,836 46% 36,917,621
Profit attributable
to: - -
Owners of the parent 20,160,229 13,833,836 46% 36,917,621
Non controlling
interest -
Continuing
operations - - -
Earnings per share:
Basic earnings per
share (cents) 3.3 2.3 46% 6.6
Headline earnings
per share (cents) 3.3 2.3 45% 5.6
Diluted earnings per
share (cents) 3.3 2.3 43% 5.6
Total number of
ordinary shares
outstanding 605,025,250 605,025,250 0% 605,025,250
Weighted average
number of ordinary
shares outstanding 605,025,250 596,905,870 1% 605,025,250
Net profit
attributable to
ordinary equity
holders of the
parent 20,160,229 13,833,836 46% 39,917,621
Adjusted for:
(Loss)/ profit on
disposal of
property, plant and
equipment (105,309) (27,700) 280% 282,183
Revaluation of
investment
properties - - 0% (3,363,655)
Fair value
adjustment of
investment
properties included
in basic earnings - - 0% (4,042,854)
Tax effect on re-
measurement of items
of a capital nature
included in earnings
in the current
period - - 0% 679,199
Headline profit 20,054,920 13,806,136 45% 33,836,149
STATEMENT OF CASH
FLOW
For the six months
ended 31 August 2014
Interim
Interim unaudited unaudited 31 Growth Full year audited
Figures in Rand 31 August 2014 August 2013 % 28 Feb 2014
Cash flows from
operating activities
Cash receipts from 17%
customers 833,384,033 710,425,156 1,315,824,084
Cash paid to
suppliers and
employees (623,139,846) (343,547,069) 81% (676,815,229)
Cash generated from
operations 210,244,187 366,878,087 -43% 639,008,855
Interest income 13,069,432 5,772,554 126% 15,264,706
Interest expense (35,271,615) (16,365,915) 116% (40,666,664)
Taxation (paid) (988,352) (4,608,218) -79% (13,292,248)
Increase in net
loans and advances (87,466,165) (66,568,997) 31% (136,393,704)
Net cash from
operating activities 99,587,487 285,107,511 -65% 463,920,945
Purchase of
property, plant and
equipment (14,549,692) (3,675,576) 296% (9,117,732)
Sale of property,
plant and equipment 2,520,225 - 0% 691,084
Purchase of
investment property (2,197,627) - 0% (5,571,292)
Purchase of other
intangible assets (52,717,135) - 0% (1,333,915)
Sale/(Purchase) of
financial assets 14,352,807 (183,958,248) -108% (387,967,244)
Net cash from
investing activities (52,591,422) (187,633,824) -72% (403,299,099)
Cash flows from
financing activities
Reduction of shares
capital of buy back
of shares (20,718,456) (3,167,140) 554% (13,209,809)
Proceeds from other
financial
liabilities 11,919 - 0% -
Repayment of other
financial
liabilities - (23,480,378) -100% (23,488,649)
Finance lease
payments (27,640) (152,586) -82% (133,733)
Dividends paid (12,545,329) - 0% -
Net cash from
financing activities (33,279,506) (26,800,104) 24% (36,832,191)
Total cash movement
for the year 13,716,559 70,673,583 -81% 23,789,655
Cash at the
beginning of the
year 86,759,771 63,595,201 36% 62,970,116
Total cash at the
end of year 100,476,330 134,268,784 -25% 86,759,771
Condensed
consolidated
statement of changes Share Share Treasury Total Share
in equity Capital premium shares Capital Reserves
For the six months
ended 31 August 2014
Balance at 1 March
2014 605 239,691,627 (13,739,664) 225,952,568 4,875,698
Profit for the
period - - - - -
Other comprehensive
income - - - - -
Total comprehensive
income for the
period - - - - -
Transactions with
owners, recorded
directly in equity - - - - -
Contributions by and
distributions to
owners - - - - -
Share incentive
costs - - - - -
Costs related to
rights issue - - - - -
Transfer from
contingency reserve - - - - 1,397,033
Own shares purchased - - (20,718,456) (20,718,456) -
Dividends declared - - - - -
Total transactions
with owners - - (20,718,456) (20,718,456) 1,397,033
Balance at 31 August
2014 605 239,691,627 (34,458,120) 205,234,112 6,272,731
For the six months
ended 31 August 2013
Balance at 1 March
2013 605 239,691,627 (529,855) 239,162,377 4,221,575
Profit for the
period - - - - -
Other comprehensive
income - - - - -
Total comprehensive
income for the
period - - - - -
Transactions with
owners, recorded
directly in equity - - - - -
Contributions by and
distributions to - - - - -
owners
Share incentive
costs - - - - 162,487
Costs related to
rights issue - - - - -
Transfer from
contingency reserve - - - - (2,833,410)
Own shares purchased - - (3,167,140) (3,167,140) -
Transactions with
Joint Venture,
recorded directly in
equity - - - - -
Total transactions
with owners - - (3,167,140) (3,167,140) (2,670,923)
Balance at 31 August
2013 605 239,691,627 (3,696,995) 235,995,237 1,550,652
For the year ended
28 February 2014
Balance at 1 March
2013 605 239,691,627 (529,855) 239,162,377 3,913,339
Profit for the
period - - - - -
Other comprehensive
income - - - - -
Total comprehensive
profit for the
period - - - - -
Transfer to reserve
- Employees shares
option scheme - - - - 962,359
Treasury shares
purchased - - (13,209,809) (13,209,809) -
Total contributions
by and distributions
to owners of company
recognised directly
in equity - - (13,209,809) (13,209,809) 962,359
Balance at 28
February 2014 605 239,691,627 (13,739,664) 225,952,568 4,875,698
Total
Condensed Attributable
consolidated to equity Non-
statement of changes Accumulated holders of the controlling
in equity profit/ (loss) company interest Total equity
For the six months
ended 31 August 2014
Balance at 1 March
2014 99,598,394 330,426,660 (824,052) 329,602,608
Profit for the
period 20,160,229 20,160,229 - 20,160,229
Other comprehensive
- - - -
income
Total comprehensive
income for the
period 20,160,229 20,160,229 - 20,160,229
Transactions with
owners, recorded
directly in equity - - - -
Contributions by and
distributions to
owners - - - -
Share incentive
costs - - - -
Costs related to
rights issue - - - -
Transfer from
contingency reserve - 1,397,033 - 1,397,033
Own shares purchased - (20,718,456) - (20,718,456)
Dividends declared (12,545,329) (12,545,329) - (12,545,329)
Total transactions
with owners (12,545,329) (31,866,752) - (31,866,752)
Balance at 31 August
2014 107,213,294 318,720,137 (824,052) 317,896,085
For the six months
ended 31 August 2013
Balance at 1 March
2013 62,373,552 305,757,504 (824,052) 304,933,452
Profit for the
period 13,833,836 13,833,836 - 13,833,836
Other comprehensive
income - - - -
Total comprehensive
income for the
period 13,833,836 13,833,836 - 13,833,836
Transactions with
owners, recorded
directly in equity - - - -
Contributions by and
distributions to
owners - - - -
Share incentive
costs - 162,487 - 162,487
Costs related to
rights issue - - - -
Transfer from
contingency reserve - (2,833,410) - (2,833,410)
Own shares purchased - (3,167,140) - (3,167,140)
Transactions with
Joint Venture,
recorded directly in
equity - - - -
Total transactions
with owners - (5,838,063) - (5,838,063)
Balance at 31 August
2013 76,207,388 313,753,277 (824,052) 312,929,225
For the year ended
28 February 2014
Balance at 1 March
2013 62,680,773 305,756,489 (824,052) 304,932,437
Profit for the
period 36,917,621 36,917,621 - 36,917,621
Other comprehensive
income - - - -
Total comprehensive
profit for the
period 36,917,621 36,917,621 - 36,917,621
Transfer to reserve
- Employees shares
option scheme - 962,359 - 962,359
Treasury shares
purchased - (13,209,809) - (13,209,809)
Total contributions
by and distributions
to owners of company
recognised directly
in equity - (12,247,450) - (12,247,450)
Balance at 28
February 2014 99,598,394 330,426,660 (824,052) 329,602,608
SEGMENTAL REPORT
Property
Figures in rand Deposits Received Micro Finance Investment
6 Months ended 31
August 2014
Interest income 11,900,163 56,279,675 6,974
Interest expense (22,086,420) (5,892,782) (23)
Net interest income/
(expense) (10,186,257) 50,386,893 6,951
Fee income - 75,653,427 -
Management fee
income - 13,724,599 -
Other microfinance
income 407,443 18,458,960 -
Operating profit
from Cell Captive
arrangement - 16,151,426 -
Fair Value
adjustment (1,120,404) - -
Net commission
income/ (expense) (2,000) (1,593,488) 193,022
Net impairment
charge on loans and - (23,439,106) -
advances
Operating expenses (727,662) (98,263,724) (415,767)
Operating (loss)/
profit (11,628,880) 51,078,987 (215,794)
Excess of acquirers'
interest in net
assets - - -
(Loss)/ profit
before taxation (11,628,880) 51,078,987 (215,794)
Taxation - 70,701 (55,177)
(Loss)/ profit for
the period (11,628,880) 51,149,688 (270,971)
(Loss)/ profit for
the period
attributable to: - - -
Owners of the
company (11,628,880) 51,149,688 (270,971)
Non controlling
interest - - -
Segment assets 795,035,026 37,722,149 22,937,649
Investment property - - 244,817,655
Loans and advances - 257,977,225 -
Cash and cash
equivalents 39,892,930 37,722,149 -
Other Financial
Assets 343,542,017 124,273,615 -
Segment liabilities 814,341,163 - -
Deposits received
from customers 806,438,511 - -
SEGMENTAL REPORT
Property
Figures in rand Deposits Received Micro Finance Investment
6 Months ended 31
August 2013
Interest income 3,675,739 33,737,891 13,634
Interest expense (5,472,903) (10,688,090) -
Net interest income/
(expense) (1,797,163) 23,049,799 13,634
Fee income - 51,944,657 -
Management fee
income - 10,673,179 -
Other microfinance
income - 12,319,571 115,836
Operating profit
from Cell Captive
arrangement - 10,679,184 -
Fair Value
adjustment 55,973 - -
Net commission
income/ (expense) - (1,535,671) 31,144
Net impairment
charge on loans and
advances - (14,496,713) -
Operating expenses (1,121,584) (81,520,502) (52,582)
Operating (loss)/
profit (2,862,774) 11,113,504 108,032
Excess of acquirers'
interest in net
assets - - -
(Loss)/ profit
before taxation (2,862,774) 11,113,504 108,032
Taxation - (10,131) (6,401)
(Loss)/ profit for
the period (2,862,774) 11,103,373 101,631
(Loss)/ profit for
the period
attributable to: - - -
Owners of the
company (2,862,774) 11,103,373 101,631
Non controlling
interest - - -
Segment assets 219,720,638 304,990,704 242,198,279
Investment property - - 238,571,174
Loans and advances - 163,929,531 -
Cash and cash
equivalents 51,403,790 21,322,565 -
Other Financial
Assets 166,024,848 38,146,216 -
Segment liabilities 492,094,546 154,115,797 96,234
Deposits received
from customers 492,094,546 - -
SEGMENTAL REPORT
Property
Figures in rand Deposits Received Micro Finance Investment
12 Months ended 28
February 2014
Interest income 13,264,721 78,012,417 27,177
Interest expense (31,005,074) (13,140,106) (11)
Net interest income/
(17,740,353) 64,872,312 27,166
(expense)
Fee income - 112,731,141 -
Management fee - 20,736,996 -
income
other microfinance
- 27,840,164 658,248
income
Operating profit
from Cell Captive - 22,804,330 -
arrangement
Fair Value
914,672 (7,027,646) -
adjustment
Net commission
258,128 (19,827,082) 115,836
income/ (expense)
Net impairment
charge on loans and - (24,899,428) -
advances
Operating expenses (1,902,024) (143,162,077) (530,045)
Operating (loss)/
(18,469,577) 54,068,709 271,205
profit
Excess of acquirers'
interest in net - - -
assets
(Loss)/ profit
(18,469,577) 54,068,709 271,205
before taxation
Taxation - (13,865) (203,382)
(Loss)/ profit for
(18,469,577) 54,054,844 67,823
the period
(Loss)/ profit for
the period
attributable to:
Owners of the
(18,469,577) 54,054,844 67,823
company
Non controlling
- - -
interest
Segment assets 401,343,968 272,002,607 243,527,577
Investment property - - 242,620,028
Loans and advances - 210,998,685 -
Cash and cash
18,679,486 29,947,904 907,549
equivalents
Other Financial
382,664,482 31,056,018 -
Assets
Segment liabilities 695,902,092 7,530,018 -
Deposits received
695,902,092 - -
from customers
SEGMENTAL REPORT
Figures in rand Reconciling Consolidated
6 Months ended 31
August 2014
Interest income 916,609 69,103,421
Interest expense (7,309,714)
(35,288,939)
Net interest income/
(expense) (6,393,105) 33,814,482
Fee income (1) 75,653,426
Management fee
income - 13,724,599
Other microfinance
income 1,807,354 20,673,757
Operating profit
from Cell Captive
arrangement - 16,151,426
Fair Value
adjustment (85,681) (1,206,085)
Net commission
income/ (expense 791 (1,401,675)
Net impairment
charge on loans and
advances (258,220) (23,697,326)
Operating expenses (9,594,176) (109,001,329)
Operating (loss)/
profit (14,522,538) 24,711,775
Excess of acquirers'
interest in net
assets - -
(Loss)/ profit
before taxation (14,522,538) 24,711,775
Taxation (4,567,070) (4,551,546)
(Loss)/ profit for
the period (19,089,608) 20,160,229
(Loss)/ profit for
the period
attributable to: - -
Owners of the
company (19,089,608) 20,160,229
Non controlling
interest - -
Segment assets 348,929,683 1,204,624,507
Investment property - 244,817,655
Loans and advances 136,436 258,113,661
Cash and cash
equivalents 43,042,456 120,657,535
Other Financial
Assets - 467,815,632
Segment liabilities 72,387,259 886,728,422
Deposits received -
from customers -
SEGMENTAL REPORT
Figures in rand Reconciling Consolidated
6 Months ended 31
August 2013
Interest income 999,933 38,427,197
Interest expense (110,033) (16,271,026)
Net interest income/
(expense) 889,900 22,156,170
Fee income 9,186,010 61,130,667
Management fee
income - 10,673,179
Other microfinance
income (19,740) 12,415,667
Operating profit
from Cell Captive
arrangement - 10,679,184
Fair Value
adjustment - 55,973
Net commission
income/ (expense) 658 (1,503,869)
Net impairment
charge on loans and
advances - (14,496,713)
Operating expenses (1,954,208) (84,648,876)
Operating profit 8,102,620 16,461,382
Excess of acquirers'
interest in net
assets - -
Profit before
taxation 8,102,620 16,461,382
Taxation (2,611,014) (2,627,546)
Profit for the
period 5,491,606 13,833,836
(Loss)/ profit for
the period
attributable to:
Owners of the
company 5,491,606 13,833,836
Non controlling
interest - -
Segment assets 68,453,654 835,363,275
Investment property -
238,571,174
Loans and advances - 163,929,531
Cash and cash
equivalents 61,476,750 134,203,105
Other Financial
Assets - 204,171,064
-
Segment liabilities (123,872,527) 522,434,050
Deposits received
from customers - 492,094,546
SEGMENTAL REPORT
Figures in rand Reconciling Consolidated
12 Months ended 28
February 2014
Interest income 1,714,357 93,018,672
Interest expense (140,861) (44,286,052)
Net interest income 1,573,496 48,732,620
Fee income - 112,731,141
Management fee
income - 20,736,996
Other microfinance
income 1,447 28,499,859
Operating profit
from Cell Captive
arrangement - 22,804,330
Fair Value
adjustment 11,070,500 4,957,526
Net commission
income/ (expense) 17,078,350 (2,374,768)
Net impairment
charge on loans and
advances (41,342) (24,940,770)
Operating expenses (18,700,298) (164,294,444)
Operating (loss)/
profit 10,982,153 46,852,490
Excess of acquirers'
interest in net
assets - -
Profit before
taxation 10,982,153 46,852,490
Taxation (9,717,622) (9,934,869)
Profit for the
period 1,264,531 36,917,621
Profit for the
period attributable
to:
Owners of the
company 1,264,531 36,917,621
Non controlling
interest - -
Segment assets 168,973,074 1,085,847,226
Investment property - 242,620,028
Loans and advances - 210,998,685
Cash and cash
equivalents 37,224,832 86,759,771
Other Financial
Assets - 413,720,500
Segment liabilities 52,812,508 756,244,618
Deposits received
from customers - 695,902,092
Notes to the condensed consolidated interim financial statements
Finbond Group Limited is a company domiciled in South Africa. The
condensed consolidated interim financial statements of the Company as
at and for the six months ended 31 August 2014 comprise the Company
and its subsidiaries (together referred to as the “Group”) and the
Group’s interests in associates and jointly controlled entities.
These condensed consolidated interim financial statements have been
prepared in accordance with the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and the Financial
Pronouncements as issued by the Financial Reporting Standards
Council, IAS 34 Interim Financial Reporting, the Companies Act and
the JSE Listings Requirements. They do not include all of the
information required for full annual financial statements, and should
be read in conjunction with the consolidated, audited annual
financial statements of the Group as at and for the year ended 28
February 2014.
These unaudited interim results have been prepared under the
supervision of Mr. GT Sayers, CA(SA).
These condensed consolidated interim financial statements were
approved by the Board of Directors on 18 September 2014.
Significant accounting policies
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are the same as those
applied by the Group in its consolidated, audited annual financial
statements as at and for the year ended 28 February 2014.
The 2013 six-month consolidated figures have been restated due to the
change in accounting policy whereby the Cell Captive arrangement is
now accounted for by applying IFRS10 instead of SIC12 (AC412). The
restatement had no effect on net profit after taxation or the
earnings of the Group.
Estimates
The preparation of interim financial statements requires management
to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets
and liabilities, income and expenses. Actual results may differ from
these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgments made by management in applying
the Group’s accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated,
audited annual financial statements as at and for the year ended 28
February 2014.
Fair value disclosures
Fair value hierarchy of instruments measured at fair value
The table below analyses assets and liabilities carried at fair
value, by level of fair value hierarchy. The different levels are
based on the extent that quoted prices are used in the calculation of
the fair value of the instruments and have been defined as follows:
Level 1: Fair value is based on quoted unadjusted prices in active
markets for identical assets or liabilities that the group can access
at measurement date.
Level 2: Fair value is determined through valuation techniques based
on observable inputs, either directly, such as quoted prices, or
indirectly, such as derived from quoted prices. This category
includes instruments valued using quoted market prices in active
markets for similar instruments, quoted prices for identical or
similar instruments in markets that are considered less than active
or other valuation techniques where all significant inputs are
directly observable from market data.
Level 3: Fair value is determined through valuation techniques using
significant unobservable inputs. This category includes all assets
and liabilities where the valuation technique includes inputs not
based on observable data and the unobservable inputs have a
significant effect on the instrument’s valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments where significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
Levels of fair value
measurements Level 1 Level 2 Level 3 Total
Assets and liabilities
measured at fair value:
Recurring
Other financial assets 8,957 369,228,079 30,130,657 399,367,693
Investment property - - 244,817,655 244,817,655
8,957 369,228,079 274,948,312 644,185,348
Valuation techniques used to derive level 2 and 3 fair values
Level 2 fair values of other financial assets have been derived by
using the rate as available in active markets. The underlying assets
and liabilities of the investment in the cell captive arrangement are
mainly cash and cash equivalents, gross debtors and SARS liabilities.
These all approximate fair value and the fair value hierarchy is
considered level 1 and level 2, with no elevated risk areas. The
IBNR provision is managed from industry data accumulated on the
Alexander Forbes Risk and Insurance Services claim system, and is
classified as a Level 3. Refer to the accounting policy on insurance
claims provisions for further details on the calculations performed
Level 3 fair values of investment properties have been generally
derived using the market value, comparable sales method of valuation,
and the residual land valuation method, as applicable to each
property.
The fair value is determined by external, independent property
valuers, having appropriate recognised professional qualifications
and recent experience in the location and category of the properties
being valued. The valuation company provides the fair value of the
Group’s investment portfolio every twelve months.
Reconciliation of assets and liabilities
measured at level 3
Subsequent
Opening capitalised Closing
Group 2015 Balance Purchases expenditure balance
Investment Property
Investment properties 242,620,028 2,100,000 97,627 244,817,655
Transfer of assets and
liabilities within levels of the
fair value hierarchy
No transfers of assets and liabilities within levels of fair value hierarchy
occurred during the current financial year. There were no transfers in 2014.
Assets and liabilities not
measured at fair value, but fair
values are disclosed Level 1 Level 2 Level 3
Finance lease obligations - 1,355,239 -
- 1,355,239 -
Cash and cash equivalents are not fair valued and the carrying amount
is presumed to equal fair value.
Short term receivables and short term payables are measured at
amortised cost and approximates fair value due to the short term
nature of these instruments. These instruments are not included in
the fair value hierarchy.
Accounting policies and restatements
Restatements of 31 August 2013 financial results
As previously
reported Restated
Figures in Rand unaudited Restatements Unaudited
STATEMENT OF FINANCIAL
POSITION
Figures in Rand
Assets
Cash and cash
equivalents 134,203,105 (65,679) 134,268,784
Other financial assets 204,171,064 5,349,921 198,821,143
Loans and other
advances to customers 163,929,529 - 163,929,529
Other receivables
14,404,756 3,455,600 10,949,156
Property, plant and
equipment 18,821,344 - 18,821,344
Investment property 238,571,174 - 238,571,174
Goodwill 61,262,303 - 61,262,303
Deferred tax - - -
Total Assets 835,363,275 8,739,842 826,623,433
Equity and liabilities
Equity
Equity Attributable to
Equity Holders of
Parent
Share capital & premium 235,995,237 - 235,995,237
Reserves 1,550,652 19,109 1,531,543
Accumulated profit/
(loss) 76,207,388 (19,109) 76,226,497
Equity attributable to
owners of the Company 313,753,277 - 313,753,277
Non-controlling
interest (824,052) - (824,052)
Total equity 312,929,225 - 312,929,225
Liabilities
Trade and other
payables 16,401,139 3,204,064 13,197,075
Deposits received from
customers 492,094,546 - 492,094,546
Current tax payable 5,833,315 3,518,721 2,314,594
Finance lease
obligation 257,719 - 257,719
Other financial
liabilities 8,272 - 8,272
Deferred tax 7,839,059 2,017,057 5,822,002
Total liabilities 522,434,050 8,739,842 513,694,208
Total equity and
liabilities 835,363,275 8,739,842 826,623,433
STATEMENT OF
COMPREHENSIVE INCOME
For the six months ended
31 August 2013
As previously Interim
reported unaudited 31
Figures in Rand unaudited Restatements August 2013
Interest income 39,390,188 (962,991) 38,427,197
Interest expense (16,365,915) 94,889 (16,271,026)
Net interest income 23,024,273 (868,103) 22,156,170
Fee income 61,130,667 - 61,130,667
Management fee income - 10,673,179 10,673,179
Other microfinance
income 38,001,737 (25,586,070) 12,415,667
Operating profit from
Cell captive arrangement - 10,679,184 10,679,184
Fair value adjustments 61,779 (5,806) 55,973
Net commission expense (1,503,869) - (1,503,869)
Net impairment charge on
loans and advances (14,496,713) - (14,496,713)
Operating expenses (85,624,314) 975,438 (84,648,876)
Profit/(loss) before
taxation 20,593,560 (4,132,178) 16,461,382
Taxation (6,759,724) 4,132,178 (2,627,546)
Total profit and
comprehensive income for
the year 13,833,836 - 13,833,836
Profit attributable to: - - -
Owners of the parent 13,833,836 - 13,833,836
Non-controlling interest
- Continuing operations - - -
For and on behalf of the Board
Dr. Malesela Motlatla Dr. Willie van Aardt
18 September 2014
--------------------------------------------------------------------
Directors
Chairman: Dr MDC Motlatla* (BA, DCom (Unisa)); Chief Executive
Officer: Dr W van Aardt (BProc (Cum Laude), LLM (UP), LLD (PU CHE)
Admitted Attorney of The High Court of South Africa, QLTT (England
and Wales), Solicitor of the Supreme Court of England and Wales); HJ
Wilken-Jonker* (BComHons (Unisa); Chief Financial Officer: GT Sayers
(CA (SA), BCom (Hons) (UNP), BCompt (Hons) (Unisa)); Adv J Noeth* (B
Iuris LLB); Adv. N Melville* (B Law, LLB(Natal) LLM(cum
laude)(Natal)SEP(Harvard) RN Xaba* (CA (SA) BCompt, BCompt (Hons)
(Unisa))R Emslie* (B Comm Law, Hons Acc, CA (SA)) D Brits* (B Com,
MBA) (NW) *Non-Executive. Secretary: CD du Plessis – Sekretari
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor: Grindrod Bank Limited
Date: 18/09/2014 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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