Wrap Text
Unaudited Consolidated interim results for the six months ended 31 August 2015
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 2015
Executive Overview
The directors are pleased to present the financial results of the
Finbond Group for the six months ended 31 August 2015.
During the six months under review, Finbond delivered another good
set of results, increasing Net Profit after Tax by 40%, Headline
Earnings per share by 45% and total active loan customers by 43%.
These solid results were achieved in difficult and challenging market
conditions.
We made further good progress with regard 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 the following achievements and significant
developments:
* Headline earnings per share increased 45% to 4.8c (Aug 2014: 3.3c).
* Basic earnings per share increased by 45% to 4.8c (Aug 2014: 3.3c).
* Profit for the period attributable to owners of the company
increased by 40% to R28.2 million (Aug 2014: R20.2 million).
* Earnings before interest, taxation, depreciation and amortization
(EBITDA) increased by 45% to R90.8 million (Aug 2014:
R62.7 million).
* Revenue from continuing operations increased by 39% to
R269.9 million (Aug 2014: R194.1 million).
* Total assets increased by 3% to R1.235 billion (Aug 2014:
R1.205 billion).
* Value of loans advanced increased by 18% to R414.1 million
(Aug 2014: R351.6 million).
* Cash received from customers increased by 21% to R599 million
(Aug 2014: R494.8 million)
* Branch Network increased by 40 branches to 321 branches
(Aug 2014: 281).
* Cost to income ratio improved by 6% to 51% (Aug 2014: 57%).
* Finbond successfully rolled out the Finbond Debit Card, Internet
Banking and Transactional Banking products, issuing 31,591 active
cards by August 2015.
* Finbond won the 2015 Sustainability Data Transparency Index awards
for the Integrated Annual Report, achieving the highest score in
the sector: “Financials – Other”, and the most improved score,
awarded by Integrated Reporting and Assurance Services (IRAS) ,
coming seventh overall.
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 1,079 staff members (August 2014:
866) and 321 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 making available 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;
2. Investment and Savings Products;
3. Transactional Banking Products; and
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.
Unsecured Lending Portfolio
The overall gross unsecured loan book reflected continued growth of
15%, ending the six-month period at R386.9 million (Aug 2014:
R336.3 million), while the related provisions outpaced this growth,
increasing year-on-year by 23% to R28.2 million at the end of the
half-year (Aug 2014: R23 million).
Total segment revenue from Finbond’s Micro Finance activities, made
up of interest, fee and insurance income (portfolio yield) increased
by 32% to R239.5 million (Aug 2014: R181.6 million).
During the period under review, Finbond offered 1 – 24 month micro-
loans from R100 - R20,000, with an average loan size of R1,472 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 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 gross book of R387 million will turn 3.5
times, resulting in collections of approximatelyR1.4 billion in cash
per year and more than R4.1 billion in cash over three years.
For the six months ended 31 August 2015, Finbond granted
R414.1 million worth of loans and received cash payments of
R599 million from customers. Cash receipts from the loan book
increased by 21%, while cash granted increased by 18% and the gross
loan book increased by 15%. This points to both good Asset Quality in
the loan portfolio and the cash generative nature of the loan book
which is, to a large extent, self-funding.
Finbond’s average loan period is significantly shorter than that of
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 as experienced elsewhere in the banking sector that
saw disproportionate growth over the past 30 - 48 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 has 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 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 34% and 61% for our 3 – 6 month product range (August 2014:
36% - 58%) and 81% - 93% for our 12 – 24 month product range at the
end of August 2015 (August 2014: 82% - 94%).
Impairments
Conservative lending practices and strict upfront credit scoring
supported by robust collection strategies and processes, ensured
better-than-industry bad debts.
Notwithstanding an increase in impairments, the loan loss reserve,
also referred to as the risk coverage ratio (impairment
provision/Portfolio at Risk: 90 days in arrears and longer), which is
an indication of a micro-finance institution’s ability to cope with
estimated loan losses, remained relatively constant at the end of
August 2015 at 95.7% (Aug 2014: 97.7%). The maintenance of such a
high coverage ratio is a direct result of continued, consistent and
conservative provisioning against future loan losses undertaken by
management. The 30-day arrears coverage ratio (impairment
provision/Portfolio at Risk: 30 days in arrears and longer), reflects
an improvement in short-term arrears coverage, being recorded at
55.9% at the half-year-end, which increased from a ratio of 51.5% at
the end of August 2014. A leading global, independent, external
assurance and advisory firm have reviewed the Group’s impairment
provisions at 31 August 2015, and independently concluded that
Finbond’s impairment provisioning methodology is appropriate and that
provisions are adequate.
Finbond recorded an increase in impairments in the year-on-year
comparison as it continued to apply the write-off policy which has
maintained high quality assets in the portfolio. Finbond’s adjusted
loan loss ratios trended slightly higher during the reporting period
with Net Impairment as a percentage of expected instalments amounting
to 7.3% (Aug 2014: 5.8%), and Net Impairment as a percentage of cash
received (which is more conservative than instalments due) of 8.6% at
the end of August 2015 (August 2014: 7.8%). These adjusted measures
are a more appropriate reflection of the impairment cost related to a
short-term loan portfolio than traditional balance sheet ratios. 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.
Thus, computations based on the outstanding balance 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 plus in arrears) is
slightly less conservative at 95.7% (August 2014: 97.7%), 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 - 6 month product range
write-off ranges between 3% and 13%.
Collection rates averaged 84% of expected receipts for the six months
ended 31 August 2015 (August 2014: 82%), following an improving
trend, which ended at 87% for the month of August 2015.
Insurance
Total Insurance Revenue for the period under review amounted to
R62.1 million (Feb 2014: R46.3 million), reflecting 34% growth.
On 10 June 2015, the NCR applied to the South African National
Consumer Tribunal (“Tribunal”) to, inter alia, order Finbond to:
- refund five consumers whom the NCR believes Finbond overcharged
in respect of credit life insurance;
- do an audit to determine how many other customers have been
charged more than the industry average since commencing its
credit life business, and to refund those customers; and
- pay an administrative fine of R1 million.
The NCR alleges that Finbond Mutual Bank customers, when taking out a
short-term unsecured loan, are required to pay unreasonable premiums
for the provision of credit life insurance, in contravention of
Section 106 (2) of the National Credit Act (“NCA”) and that the
commission charged for this insurance is not properly disclosed.
Finbond takes its obligations under the NCA seriously and respects
the authority of the NCR. Finbond is however confident that it at all
times complied with all relevant laws and regulations and that the
NCR application does not have legal merit and will be dismissed. The
insurance premium rates of the Credit Life Insurance Products that
Finbond Mutual Bank sells to consumers are risk based, product
specific, value adding, fully justified and not unreasonable nor at
an unreasonable cost to the consumer and Finbond will demonstrate
this to the Tribunal.
Finbond has investigated the allegations and has taken legal advice,
and believes the matter will be satisfactorily resolved in Finbond’s
favour through due legal process.
Liquidity
Finbond’s liquidity position at the end of August 2015 reflects
R78.6 million cash in bank (Aug 2014: R100.5 million). Cash, cash
equivalents and liquid investments decreased by 27% to R362.8 million
(Aug 2014: R499.8 million).
Cash Received (including capital repaid, fees and interest) as a
percentage of Cash Granted for the period from March 2015 to August
2015, averaged 145% (August 2014: 141%).
At the end of August 2015 the deposit book remained relatively
unchanged at R819.2 million (August 2014: R830.7 million), as the
Group deliberately slowed the rate of deposit-taking in order to
prudently manage levels of surplus funding. The average deposit size
increased by 3.9% from R327,770 to R340,416, the average term
increased from 27.6 months to 29.5 months, and the average interest
rate increased from 9.2% to 9.5%. This gave rise to an overall
decline in Net Cash from Operating Activities for the six months.
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, recently
adding a 32-day call deposit product to the product offering, which
had no impact on liquidity in the period ending August 2015. Given
the long-term nature of Finbond’s liabilities (fixed term deposits
with an average term of 29.5 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 2,344 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
remains well in excess of its minimum regulatory capital
requirements, with an excess of R124.5 million over and above the
R250 million required by the Registrar of Banks and an excess of
R297.2 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 2015 Finbond’s:
- liquidity coverage ratio % was 314% [214% more than required
from 2019]
- net stable funding ratio % was 517% [417% more than required
from 2018]
- capital adequacy ratio % was 35.9% [25.9% more than required
from 2018].
Increasing Footprint
Finbond currently operates through 321 branches in South Africa, of
which 97 are located in Gauteng, 58 in KwaZulu-Natal, 66 in the
Western Cape, 46 in the Eastern Cape and 54 in the Free State and
North West.
During the period under review, we increased our branch network by
40 branches and intend to increase it by between 40 - 80 branches
per year for the next five years.
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 the following:
- Rolling out Finbond Mutual Bank’s 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 Internet and Cell Phone Banking Products and
Applications; Growing market share through the increased sale
of short- and medium-term products, specifically the ,30-day,
90-day, six-month and 12 – 24 month products;
- Further refining, developing and improving all information
technology systems and processes in all divisions;
- Further diversifying revenue generation through the conservative
roll-out of a new, secured home loan product;
- Selective strategic acquisitions.
Prospects
It is not expected that the challenging macro-economic environment
will improve, nor will the adverse market conditions within which
Finbond operates, 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 the
following:
- 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 321 Branch Network;
- Superior Asset Quality;
- Access to funding;
- Ability to leverage the existing cost platform, while
diversifying income streams;
- 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.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
Interim Interim Full year
%
unaudited unaudited audited
Growth
Rand Thousand 31 August 2015 31 August 2014 28 February 2015
Assets
Cash and cash
equivalents 78,623 100,476 (22%) 197,500
Other financial assets 284,179 399,368 (29%) 372,772
Loans and other advances
to customers 310,178 261,178 19% 290,715
Other receivables 94,344 26,358 258% 57,553
Inventories 2,305 - 100% 2,567
Current tax receivable 2,071 2,037 2% 2,532
Property, plant and
equipment 52,191 31,908 64% 46,044
Investment property 264,605 244,818 8% 248,820
Goodwill 139,808 115,313 21% 120,034
Intangible Assets 171 - 100% 171
Deferred tax 6,670 23,168 (71%) 10,545
Total Assets 1,235,145 1,204,624 3% 1,349,253
Equity
Equity attributable to
equity holders of parent
Share capital & premium 183,868 205,234 (10%) 201,523
Reserves 4,586 6,273 (27%) 3,428
Retained income 149,936 107,213 40% 141,777
Equity attributable to
owners of the Company 338,390 318,720 6% 346,728
Non-controlling interest (824) (824) 0% (824)
Total Equity 337,566 317,896 6% 345,904
Liabilities
Trade and other payables 17,354 16,712 4% 26,299
Fixed and Notice
deposits 819,237 830,710 (1%) 921,933
Transactional deposits 2,601 - 100% 69
Current tax payable 25 3 733% 2
Finance lease obligation 1,181 1,355 (13%) 1,533
Loans from shareholders 18,000 - 100% 15,000
Deferred tax 39,181 37,948 3% 38,513
Total Liabilities 897,579 886,728 1% 1,003,349
Total Equity and
Liabilities 1,235,145 1,204,624 3% 1,349,253
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended
Six Months ended
Interim Interim % Full Year
unaudited unaudited Growth audited
Rand Thousand 31 August 2015 31 August 2014 28 February 2015
Interest income 78,978 69,103 14% 145,457
Interest expense (42,658) (35,289) (21%) (76,137)
Net interest income 36,320 33,814 7% 69,320
Fee income 98,338 75,653 30% 170,128
Management fee income 16,724 13,725 22% 27,766
Other micro-finance
income 76,304 20,674 269% 79,686
Operating (loss)/profit
from Cell Captive
arrangement (131) 16,152 (101%) 30,612
Fair value adjustments (422) (1,206) 65% 1,790
Net commission expense (1,911) (1,402) (36%) (3,384)
Net impairment charge on
loans and advances (47,885) (23,697) (102%) (60,137)
Operating expenses (135,187) (109,001) (24%) (242,418)
Profit before taxation 42,150 24,712 71% 73,363
Taxation (13,932) (4,552) (206%) (22,496)
Total profit and 28,218 20,160 40% 50,867
comprehensive income for
the year
Profit attributable to:
Owners of the parent 28,218 20,160 40% 50,867
Non-controlling interest
- Continuing operations - - - -
Basic earnings/ (loss)
per share (cents) 4.8 3.3 45% 8.6
Earnings per share:
Basic earnings per
share (cents) 4.8 3.3 45% 8.6
Headline earnings per
share (cents) 4.8 3.3 45% 8.6
Diluted earnings per
share (cents) 4.8 3.3 45% 8.6
Total number of
ordinary shares
outstanding 570,103 605,025 (6%) 589,614
Weighted average number
of ordinary shares
outstanding 587,224 605,025 (3%) 593,308
Net profit attributable
to ordinary equity
holders of the parent 28,218 20,160 40% 50,867
Adjusted for:
(Loss)/ profit on
disposal of property,
plant and equipment - (105) (100%) 123
Revaluation of
investment properties - - - (4,002)
Fair value adjustment
of investment
properties included in
basic earnings - - - (4,683)
Tax effect on re-
measurement of items of
a capital nature
included in earnings in
the current period - - - 8,876
Headline profit 28,218 20,055 41% 51,181
CONSOLIDATED STATEMENT OF CASH FLOW
for the period ended
Six Months ended Full Year
Interim unaudited Interim unaudited % audited
Rand Thousand 31 August 2015 31 August 2014 Growth 28 February 2015
Cash flows from
operating
activities
Cash generated
from operations (115,080) 100,575 (214%) 161,166
Tax paid (8,906) (988) (801%) (8,543)
Net cash from
operating
activities (123,986) 99,587 (225%) 152,623
Cash flows from
investing
activities
Purchase of
property, plant
and equipment (12,404) (14,550) 15% (31,947)
Sale of
property, plant
and equipment 254 2,520 (90%) 1,741
Purchase of
investment
property (15,785) (2,198) (618%) (2,198)
Purchase of
other intangible
assets (19,774) (52,717) 62% (57,608)
Purchase of
financial assets (116,426) (125,571) 7% (589,187)
Sale of
financial assets 204,597 139,924 46% 660,977
Net cash from
investing
activities 40,462 (52,592) 177% (18,222)
Cash flows from
financing
activities
Reduction of
shares capital
of buy back of
shares (17,654) (20,718) 15% (24,819)
Proceed of other - 12 (100%) -
financial
liabilities
Proceeds from
shareholders’
loans 3,000 - 100% 15,000
Finance lease
payments (640) (28) 2,186% (1,136)
Dividends paid (20,059) (12,545) 60% (12,706)
Net cash from
financing
activities (35,353) (33,279) 6% (23,661)
Total cash
movement for the
period (118,877) 13,716 (967%) 110,740
Cash at the
beginning of the
period 197,500 86,760 128% 86,760
Total cash at
the end of the
period 78,623 100,476 (22%) 197,500
CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY
For the period ended
Rand Thousand Interim Interim Full Year
unaudited unaudited audited
31 August 31 August 28 February
2015 2014 2015
Total equity at the beginning of the period 345,904 329,603 329,603
Change in share capital and premium
Purchase of treasury shares (17,654) (20,718) (24,430)
Change in reserves
Equity-settled share-based payment 1,158 1,396 2,409
Total comprehensive income for the period 28,218 20,160 50,867
Dividends paid (20,059) (12,545) (12,545)
Transfer between reserves - - -
Change in non-controlling interest
Total comprehensive income for the period - - -
Dividends paid - - -
Movement in non-controlling interest in
reserves - - -
Total equity at the end of the period 337,567 317,896 345,904
SEGMENTAL REPORTING
Investment Micro Property Transactional Other Total
Rand Thousand Products Finance Investment Banking
6 Months ended
31 August 2015
Interest
income 10,938 66,208 - - 1,832 78,978
Interest
expense (24,648) (5,708) - (257) (12,045) (42,658)
Net Interest
Income (13,710) 60,500 - (257) (10,213) 36,320
Fee income 30 96,967 - 2,112 (771) 98,338
Management fee
income - - - - 16,724 16,724
Other micro-
finance income - 76,304 - - - 76,304
Operating
profit from
Cell Captive
arrangement - (131) - - - (131)
Fair value
adjustment (422) - - - - (422)
Net commission
income - (2,271) 95 - 265 (1,911)
Net impairment
charge on
loans and
advances - (46,221) - - (1,664) (47,885)
Operating
expense (1,040) (120,351) (948) (1,395) (11,453) (135,187)
Profit/(Loss)
before
taxation (15,142) 64,797 (853) 460 (7,112) 42,150
Taxation 5,006 (21,420) 282 (152) 2,352 (13,932)
(Loss)/profit
for the period (10,136) 43,377 (571) 308 (4,760) 28,218
(Loss)/profit
for the period
attributed to:
Owner of
company (10,136) 43,377 (571) 308 (4,760) 28,218
Non-
controlling
interest - - - - - -
Significant
segment assets
Cash and cash
equivalents 43,693 32,99 2 1,748 188 78,623
Other
Financial
Assets 268,819 - - - 15,360 284,179
Loans and
advances - 302,827 - - 7,351 310,178
Inventories
- - - 2,305 - 2,305
Property,
Plant and
Equipment 7 40,831 - 1,315 10,038 52,191
Investment
Property - - 264,605 - - 264,605
Goodwill - 139,808 - - - 139,808
Significant
segment
liabilities
Deposits
received from
customers 819,237 - - - - 819,237
Transactional
deposits - - - 2,601 - 2,601
Loans from
shareholders - - - - 18,000 18,000
SEGMENTAL REPORTING
Investment Micro Property Transactional Other Total
Rand Thousand Products Finance Investment Banking
6 Months ended
31 August 2014
Interest
income 11,900 56,280 7 - 917 69,104
Interest
expense (22,086) (5,893) - - (7,310) (35,289)
Net Interest
Income (10,186) 50,387 7 - (6,393) 33,815
Fee income - 75,653 - - - 75,653
Management fee
income - 13,725 - - - 13,725
Other micro-
finance income 407 18,459 - - 1,807 20,673
Operating
profit from
Cell Captive - 16,151 - - - 16,151
arrangement
Fair Value
adjustment (1,120) - - - (86) (1,206)
Net commission
income (2) (1,593) 193 - 1 (1,401)
Net impairment
charge on
loans and
advances - (23,439) - - (258) (23,697)
Operating
expense (728) (98,264) (416) - (9,594) (109,002)
Profit/(Loss)
before
taxation (11,629) 51,079 (216) - (14,523) 24,711
Taxation - 71 (55) - (4,567) (4,551)
(Loss)/profit
for the period (11,629) 51,150 (271) - (19,090) 20,160
(Loss)/profit
for the period
attributed to:
Owner of
company (11,629) 51,150 (271) - (19,090) 20,160
Non-
controlling
interest - - - - - -
Significant
segment assets
Cash and cash
equivalents 39,893 37,722 - - 43,042 120,657
Other
Financial
Assets 343,542 124,274 - - - 467,816
Loans and
advances - 257,977 - - 136 258,113
Inventories - - - - - -
Property,
Plant and
Equipment 9 24,962 - - 6,937 31,908
Investment
Property - - 244,818 - - 244,818
Goodwill - 115,313 - - - 115,313
Significant
segment
liabilities
Deposits
received from
customers 806,439 - - - - 806,439
Transactional
deposits - - - - - -
Loans from
shareholders - - - - - -
SEGMENTAL REPORTING
Investment Micro Property Transactional Other Total
Rand Thousand Products Finance Investment Banking
12 Months
ended 28
February 2015
Interest
income 23,577 119,768 28 - 2,083 145,456
Interest
expense (37,700) (16,049) - (128) (22,259) (76,136)
Net Interest
Income (14,123) 103,719 28 (128) (20,176) 69,320
Fee income (2) 169,835 290 9 (4) 170,128
Management fee
income - - - - 27,766 27,766
Other micro-
finance income 515 50,105 - - 29,066 79,686
Operating
profit from
cell captive
arrangement - 30,612 - - - 30,612
Fair Value
adjustment (2,212) - 4,002 - - 1,790
Net commission
income - (3,384) - - - (3,384)
Net impairment
charge on
loans and
advances - (57,959) (923) - (1,254) (60,136)
Operating
expense (1,654) (225,112) (927) (2,076) (12,649) (242,418)
Profit/(Loss)
before
taxation
Taxation - 71 171 - (22,738) (22,496)
(Loss)/profit
for the period (17,476) 67,887 2,641 (2,195) 11 50,868
(Loss)/profit
for the period
attributed to:
Owner of
company (17,476) 67,887 2,641 (2,195) 11 50,868
Non-
controlling
interest - - - - - -
Significant
segment assets
Cash and cash
equivalents 154,926 42,536 38 - - 197,500
Other
Financial
Assets 369,720 3,053 - - - 372,773
Loans and
advances - 290,715 - - - 290,715
Inventories - - - 2,567 - 2,567
Property,
Plant and
Equipment 10 38,267 - 1,597 6,171 46,045
Investment
Property - - 248,820 - - 248,820
Goodwill - 120,034 - - - 120,034
Significant
segment 921,933 - - 69 15,000 937,002
liabilities
Deposits
received from
customers 921,933 - - - - 921,933
Transactional
deposits - - - 69 - 69
Loans from
shareholders - - - - 15,000 15,000
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 2015 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 2015.
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 29 September 2015.
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 2015.
Estimates
The preparation of interim financial statements requires management
to make judgements, 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 judgements 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 2015.
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
Rand Thousand Level 1 Level 2 Level 3 Total
Assets and liabilities
measured at fair value:
Recurring
Other financial assets - 281,126 3,053 284,179
Investment property - - 264,605 264,605
- 281,126 267,658 548,784
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 of the calculations performed.
Level 3 fair values of investment properties have been generally
derived using the market value, the 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
Rand Thousand
Subsequent
Opening capitalised Closing
Group 2015 Balance Purchases expenditure balance
Investment Property
Investment properties 251,873 15,785 - 267,658
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 2015.
Assets and liabilities not
measured at fair value, but fair
values are disclosed Level 1 Level 2 Level 3
Finance lease obligations - 1,181 -
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 approximate fair value, due to the short-term
nature of these instruments. These instruments are not included in
the fair value hierarchy.
For and on behalf of the Board
Dr Malesela Motlatla Dr Willie van Aardt
29 September 2015
--------------------------------------------------------------------
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 Com (Law), Hons (Acc),
(CA)(SA)); D Brits* (B Com, MBA) (NW).
Secretary: CD du Plessis – Sekretari
*Non-executive
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: 29/09/2015 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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