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Condensed Audited Financial Results for the Year Ended 30 September 2014
AFRICAN BANK INVESTMENTS LIMITED (in business rescue)
(Incorporated in the Republic of South Africa)
(Registration number 1946/021193/06)
(Ordinary share code: ABL) (ISIN: ZAE000030060)
(Hybrid instrument code: ABLP) (ISIN: ZAE000065215)
('ABIL' or 'the company')
CONDENSED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014
OVERVIEW
The 2014 financial year was one of significant changes for African Bank Investments Limited
('ABIL') with the following events taking place:
- African Bank Limited ('African Bank'), a subsidiary of ABIL, was placed under curatorship on
10 August 2014;
- Ellerines Furnishers Proprietary Limited ('Ellerines Furnishers'), a subsidiary of Ellerine Holdings
Limited ('Ellerine Holdings'), which is in turn a subsidiary of ABIL, was placed under business
rescue on 7 August 2014;
- Ellerine Holdings was placed under business rescue on 22 August 2014; and
- Trading in ABIL securities on the JSE was suspended on 11 August 2014.
Subsequent to year end, the company began voluntary business rescue proceedings on
5 June 2015.
The board of directors of ABIL ('the Board') has presented unconsolidated company results as the
Board was unable to prepare consolidated results. During the financial year under review and for
the reasons described below, the company lost control of two of its material wholly owned
subsidiaries, African Bank and Ellerine Holdings.
On 10 August 2014, the board of African Bank requested the Registrar of Banks to place the bank
under curatorship. The Registrar in conjunction with the Minister of Finance, placed African Bank
under curatorship in terms of section 69 of the Banks Act, 1990. From that date control of African
Bank was vested with the curator and the African Bank board of directors was relieved of its duties.
From the date that African Bank was placed under curatorship ABIL has had neither control nor
access to the African Bank accounting records and data relating to its advances book.
In light of the significant size of the additional credit impairment provision raised by the curator on
the advances book, ABIL requested access to the African Bank accounting records in order to form
a view of the accuracy and correctness of the significant changes to the provisions - materially
affecting both the current and the prior year results of African Bank.
The board of ABIL agreed to appoint KPMG to conduct an independent review to verify the accuracy
of the calculations of the impairment provisions.
The board of ABIL also appointed an independent accounting expert to provide a view on the
correctness of the IFRS accounting treatment that African Bank adopted for the increased provisions,
as this would directly affect the 2014 ABIL consolidated financial statements and the comparative
for 2013. In terms of professional rules, the curator of African Bank and Deloitte (who acted as
auditors of the African Bank financial statements for the year ended September 2013 and prior years)
had to agree on the facts relating to the past and additional credit impairment provisions raised in
order for the independent accounting expert to furnish an opinion on the proper IFRS accounting
for the additional credit impairment provisions. Regrettably, the ABIL board was unable to
convince the curator to support this process and Deloitte would only respond to the requests for
confirmation of background facts relevant to the accounting after the curator had agreed to the
background facts. Therefore, the KPMG review referred to above did not take place, and the
independent accounting expert could not complete his work.
Given the circumstances described above, the Board is not in a position to satisfy itself on the
correctness or accuracy of the African Bank financial statements prepared by the curator, and not
in a position to consolidate the financial results of African Bank up to the date it was placed under
curatorship.
On 22 August 2014, Ellerine Holdings commenced voluntary business rescue proceedings in terms
of section 129 of the Companies Act 71 of 2008. From that date, control of Ellerine Holdings vested
with the business rescue practitioner.
The major trading subsidiary of Ellerine Holdings, Ellerines Furnishers Proprietary Limited ('Ellerines
Furnishers'), had already commenced voluntary business rescue proceedings on 7 August 2014.
The business rescue practitioners of Ellerines Furnishers disposed of or closed all South African
operations before 31 December 2014. As a result, all staff involved in the South African business
operations were retrenched. As Ellerines Furnishers no longer has staff, it is not possible to obtain
sufficient and proper financial information to perform the consolidation of Ellerine Holdings up to
the date it was placed in business rescue. Given the circumstances, the board is not in a position
to consolidate the financial results of Ellerine Holdings up to the date it was placed in business
rescue.
FINANCIAL PERFORMANCE
The company incurred a loss after tax of R16.2 billion (2013: R225 million) mainly due to the
impairment of its investments in African Bank Limited and Ellerine Holdings Limited.
As a consequence of the above, the ordinary shareholders' equity reduced from net assets of
R9.7 billion in 2013 to R1.4 billion net liability.
GOING CONCERN
ABIL is currently in business rescue due to the demand for repayment of loans and fulfilment of
guarantees issued to various financial institutions. Information regarding the business rescue
proceedings is available at http://abil.investoreports.com/investor-media/abil-business-rescue/
The company is an investment holding company and hence is reliant on the dividends it receives
from its subsidiaries for income in order to meet its commitments.
The Board believe that the claims by the creditors will be paid in full for the following reasons:
- The company's subsidiary, The Standard General Insurance Company Limited ('Stangen'), is in
a strong financial position and has equity of approximately R1.1 billion at 30 September 2015.
- Stangen is profitable and in the 2015 financial year made profits of approximately R1.4 billion.
- Value will be realised from Stangen's run-off credit life book with African Bank, despite the lapsing
of the purchase and sale agreement for the entire issued shares in Stangen. Stangen is exploring
various ways to retain value in its book as well as developing new routes to market independent
of African Bank Limited.
- Stangen has sufficient cash and equity to declare dividends to ABIL that will fund operations,
facilitate repayment of ABIL's creditors and provide ABIL with funds to either invest in new
opportunities or to make distributions to ABIL's shareholders.
The Board believes that if Stangen is either sold or continues operating as a subsidiary of ABIL,
there will be sufficient cash to pay ABIL's creditors, fund operations and potentially make new
investments or distributions to ABIL's shareholders.
Thus the Board concluded that the preparation of the financial information as a going concern is
appropriate.
RIGHTS OFFER
The company raised R5.5 billion in a rights offer which was finalised in December 2013. These
funds were utilised to capitalise African Bank Limited.
DIVIDENDS
No ordinary dividends were declared in the 2014 financial year. A preference dividend of 349 cents
per share was declared on 19 May 2014 and paid on 17 June 2014.
DIRECTORATE
The chief executive officer, Leon Kirkinis resigned on 6 August 2014 whilst Toni Fourie and Tami
Sokutu, both executive directors, resigned with effect from 6 February 2014.
Nithia Nalliah resigned subsequent to year end on 31 March 2015 and Jack Koolen sadly passed
away subsequent to year end on 3 May 2015.
LOOKING AHEAD
The company is currently under business rescue and its future will depend on the outcome of the
business rescue process, which is forecast to conclude in 2016.
On behalf of the board
Mutle Mogase
Chairman
Company income statement for the year ended 30 September 2014
R million 2014 2013
Dividends received 1 271 1 227
Sundry income 7 -
Interest received 9 2
Total income 1 287 1 229
Reversal of impairment loss - 338
Operating costs (372) (7)
Impairment of financial instruments (167) -
Impairment of subsidiaries (16 925) (1 784)
Finance cost (6) -
Indirect tax (4) (1)
Loss before taxation (16 187) (225)
Direct taxation: SA normal tax (4) -
Loss for the year (16 191) (225)
Reconciliation between basic loss and headline earnings
Loss for the year (16 191) (225)
Preference dividends (89) (88)
Basic loss attributable to ordinary shareholders (16 280) (313)
Adjusted for: Impairment of subsidiaries 16 925 1 446
Headline earnings 645 1 133
Earnings per share (cents)
Basic and diluted loss per share (1 160,9) (32,2)
Headline earnings per share 46,0 116,5
Weighted number of shares in issue (million) 1 402,4 972,7
Company statement of other comprehensive income for the year ended 30 September 2014
2014 2013
Loss for the year (16,191) (225)
Other comprehensive loss - -
Total comprehensive loss (16,191) (225)
Company statement of financial position as at 30 September 2014
R million 2014 2013
Assets
Short-term deposits and cash 4 35
Other financial assets 4 125
Deferred tax asset - 1
Investment in subsidiaries 564 12,040
Total assets 572 12,201
Liabilities and equity
Borrowings 447 1,314
Other liabilities 378 29
Total liabilities 825 1,343
Ordinary share capital 192 20
Ordinary share premium 14,458 9,420
Reserves (16,033) 288
Ordinary shareholders' equity (1,383) 9,728
Preference shareholders' equity 1,130 1,130
Total equity (capital and reserves) (253) 10,858
Total liabilities and equity 572 12,201
Tangible net asset value per ordinary share (cents) (92.1) 1,192.4
Net asset value per ordinary share (cents) (92.1) 1,192.4
Number of shares in issue (million) 1,501.0 815.8
Company statement of changes in equity for the year ended 30 September 2014
Ordinary shares
Ordinary
share capital Retained
R million and premium earnings
Balance at 30 September 2012 9 151 1 689
Shares issued in scrip distribution 289 (289)
Dividends paid - (799)
Total comprehensive loss for the year - (313)
Balance at 30 September 2013 9 440 288
Shares issued in rights issue 5 210 -
Dividends paid - (41)
Total comprehensive loss for the year - (16 280)
Balance at 30 September 2014 14 650 (16 033)
Ordinary Preference
shareholders' share capital
R million equity and premium Total
Balance at 30 September 2012 10 840 1 130 11 970
Shares issued in scrip distribution - - -
Dividends paid (799) (88) (887)
Total comprehensive loss for the year (313) 88 (225)
Balance at 30 September 2013 9 728 1 130 10 858
Shares issued in rights issue 5 210 - 5 210
Dividends paid (41) (89) (130)
Total comprehensive loss for the year (16 280) 89 (16 191)
Balance at 30 September 2014 (1 383) 1 130 (253)
Company statement of cash flows for the year ended 30 September 2014
R million 2014 2013
Cash generated from operations 1 258 1 218
Cash receipts 1 287 1 229
Cash payments (29) (11)
Indirect and direct taxation paid (7) (1)
Cash inflow from operating activities 1 251 1 217
Cash outflow from investing activities (5 494) (1 381)
Investments acquired during the year (177) (120)
Investments disposed of during the year 132 -
Investments in subsidiaries (5 449) (1 261)
Cash inflow from financing activities 4 216 192
Cash (outflow)/inflow from funding activities (867) 1 079
Issue of ordinary shares 5 213 -
Preference shareholders' payments and transactions (89) (88)
Ordinary shareholders' payments and transactions (41) (799)
(Decrease)/Increase in cash and cash equivalents (27) 28
Cash and cash equivalents at the beginning of the year 35 7
Reclassification of cash held by African Bank Limited (4) -
Cash and cash equivalents at the end of the year 4 35
NOTES TO THE FINANCIAL STATEMENTS
AUDITORS' REPORT
The accompanying financial information is extracted from the audited financial statements but in
itself is not audited. The auditors have expressed an adverse opinion on the financial statements
of the group and an unqualified opinion with an emphasis of matter on the separate financial
statements of the company. A paragraph relating to a reportable irregularity was furthermore included.
An extract of the audit opinion is as follows:
'Basis for adverse opinion on consolidated financial statements and an unqualified opinion on the
separate financial statements
The company has subsidiaries and is required by International Financial Reporting Standards to
prepare consolidated financial statements. As described in the directors' report, the directors have
prepared unconsolidated financial statements. These financial statements have been prepared on
the same basis as separate financial statements, which are financial statements permitted in terms
of International Financial Reporting Standards when an entity also prepares consolidated financial
statements. Unconsolidated financial statements are prepared on the basis that investments in
subsidiaries are reported at cost and income is recognised when dividends from subsidiaries are
receivable. The effect of not preparing consolidated financial statements in accordance with
International Financial Reporting Standards is not given as required.
Adverse opinion on consolidated financial statements
In our opinion, because of the significance of the matter discussed in the preceding paragraph,
the financial statements do not present fairly the financial position of the group as at 30 September
2014, and of its financial performance and cash flows for the year then ended, in accordance with
International Financial Reporting Standards, and the requirements of the Companies Act of South
Africa.
Unqualified opinion on the separate financial statements
In our opinion, the separate financial statements present fairly, in all material respects, the financial
position of the company as at 30 September 2014, and its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards, and the
requirements of the Companies Act of South Africa.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 3.1 to the financial statements which
indicate that the company incurred a loss of R16.2 billion for the year ended 30 September 2014
and, as at that date the company's total liabilities exceed its total assets by R253 million. Note 3.1
also indicated that these conditions, along with other matters, indicate the existence of a material
uncertainty which may cast significant doubt on the company's ability to continue as a going concern.
Report on other legal and regulatory requirements
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing Profession
Act, we report that we have identified certain unlawful acts or omissions committed by persons
responsible for the management of African Bank Investments Limited which constitute reportable
irregularities in terms of the Auditing Profession Act, and have reported such matters to the
Independent Regulatory Board for Auditors.
The reportable irregularities are that the annual financial statements for the years ended
30 September 2014 and 30 September 2015 have not been published within six months after the
year-end as required in terms of Section 30(1) of the Companies Act and the Annual General Meeting
has not been held within 15 months from the previous Annual General Meeting as required by
Section 61(7) if the Companies Act.
The full audit report is available for inspection at the company's registered office. The auditors'
report does not necessarily report on all of the information contained in these financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditors' engagement they should obtain a copy of the auditors' report together with the
accompanying financial information from the issuer's registered office.
BASIS OF PREPARATION
The preparation of this financial information was supervised by Reynold Ngobese CA(SA).
Except for the non-preparation of consolidated results, this 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 Listings Requirements of the JSE Limited.
The company has adopted the following standards and interpretations during the financial year,
which did not have material impact on the reported results:
- IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine
- IFRS 1 - First time adoption of International Financial Reporting Standards
- IFRS 7 - Financial instruments: Disclosures
- IFRS 10 - Consolidated Financial Statements
- IFRS 11 - Joint Arrangements
- IFRS 12 - Disclosure of Interests in Other Entities
- IFRS 13 - Fair Value Measurement
- IAS 19 - Employee Benefits
- IAS 27 - Consolidated and Separate Financial Statements
- IAS 28 - Investments in Associates and Joint Ventures
All the other accounting policies and their application are consistent with those used for the
company's 2013 annual financial statements.
The directors take full responsibility for the preparation of these financial results and confirm that
the financial information has been correctly extracted from the underlying financial statements.
CONTINGENT LIABILITIES
A number of Ellerine Furnishers employees have claimed amounts due to them from Ellerine
Furnishers Proprietary Limited and Ellerine Holdings Limited. The amounts claimed by the executives
amounts to R42.6 million.
The claimants are also seeking to recover this amount from the company.
The legal opinion obtained by the company from an eminent Senior Counsel states that the
company is not liable for payment of the amounts claimed and accordingly the company has not
provided for this contingent liability.
Midrand
22 April 2016
Sponsor
Merchantec Capital
Board of directors
Independent non-executive:
MC Mogase (Chairman)
N Adams
Advocate MF Gumbi
NB Langa-Royds
M Mthombeni
RJ Symmonds
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/021193/06)
(Ordinary share code: ABL) (ISIN: ZAE000030060)
(Hybrid instrument 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 Proprietary Ltd
13th Floor, Rennie House
19 Ameshoff Street
Braamfontein
PO Box 4844
Johannesburg
2000
Telephone: +27 11 713 0800
Telefax: +27 86 674 4381
Website
www.abil.co.za
Date: 22/04/2016 05:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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