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FINBOND GROUP LIMITED - Audited consolidated results for the year ended 28 February 2018

Release Date: 30/05/2018 10:12
Code(s): FGL     PDF:  
Wrap Text
Audited consolidated results for the year ended 28 February 2018

FINBOND GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: “FGL” ISIN: ZAE000138095
(“Finbond” or “the Company” or “the Group")

AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2018

Executive Overview

The directors are pleased to present the financial results of the Finbond Group for
the 12 months ended 28 February 2018.

During the 12 months under review, Finbond delivered another set of excellent results,
increasing headline earnings per share by 81.2%, Operating profit from continuing
operations by 57.3% and EBITDA by 52.2%.

Our continued successful expansion into the United States of America, strong focus on
our core short term lending business, conservative lending practices, strict upfront
credit scoring procedures, effective collections, an increased distribution footprint
and a strong focus on customer service helped us achieve these exceptional results.

In giving effect to our strategic plan of action we made the following progress during
the period under review:

-   Headline earnings per share increased by 81.2% to 33.7 cents (Feb 2017: 18.6
    cents).
-   Operating profit from continuing operations increased by 57.3% to R439.5 million
    (Feb 2017: R279.4 million).
-   Loan and other fee income increased by 46.3% to R841.3 million (Feb 2017: R575.1
    million).
-   Earnings before interest, taxation, depreciation and amortization (EBITDA)
    increased by 52.2% to R704.5 million (Feb 2017: R462.9 million).
-   Revenue from continuing operations increased by 53.5% to R2.38 billion (Feb 2017:
    R1.55 billion).
-   Number of loans advanced grew by 26.6% to 1 880 108 (Feb 2017: 1 484 973)
-   Value of loans advanced increased by 31.7% to R5.4 billion (Feb 2017: R4.1
    billion).
-   Cash received from customers increased by 33.3% to R7.2 billion (Feb 2017: R5.4
    billion).
-   We expanded our overall branch network by 22.2% to 672 branches of which 415
    branches are in South Africa (Feb 2017: 379) and 257 are in the United States of
    America (Feb 2017: 171).
-   We increased our presence in the North American short term lending market with
    the acquisition of a further 86 short term lending stores in the United States
    of America.

We remain focused on executing the Group’s strategy and top business priorities
namely, optimal capital utilization, earnings growth, strict upfront credit scoring,
good quality sales, effective collections, cost containment and training and
development of staff members.
Headline Earnings up 81.2%

Headline earnings increased by 81.2% from R139.1 million to R252.6 million, and
generated a return of 24.1% on our shareholders’ equity for the 2018 financial year.

Earnings before interest, taxation, depreciation and amortization (EBITDA) increased
by 52.2% to R704.5 million (Feb 2017: R462.9 million).

The success of our expansion strategy is evident from the increased earnings generated
from each regional income stream.


Revenue, Profit and Profitability

Operating profit from continuing operations increased by 57.3% to R439.5 million (Feb
2017: R279.4 million)

Finbond increased turnover to R2.4 billion, an increase of 53.4% over 2017. Finbond’s
profit margin slightly increased from 18.0% of turnover in 2017 to 18.4% in 2018.

The majority of profit for the year was derived from small personal loans. The
operating Cost to Income ratio improved this year to end the financial year at 59.6%
(Feb 2017: 61.1%).

Total segment revenue from Finbond’s Micro Finance activities in both South Africa
and North America, made up of interest, fee and insurance income (portfolio yield)
increased by 52.2% to R2.2 billion (Feb 2017: R1.5 billion).


Well-Executed Sustainable Strategy

Finbond’s exceptional financial and operational performance is testimony to a well-
executed sustainable strategy in terms of the Board Approved Five Year Strategic Plan
of Action.

Our strategy is transforming Finbond into a focussed multinational business
diversified across geographies and products with 59% of revenue in US$.

Finbond’s strategy is by no means unique with many other international financial
services groups following a similar approach. Finbond’s ability to effectively execute
strategy is the key differentiator. This enabled the Group to achieve particularly
satisfactory results despite a challenging business environment.


South Africa:

Continued Strong Focus on Short Term Loans

Finbond’s focus remains on small, short-term loans. Despite continued strong
competition in the short term loan market over the past 12 months we still have a 30%
market share of all two and three month loans in South Africa.

Finbond’s consistent conservative approach has ensured sustainable growth in the Micro
Credit portfolio that is not driven by advancing larger loans or increasing the term
of loans. We prefer quality above quantity.
During the period under review Finbond’s average loan size was R1,479 with an average
tenure of 3.7 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. For the twelve months ended 28 February 2018, Finbond granted R1.6 billion
worth of loans and received cash payments of R2.5 billion from customers. The whole
loan portfolio turns over three times a year.

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 25 – 84 month, R21 000 – R180 000 long term
unsecured lending market that continues to cause significantly increased write offs,
bad debts and forced rescheduling of loans. Finbond’s historic data and vintage curves
indicate that shorter term loans offer lower risk as consumers are more likely to
repay these loans as opposed to longer term loans.


Consistent Conservative Upfront Credit Scoring Practices

While the size of the South African loan book has increased, the risk profile of the
book has at the same time again been adjusted to take into account the increased
financial pressure on the South African consumer.

During the period under review the asset quality of our loan book remained high and
the average credit scores of customers remained stable. One of the key value drivers
is the quality of new business. Without quality, new business growth is meaningless
and not sustainable.

Detailed affordability calculations are 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 were again included in all
affordability assessments.

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 are
continually adjusted to reduce credit risk and further improve the quality of assets
held.

Finbond’s lending practices have been consistently conservative over the past number
of years and our rejection or decline rates remain higher than that of our major
competitors. Rejection rates in South Africa stood at between 74.59% and 90.75% for
our 12-24 month product at the end of February 2018.


Low Risk Liquidity Structure and Conservative Liquidity Management

The growth in the surplus funding was curbed during the financial year in an effort
to reduce interest expense on excess surplus cash. Finbond’s liquidity position at
the end of February 2018 reflects R548.2 million in cash, cash equivalents and liquid
investments (Feb 2017: R727.3 million).

Cash Received from customers as a percentage of Cash Granted to customers for the
twelve months ended 28 February 2018 averaged 133%.

By the end of February 2018 the deposit portfolio amounted to R1.03 billion (Feb 2017:
R1.10 billion). The average deposit size was R370 310, the average term 52 months and
the average interest rate was 9.93%.
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 term
deposits. Given the long term nature of Finbond’s liabilities (fixed term deposits
with an average term of 26,34 months) and short term nature of its assets (short term
micro loans with an average term just more than 3,7 months), Finbond possesses a low
risk liquidity structure.


Basel III Requirements

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 Mutual Bank continued to comfortably exceed the minimum regulatory capital
requirement in February 2018, reflecting an excess of R91.1 million over and above
the R290.2 million (25% of Risk Weighted Assets) required by the Registrar of Banks,
and an excess of R265.5 million over and above the required qualifying regulatory
capital per Basel III.

Although Finbond Mutual Bank 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 28 February 2018, Finbond’s:
-    liquidity coverage ratio was 176% (76% more than required from 2019);
-    net stable funding ratio was 495% (395% more than required from 2019); and
-    capital adequacy ratio was 34.8% (9.8% more than required from 2019), and 7.85%
     above the minimum prudential limit required by the Registrar of Banks.


United States of America and Canada

Continued Expansion and Focus on Short Term Instalment Loans

During 2018 Finbond continued expanding its business presence in the United States of
America’s short-term lending market.

Finbond currently has 257 branches in North America operating in the following states:
Florida, Ohio, Missouri, Michigan, Mississippi, Alabama, South Carolina, Illinois,
Indiana, Wisconsin, California, Oklahoma, Tennessee, Nevada, New Mexico, Utah,
Louisiana. In addition to the US States Finbond also has a presence in Ontario,
Canada.

Finbond also has and an online offering that offers instalment loans in the states of
Illinois, Wisconsin, Missouri, New Mexico, Utah and Nevada via the Creditbox.com
website.

It is the intention to increase our footprint by a further 60 branches in the year
ahead.

Approximately 59% of revenue is currently denominated in US$ and the intention is to
grow US$ earnings to approximately 70% - 80% of the Group’s earnings in three to five
years.

The rationale for the continued North American expansion inter alia includes:

-   Earnings enhancing growth;
-   Significant growth opportunity in the North American short term lending industry;
-   Anorganic growth in Finbond’s core “30-day” competency;
-   Diversification of Country and Political Risk;
-   Effective ZAR hedge;
-   Teaming up with existing owners/managers with 10 - 30 years’ experience in
    operating short term lending businesses in North America; and
-   Opportunity to operate and earn revenue in the $46 billion a year USA Alternative
    Financial Services Market.

Finbond’s North American sales are well diversified across the various US states in
which Finbond operates.


Serious Investment in Distribution and People

Our operating costs increased by 50.0% from R864.0 million to R1,296.4 million in the
current year.

During the past financial year Finbond increased its overall branch network by 122 to
672 branches (March 2017: 550).

In South Africa Finbond increased its branch network by 36 branches to 415 branches
and installed 89 ATM’s.

In North America Finbond expanded its branch network from 171 to 257. As part of our
client-centric focus we ensured that our distribution channels reflect the
demographics of our clients.

We intend to open a further 30 branches in South Africa in the year ahead and to
expand our branch network in the United States of America with an additional 60
branches.


Providing Inclusive Financial Services

Achieving sustainable and inclusive development in the Financial Services Sector goes
hand-in-hand with improving access to financial services, particularly for the poor
and vulnerable. Unsecured lending has become a permanent feature of the credit
landscape in the different markets that Finbond operate in, providing credit solutions
and access to funding to the previously disadvantaged, under-banked and unbanked.

A significant portion of the adult population are still actively seeking banking and
credit solutions but remain largely unattended and underserviced. These unbanked and
underserviced do not fall outside the banking sector by choice. An important reason
for their predicament is that banks do not offer products tailored to their specific
needs.

Responsible unsecured lending fulfills the important role in both North America and
South Africa of including the previously excluded and giving them access to credit
and will continue to grow rather than diminish in importance.

Finbond is well positioned and able to provide much needed inclusive financial
services and products to the unbanked, underbanked and previously disadvantaged in
step with the principles of financial inclusion and promoting access to financial
services.
Credit ratings Upgrade

In October 2017, Global Credit Ratings upgraded the long term national scale rating
of Finbond Group Limited to BBB(ZA) and affirmed the short term national scale rating
of A3(ZA); with the outlook accorded as Stable.

Global Credit Ratings has accorded the above credit ratings to Finbond based on the
following key criteria:

    -    The upgrade of Finbond Group Limited’s long term rating stems from notably
         improved earnings diversification, following business acquisitions undertaken
         during FY17.
    -    Further rating support is derived from the Group’s very strong capitalisation,
         low risk liquidity structure, as well as strong competitive position in a niche
         market of short term unsecured lending.
    -    Finbond reflects notably improved earnings diversification, following the
         successful execution of the initial phase of its Five Year Strategic Plan,
         targeting local and offshore businesses with product ranges and customer bases
         in sync with the Group’s existing core competencies.


Shareholders Loans

On 20 October 2016, shareholders were advised that as part of the Company’s earnings
enhancing growth strategy in terms of which Finbond expanded its short-term lending
business into the North American market, Finbond entered into an agreement to acquire
50% of Americash Holding LLC and Creditbox.com LLC with an option to acquire the
remaining 50% by 1 October 2017.

Finbond intended to raise the requisite capital to fund this acquisition from its
shareholders by means of a Rights Offer.

In order to fund the purchase consideration in respect of the acquisition, that was
due and payable in the course of October 2016, Finbond’s three major shareholders
(Riskowitz Value Fund LP, Net1 Finance Holdings (Pty) Ltd and Finbond Chief Executive
Officer, Dr Willie van Aardt through Kings Reign International (Ltd) (“the Lenders”)
extended unsecured shareholder loans to Finbond to the value of US$37.5 million (R525
million).

During April 2018, two of the lenders elected to convert their loans into equity by
way of the Rights Offer that was offered to all shareholders and concluded on 23 April
2018. Both Riskowitz Value Fund LP and Net 1 Finance Holdings (Pty) Ltd elected to
convert their loans and the only loan that remains in place is that of Kings Reign
International Ltd at $10 million.

Subject to the terms and conditions set out in the Amendment Agreement, the Lender
made available to Finbond the shareholder loan on the following terms and conditions:

-   The Amended Commencement Date: 28 February 2018
-   Loan Amount: $10 million.
-   Repayment Date: on/or before 31 August 2021 or such later date as may be mutually
    agreed upon by the Parties in writing.
-   Security: Unsecured.
-   Interest Rate: LIBOR plus 12% (LIBOR meaning the three month US Dollar London
    interbank offered rate administered by ICE Benchmark Administration Limited).
-   The Conversion Rate: the rate of exchange against which the Shareholders’ Loans
    shall be converted from US Dollars into South African Rand at such time as which
    the Rights Option shall be exercised and which shall, notwithstanding the
    prevailing rate of exchange at such time, be the greater of (a) R13.01 to $1 or,
    (b) the average mid-point rate for the 30 day period immediately preceding close
    of business on the business day prior to the Repayment Date.
-   Rights Option: the Lenders’ respective entitlement to: (a) elect to convert their
    shareholders loans into shares in FGL at a price of R 2.39 by way of a Rights
    Offer in the future; or (b) continue earning interest at the applicable interest
    rate until such a time as the loans are repaid in full.
-   In determining the number of shares which a Lender is entitled to, a Lender
    should be in the same position the Lender would have been had it elected to
    convert its new loan to Finbond shares on 28 February 2017 on the basis that
    Finbond had 762,210,879 shares in issue on a fully diluted basis.
-   Interest shall be paid in US dollars on a quarterly basis within five business
    days of the last day forming part of the relevant interest measurement period.
-   The terms and conditions of the original Shareholders’ Loan Agreement remain
    unaltered save to the extent contemplated in the Amendment Agreement.


Appointment and Retirement of Directors

In accordance with the requirements of paragraph 3.59 of the JSE Limited Listings
Requirements, shareholders are advised of the appointment to the Boards of Finbond
Group Limited and Finbond Mutual Bank, effective 1 June 2018, of Mr Pieter Albert
Naude as an Independent Non-Executive Director.

Mr Naude spent many years in various executive positions in the banking sector and
has extensive executive and managerial experience in Discounting, Relationships, Asset
Based Finance and Corporate Banking during his long and industrious career at Absa
Corporate and Merchant Bank. Some of Mr Naude’s positions included Business Centre
Manager (E-level), Regional General Manager (E-level) and Manager: Corporate Banking
Services (E-level). The Board looks forward to the valuable experience and
contributions he will bring to Finbond.

In accordance with the requirements of paragraph 3.59 of the JSE Limited Listings
Requirements, shareholders are advised of the retirement and resignation of Adv Jasper
Jurgens Noeth as Independent Non-Executive Director from the Boards of Finbond Group
Limited and Finbond Mutual Bank due to ill health.

Finbond would like to thank Adv Noeth for his extremely valuable contributions to the
Board over that past 12 years and wish him a speedy recovery.


Thank You

Leonardo da Vinci said that “It had long since come to my attention that people of
accomplishment rarely sat back and let things happen to them. They went out and
happened to things.”

Quality staff with passion, commitment and dedication that ‘make things happen’ is
the driving force in creating a successful business. We would like to thank each one
of them for their continued valued contributions.


Looking Ahead
We believe that the evolution from a short term Micro Finance Institution to a Bank
in South Africa and our continued expansion into the North American Short Term Lending
market in the implementation of our strategic action plan will ensure that we achieve
good results in the medium to long term. Sustained focus on our core competencies
will keep us on course to become the best short term instalment lender in the world.

There are still a number of challenges facing Finbond in the various markets that it
operates in. However, we remain confident that we have the required resources and
depth in management to overcome these challenges and remain optimistic about our
prospects for the future due to Finbond’s: Improvements achieved in earnings and
profitability despite difficult market conditions; Improvement achieved in cash
generated from operating activities; Management expertise; Strong Cash Flow; Strong
Liquidity and surplus cash position; Uniquely positioned 415 branch network in South
Africa and 257 branches in North America; Superior Asset Quality; Access to funding;
Conservative Risk Management and growth potential in the Micro Finance and Banking
markets in the lower end of the market both in South Africa and North America.

We plan for a continued rise in revenue both in South Africa and in North America.
Our business is in a development and growth phase and, as with all growing businesses,
real risks remain.



SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
                                           28 February     28 February
                                               2018           2017 *        Change
R'000

Assets
Cash and cash equivalents                       422,339          547,351    (23%)
Other financial assets                          216,856          207,717      4%
Unsecured loans and other advances to
customers                                       937,391          800,599     17%
Trade and other receivables                     158,177          139,850     13%
Other assets                                     12,632              760    1562%
Secured loans and other advances to
customers                                       210,977          220,958     (5%)
Property, plant and equipment                   131,816          113,800     16%
Investment property                             266,771          278,185     (4%)
Deferred taxation                                14,215           20,115    (29%)
Goodwill                                        830,077          752,699     10%
Intangible assets                               108,035          115,064     (6%)
Total assets                                  3,309,286        3,197,098      4%

Equity
Capital and reserves
Share capital                                   724,525          715,667      1%
Reserves                                       (194,581)         (72,350)   (169%)
Retained income                                 477,442          292,351     63%
Share capital and reserves
attributable to ordinary shareholders        1,007,386          935,668       8%
Non-controlling interest                       163,346          226,249     (28%)
Total equity                                 1,170,732        1,161,917       1%

Liabilities
Bank overdraft                                  91,033           27,725      228%
Trade and other payables                       124,029           81,428      52%
Other liabilities                               11,757           10,105      16%
Current tax payable                             42,073           40,456       4%
Derivative financial instrument                 47,430                -      100%
Loans from shareholders                        470,586          508,440      (7%)
Purchase consideration payable                       -          213,375     (100%)
Fixed and notice deposits                    1,027,114        1,098,609      (7%)
Deferred taxation                               45,704           55,043     (17%)
Commercial paper                               278,828                -      100%
Total liabilities                            2,138,554        2,035,181       5%

Total equity and liabilities                 3,309,286        3,197,098       4%


SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended

                                             28 February      28 February
                                                 2018            2017 *        Change
R'000


Interest income                                 1,541,716          978,551      58%
Interest expense                                  (208,231)       (144,929)    (44%)
Net interest income/(expense)                    1,333,485         833,622      60%


Fee income                                         458,540         329,925      39%
Management fee income                               66,971          58,229      15%
Other operating income                             315,783         186,939      69%
Fair value adjustments                              (6,872)          2,967     (332%)
Foreign exchange gain/(loss)                        52,318          27,931       87%
Net impairment charge on loans and
advances                                          (484,238)       (296,213)    (63%)
Operating expenses                              (1,296,444)       (863,960)    (50%)
Profit before taxation                             439,543         279,440      57%
Taxation                                          (104,582)       (72,156)     (45%)
Profit after taxation                              334,961         207,284      62%

Other comprehensive income to be
reclassified to profit or loss
Foreign currency translation difference
for foreign operations                      (140,825)   (110,176)   (28%)
Total comprehensive income for the year      194,136      97,108     100%

Profit attributable to:
Owners of the company                        234,201     138,727     69%
Non-controlling interest                     100,760      68,557     47%
Profit for the period                        334,961     207,284     62%

Total comprehensive income attributable
to:
Owners of the company                        118,824      55,496     114%
Non-controlling interest                      75,312      41,612     81%
Total comprehensive income                   194,136      97,108     100%

Earnings per share
Earnings per share (cents)
   Basic                                        31.3        18.6     68%
   Diluted                                      29.8        18.6     60%

Headline earnings per share (cents)
   Basic                                        33.7        18.6     81%
   Diluted                                      31.7        18.6     70%

Total number of ordinary shares
outstanding                                  748,547     746,712      0%

Weighted average number of ordinary
shares outstanding                           748,570     746,539      0%
Effect on conversion of shareholders
loans into equity                            204,131           -     100%
Weighted average number of ordinary
shares (diluted) at 28 February 2018         952,701     746,539     28%

Profit attributable to owners of the
Company                                      234,201     138,727     69%
Adjusted for:
Interest on shareholders loans                49,284           -     100%
Fair value adjustment on foreign exchange
derivative                                    34,150           -     100%
Foreign exchange gain on loans from
shareholders                                 (34,044)          -    (100%)
Diluted earnings                             283,591     138,727     104%

Net profit attributable to ordinary
equity holders of the parent                 234,201     138,727     69%
Adjusted for:
Loss on disposal of property, plant and
equipment                                      1,755         632     178%
Fair value changes of investment
properties                                    16,639         (245)   6891%
Headline earnings                            252,595       139,114     82%
Adjusted for:
Interest on shareholders loans                49,284             -     100%
Fair value adjustment on foreign exchange
derivative                                    34,150             -     100%
Foreign exchange gain on loans from
shareholders                                 (34,044)            -    (100%)
Diluted headline earnings                    301,985       139,114     117%



SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended

                                            28 February         28 February
                                                2018               2017 *             Change
R'000

Cash flows from operating activities
Cash generated fromfrom operations                  71,004            262,995         (73%)
Taxation paid                                     (105,872)           (44,788)       (136%)
Net cash from operating activities                 (34,868)           218,207        (116%)

Cash flows from investing activities
Purchase of property, plant and
equipment                                          (57,050)           (29,103)        (96%)
Sale of property, plant and equipment                     -               720         (100%)
Purchase of investment property                    (10,029)            (8,330)        (20%)
Sale/(Purchase) of other intangible
assets                                                    -           (19,064)         100%
Purchase of financial assets                       (20,238)                 -        (100%)
Sale of financial assets                            52,863             26,814          97%
Acquisition of subsidiaries net of cash
acquired                                          (213,498)          (714,576)         70%
Net cash from investing activities                (247,952)          (743,539)         67%


Cash flows from financing activities
Buy back of shares                                 (43,478)            (3,964)        (997%)
Issue of share capital                                    -           516,266         (100%)
(Repayment)/proceeds from shareholders
loan                                                (5,565)           490,440         (101%)
Proceeds from commercial paper                     278,828                    -        100%
Finance lease payments                              (2,525)             1,873         (235%)
Dividends paid                                    (101,945)           (66,064)        (54%)
Net cash from financing activities                 125,315            938,551         (87%)
Total cash movement for the year                   (157,505)          413,219        (138%)
Cash at the beginning of the year                   519,626           106,407         388%
Effect of movements in exchange rates
on cash held                                        (30,815)                -        (100%)
Total cash at end of the year                       331,306           519,626         (36%)



SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended


                                                 28 February 2018      28 February 2017 *
R'000

Total equity at the beginning of the period             1,161,917                    387,989
Total comprehensive income for the year                   194,136                     97,108
Rights issue net of costs                                       -                    516,266
Change in control                                          (8,992)                         -
Issue of shares                                            54,049                          -
Equity settled share based payment released               (10,881)                         -
Equity settled share based payment charge                    4,027                     4,405
Treasury shares purchased                                 (45,191)                   (3,964)
Business combinations                                     (24,052)                   226,177
Dividends                                                (154,281)                   (66,064)
Total equity at the end of the period                   1,170,732                  1,161,917




SUMMARISED CONSOLIDATED SEGMENTAL INFORMATION
OPERATING SEGMENTS

R'000
                                             Property   Transact
28 February       Investment                 Investme     ional
2018               Products    Lending          nt       Banking       Other         Total

Interest
income                19,560   1,516,473           -      1,517         4,166      1,541,716
Interest
expense            (107,205)     (76,013)          -      (167)       (24,846)      (208,231)
Net interest
income              (87,645)   1,440,460           -      1,350       (20,680)     1,333,485
Fee income                 -     455,171           -      3,369             -        458,540
Management
fee income                 -          -            -          -         66,971        66,971
Other
operating
income                    52     264,928           -        603         50,200        315,783
Fair Value
adjustments                -      62,086    (21,443)         -         (47,515)       (6,872)
Foreign
exchange gain                                                           52,318         52,318
Net
impairment
charge on
loans and
advances                -     (474,727)            -        27         (9,538)       (484,238)
Operating
expenses           (2,271)   (1,230,178)      (1,999)   (2,306)       (59,690)     (1,296,444)
Operating
(loss)/profit
before
taxation         (89,864)      517,740       (23,442)    3,043         32,066         439,543
Taxation           32,668     (133,010)         8,522   (1,106)       (11,656)       (104,582)
Profit/(loss)
for the
period           (57,196)      384,730       (14,920)    1,937         20,410          334,961

Significant
segment
assets
Cash and cash
equivalents       153,096      231,733              -    6,937         30,573          422,339
Other
financial
assets            216,709          147              -        -              -          216,856
Unsecured
Loans and
other
advances to
customers               -      937,391              -        -             -           937,391
Secured Loans
and other
advances to
customers               -      210,977              -        -             -           210,977
Trade and
other
receivables             -       97,922              -        -        60,255            158,177
Property,
plant and
equipment               -      111,264              -     2,441       18,111           131,816
Investment
property                -      266,771              -       -        266,771
Goodwill                -      830,077              -       -            -             830,077
Intangible
assets                  -      108,035              -       -            -            108,035
Significant
segment
liabilities
Fixed and
notice
deposits        1,027,114                          -          -            -       1,027,114
Commercial
Paper             278,828                          -           -           -         278,828
Loans from
shareholders             -             -           -           -      470,586         470,586

                                           Property    Transact
28 February     Investment                 Investme      ional
2017 *           Products    Lending          nt        Banking    Other       Total

Interest
income              16,654     955,035            -       3,430      3,432      978,551
Interest
expense           (70,063)     (58,577)           -        (658)   (15,631)    (144,929)
Net interest
income            (53,409)     896,458            -       2,772    (12,199)     833,622
Fee income               -     327,738            -       2,187            -    329,925
Management
fee income               -           -            -           -     58,229       58,229
Other
operating
income                   -     186,939            -           -            -    186,939
Fair value
adjustment               -             -        315           -      2,652        2,967
Foreign
exchange gain            -             -          -           -     27,931       27,931
Net
impairment
charge on
loans and
advances                 -    (294,943)           -      (1,270)           -   (296,213)
Operating
expenses             1,647    (832,069)      (2,195)     (3,946)   (27,397)    (863,960)
Operating
(loss)/profit
before
taxation          (51,762)     284,123       (1,880)       (257)    49,216      279,440
Taxation            15,327     (73,543)         557          76    (14,573)     (72,156)
Profit/(loss)
for the
period            (36,435)     210,580       (1,323)       (181)    34,643      207,284

Significant
segment
assets
Cash and cash
equivalents        120,760     359,713            -       5,443     61,435      547,351
Other
financial
assets             207,359         358            -           -            -    207,717
Unsecured
Loans and
other
advances to
customers                -     800,599            -           -            -    800,599
Secured Loans
and other                -     220,958            -           -            -    220,958
advances to
customers
Trade and
other
receivables              -      107,481            -         -         32,369       139,850
Property,
plant and
equipment                4      103,584            -       471          9,741       113,800
Investment
property                 -            -      278,185         -              -       278,185
Goodwill                 -      752,699            -         -              -       752,699
Intangible
assets                   -      115,064            -         -              -       115,064
Significant
segment
liabilities
Purchase
consideration
payable                   -      213,375            -         -              -       213,375
Fixed and
notice
deposits          1,098,609            -            -         -              -     1,098,609
Loans from
shareholders                            -            -         -        508,440       508,440



GEOGRAPHICAL SEGMENTS
28 February 2018
 R'000                             South Africa      North America                Total


 Interest Income                        237,757          1,303,959                1,541,716
 Interest expense                      (146,129)           (62,102)                (208,231)
 Net interest income                     91,628          1,241,857                1,333,485
 Fee income                             413,878             44,662                  458,540
 Management fee income                   66,909                 62                   66,971
 Other operating income                 303,023             12,760                  315,783
 Fair value adjustment                  (68,958)            62,086                   (6,872)
 Foreign exchange gain/(loss)            52,355                (37)                  52,318
 Net Impairment charge on loans        (159,184)          (325,054)                (484,238)
and advances
 Operating expenses                    (506,570)          (789,874)             (1,296,444)
 Profit before taxation                 193,083            246,463                  439,543
 Taxation charge                        (70,188)           (34,394)                (104,582)
 Profit for the period                  122,893            212,069                  334,961
 Significant segment assets
 Cash and cash equivalents              248,575         173,764          422,339
 Other financial assets                 216,709             147          216,856
 Unsecured loans and other              471,858         465,533          937,391
 advances to customers
 Secured loans and other                185,389          25,588          210,977
 advances to customers
 Trade and other receivables            137,440          20,737          158,177
 Property, plant and equipment          68,629          63,187          131,816
 Investment property                   266,771               -          266,771
 Goodwill                              196,787         633,290          830,077
 Intangible assets                         171         107,864          108,035


Significant segment liabilities
 Fixed and notice deposits           1,027,114               -        1,027,114
 Commercial Paper                      278,828               -          278,828
 Loans from shareholders               470,586               -          470,586



28 February 2017
 R'000                            South Africa    North America        Total


 Interest Income                       202,412            776,139       978,551
 Interest expense                     (107,385)           (37,544)     (144,929)
 Net interest income                    95,027            738,595       833,622
 Fee income                            299,782             30,143       329,925
 Management fee income                  58,229                    -      58,229
 Other operating income                173,783             13,156       186,939
 Fair value adjustment                   1,833              1,134         2,967
 Foreign exchange gain                  27,931                    -      27,931
 Net Impairment charge on
loans and advances                    (120,306)          (175,907)     (296,213)
 Operating expenses                   (405,086)          (458,874)     (863,960)
 Profit before taxation                131,193            148,247       279,440
 Taxation charge                       (43,271)           (28,885)      (72,156)
 Profit for the period                  87,922            119,362       207,284
 Significant segment assets
 Cash and cash equivalents             232,058              315,293       547,351
 Other financial assets                207,717                    -       207,717
 Unsecured loans and other
advances to customers                  395,763              404,836       800,599
 Secured loans and other
advances to customers                  203,562               17,396       220,958
 Trade and other receivables           124,531               15,319       139,850
 Property, plant and equipment          58,928               54,872       113,800
 Investment property                   278,185                    -       278,185
 Goodwill                              192,389              560,310       752,699
 Intangible assets                         171              114,893       115,064


Significant segment
liabilities
 Purchase consideration
payable                                       -             213,375       213,375
 Fixed and notice deposits            1,098,609                    -    1,098,609
 Loans from shareholders                508,440                    -      508,440


* - For the 2017 financial year the results have been restated due a reclassification
between Deferred Tax Liability and Non-controlling interest as well as between
Interest Income and Fee Income. See additional information later.


Notes to the summarised consolidated financial statements

Finbond Group Limited is a company domiciled in South Africa. The summarised
consolidated financial statements of the Company as at and for the twelve months ended
28 February 2018 comprise the Company and its subsidiaries (together referred to as
the “Group”) and the Group’s interests in associates and jointly controlled entities.

Basis of preparation

The summarised consolidated financial statements have been prepared in accordance
with the requirements of the JSE Limited Listings Requirements and the requirements
of the Companies Act of South Africa. The summarised consolidated financial statements
have been prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (“IFRS”) IAS
34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and financial pronouncements as issued by the Financial
Reporting Standards Council IAS 34 Interim Financial Reporting, the Companies Act and
the JSE Listings Requirements. It does not include all of the information required
for full annual financial statements and should be read in conjunction with the
audited consolidated annual financial statements of the Group as at and for the year
ended 28 February 2018.
The accounting policies applied by the Group in these summarised consolidated
financial statements are consistent with those accounting policies applied in the
preparation of the previous consolidated annual financial statements.

The summarised consolidated financial statements were prepared under the supervision
of Mr C Eksteen CA(SA), in his capacity as chief financial officer.

These summarised consolidated financial statements are extracted from the Group’s
audited financial statements and are not themselves audited. The directors take full
responsibility for the preparation of these summarised consolidated financial
statements and the financial information has been correctly extracted from the Group’s
audited financial statements.

Estimates

The preparation of annual 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 summarised consolidated 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 annual financial statements as at and for the year ended 28 February
2017.

Fair value measurement

Fair value hierarchy of instruments measured at fair value

The fair value hierarchy reflects the significance of the inputs used in making fair
value measurements. The level within which the fair value measurement is categorised
in its entirety, is determined on the basis of the lowest level input that is
significant to the fair value measurement in its entirety.

The different levels 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
 Rand Thousand
 Assets and liabilities
 measured at fair value:
 Recurring
 Other financial assets            -    216,498            358        216,856
 Investment property               -          -        266,771        266,771
 Foreign         exchange
 derivative on loans from
 shareholders                      -          -         47,430         47,430
                                   -    216,498        314,559        531,057

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 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.
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.

Rand Thousand
                                          Gains/losses
                                          recognized         Subsequent
                             Opening      in profit or       capitalised        Closing
                             Balance      loss               expenditure        balance
Assets
Investment properties        278,185           (21,443)              10,029     266,771

Liabilities

Contingent consideration     (31,458)              62,573           (31,115)          -


Derivative financial
instrument                   -                    (47,430)                 -    (47,430)


No transfers of assets and liabilities within levels of fair value hierarchy occurred
during the current financial year.

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.

Correction of prior period error
During the year the Group discovered that taxation had been erroneously accounted for
on the pass-through entities where less than 100% interest is held. These pass-through
entities are taxed as partnerships and the taxation due on income attributable to
minorities are not to be included in the consolidated Group assets and liabilities.
As a consequence, deferred taxation was overstated and non-controlling interest
understated in the prior year. The error has been corrected by restating each of the
affected financial statement line items for the prior year. The Group also restated
its statement of comprehensive income classification of certain fee income on loans
advanced, to interest income due to it falling within the effective interest rate
definition. Comparatives amounts in the statement of comprehensive income were
restated for consistency. Since the amounts are classifications within the operating
activities in the statement of comprehensive income, the restatement did not have any
effect on the Group's statement of financial position nor the statement of cash flows.

The following tables summarise the impact on the Group's consolidated financial
statements for the year ended 28 February 2017:

                                                    Impact of correction of error
                                                      As
                                                                              As
                                                  previously Adjustments
                                                                           restated
R'000                                              reported

Consolidated statement of financial position

Deferred taxation                                          -       20,115    20,115
Other assets                                           1,379         (619)      760
Other asset items                                  3,176,223            - 3,176,223
Total assets                                       3,177,602       19,496 3,197,098

Deferred taxation                                     60,056       (5,013)    55,043
Other liability items                              1,980,138           -   1,980,138
Total liabilities                                  2,040,194       (5,013) 2,035,181

Non-controlling interest                             201,740       24,509     226,249
Other equity items                                   935,668           -      935,668
Total liabilities                                  1,137,408       24,509   1,161,917

Consolidated statement of comprehensive income

Taxation                                             (98,994)      26,838    (72,156)
Others                                               279,440            -    279,440
Profit after taxation                                180,446       26,838    207,284
Foreign currency translation difference for
foreign operations                                  (107,847)      (2,329) (110,176)
Total comprehensive income for the year               72,599       24,509    97,108

Profit attributable to :
Owners of the company                                138,727            -     138,727
Non-controlling interest                              41,719       26,838      68,557
                                                     180,446       26,838     207,284
Total comprehensive income attributable to :
Owners of the company                                 55,496               -       55,496
Non-controlling interest                              17,103          24,509       41,612
                                                      72,599          24,509       97,108


                                                    Impact of correction of error
                                                      As
                                                                              As
                                                  previously Adjustments
                                                                           restated
R'000                                              reported

Consolidated statement of comprehensive income

Interest income                                      568,060         410,491      978,551
Fee income                                           740,416        (410,491)     329,925


Business Combination
During the reporting period the group acquired a number of branches in South
Africa, USA and Canada as a going concern through business combinations, summarised
below:

                                                 28 February 2018     28 February 2017
South Africa
Recognised amounts of identifiable assets
acquired and liabilities assumed
Loans and other advances to customers                  32,542                  12,744
Property, plant and equipment                             110                       -
Total identifiable net assets at fair value            32,652                  12,744
Goodwill arising on acquisition                         4,398                  39,413
Purchase consideration transferred                     37,050                  52,157
Consideration paid in cash                             37,050                  52,157

North America
Recognised amounts of identifiable assets
acquired and liabilities assumed

Cash and cash equivalents                              10,379              82,430
Loans and other advances to customers                  70,704             469,541
Property, plant and equipment                           5,949              59,648
Intangible                                              3,908              12,930
Goodwill                                                   67             126,601
Other assets                                            2,077               9,825
Total liabilities                                      (6,691)           (140,770)
Total identifiable net assets at fair value            86,393             620,205
Non-controlling interest measured at fair              (9,019)           (259,211)
value
Goodwill arising on acquisition                       141,695             621,961
Purchase consideration transferred                    219,069             982,955
Purchase consideration
Consideration paid in cash                            186,827            744,849
Contingent consideration liability                     32,242            238,106
Total consideration                                   219,069            982,955


Events after the reporting period

Shareholders were advised on 23 March 2018 that Finbond would be raising capital by
way of a partially underwritten rights offer (“the Rights Offer”) in order to partially
repay the loans that were extended to Finbond during the course of September 2016
that allowed Finbond to conclude the Americash Holding LLC and Creditbox.com LLC
acquisitions.

In terms of the Rights Offer, 172 609 725 new Finbond ordinary shares of 0.0001 cents
each were offered for subscription to Finbond shareholders in the register at the
close of trade on Friday, 6 April 2018. The shareholders were able to subscribe for
shares at 239 cents per share, on the basis of 22.18391 Rights Offer shares for every
100 Finbond ordinary shares held.

The Rights Offer was successfully concluded on Monday, 23 April 2018 with R398.7
million being raised. Two of the Shareholders, Riskowitz Value Fund LP and Net 1
Finance Holdings (Pty) Ltd, that extended loans to the Group, elected to convert
their loan into equity during the Rights Offer. The only Shareholder loan that remains
in place is that of Kings Reign International Ltd at $10 million.

Independent auditor's opinion

The Group’s consolidated financial statements have been audited by the Company’s
auditors, KPMG Inc., who have expressed an unmodified opinion which is available for
inspection at the Company’s registered office.

Dividend

The Board has approved the declaration of a dividend from retained earnings of 9.91
cents per share (“Cash Dividend”). Shareholders will, however, be entitled to elect
to receive a capitalisation share issue alternative (“the Capitalisation Issue
Alternative”). If no election is made, the Cash Dividend will be paid.

The circular related to the Cash Dividend and Capitalisation Issue Alternative will
be distributed to shareholders and the relevant dates will be announced on SENS, 
in due course.

The Cash Dividend will be payable in the currency of South Africa. The Cash Dividend
is subject to a local dividend tax rate of 20%, resulting in a net Cash Dividend of
7.928 cents per share, unless the relevant shareholder is exempt from dividend tax or
is entitled to a reduced rate in terms of the applicable double tax agreement. The
company's income tax reference number is 9194313145. At the date of this announcement
the company has 944 907 501 ordinary shares in issue.

If approved, the Capitalisation Issue Alternative will not be subject to dividend
tax. However, there are possible tax implications of electing to receive shares under
the Capitalisation Issue Alternative and shareholders are advised to obtain their own
professional advice in this regard.

References to future financial performance included anywhere in this announcement
have not been reviewed or reported on by the Group’s external auditors.
For and on behalf of the Board

Dr Malesela Motlatla                             Dr Willem van Aardt

30 May 2018
--------------------------------------------------------------------
Directors

Chairman: Dr MDC Motlatla* (BA, DCom (Unisa)); Chief Executive Officer: Dr W van Aardt
(BProc (Cum Laude), LLM (UP), LLD (PUCHE) 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* (BCom Hons (Unisa); Chief Financial Officer: CH Eksteen (CA
(SA) BCom (Hons Acc) (UP)); 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); D Brits* (B Com, MBA) (NW);        HG Kotze* (BCom (Acc)(Hons), HDip Tax,
Certificate in Treasury Management); Chief Operating Officer: C van Heerden (MBA).

Secretary: Ben Bredenkamp (B Com Accounting, LLB (UP), MBA (Edinburgh))

*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: 30/05/2018 10:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
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