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AFRICAN BANK INVESTMENTS LIMITED - Trading Statement And Related Information

Release Date: 02/05/2013 17:00
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Trading Statement And Related Information

(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Ordinary share code: ABL         ISIN: ZAE000030060
Preference share code: ABLP ISIN: ZAE000065215
("ABIL" or “the group”)

(Incorporated in the Republic of South Africa)
(Registered bank)
(Registration number 1975/002526/06)
Company code: BIABL
(“African Bank”)


Shareholders are advised that both headline earnings and earnings for the six months to 31 March 2013 are
expected to decline by between 25% and 28% relative to the R1 370 million reported for the equivalent six
months to 31 March 2012. Similarly, headline earnings per share and earnings per share are expected to
decrease by between 25% and 28% relative to the comparable 170,4 cents per share. ABIL operates through
two business units, the Banking unit, consisting of the operations of African Bank and Stangen and the Retail
unit, consisting of the furniture retail and furniture insurance activities. Headline earnings in the Banking unit
declined by between 19% and 22%, while the Retail unit achieved marginal profitability, as a result of a high
fixed cost base and lower sales.

The first half of the 2013 financial year was a challenging period. The Banking unit showed positive
advances growth and maintained good control over operating and funding costs. These improvements were
however negated by
- a lower yield, partially as a result of higher suspension of interest and fees;
- an elevated charge for bad and doubtful advances, particularly on the furniture credit portfolio, as a
  result of higher provisions due to an increase in risk; and
- substantially increased insurance claims and provisions resulting from the group broadening the range
  of insured events.

While these trends were evident in the first five months of the year, the negative impact on the results was
exacerbated by ABIL’s decision to write-off an additional amount of non-performing loans in March and to
augment the NPL coverage post the write-off, which amplified the bad debt charge.

Trading conditions in the furniture industry deteriorated further during the period, as both the willingness and
ability of consumers to spend came under pressure and the deflationary trends in durable goods continued.
Efforts to further reduce costs and maintain firm margins did not counter the decline in merchandise sales.
The business is also currently carrying duplicate costs from the recent rollout of the centralised distribution
network which further affected results.

Outlook for the remainder of the financial year
For the Banking unit, the group anticipates that the reduction in yield will normalise in the second half of
2013. The bad debt charge is expected to remain elevated for the rest of the year, but the risk reduction
measures will benefit the charge from 2014. At the same time, the increased write-offs have improved the
quality of the remaining NPL portfolio. These trends, complemented by continued growth in advances, new
products, as well as innovations in the group’s offering, provide a solid underpin for the business over the
medium term.

The slowdown in furniture sales growth is expected to continue and conditions for the Retail unit are
therefore unlikely to improve in the second half of the year. Overall, the decline in ABIL’s results for the full
year is expected to be lower than the decline in the first half of the year.
The forecast financial information, on which this trading statement is based, has not been reviewed nor
audited and reported on by ABIL’s external auditors.

The interim results for the six months ended 31 March 2013 are expected to be released on SENS and RNS
on or about Monday, 20 May 2013.

2 May 2013

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 02/05/2013 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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