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FINBOND GROUP LIMITED - Consolidated results for the year ended 28 February 2019

Release Date: 31/05/2019 17:45
Code(s): FGL     PDF:  
 
Wrap Text
Consolidated results for the year ended 28 February 2019

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")

CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019

During the 12 months under review, Finbond delivered lackluster results, with
Interest revenue increasing by 17.4% to R1.81 billion; Revenue from continuing
operations increasing by 8.2% to R2.58 billion, Income from operations
increasing by 1.4% to R2.25 billion and EBITDA decreasing by 39.7%.

These substandard results were the consequence of a once off abnormal fair value
adjustment and the transition of SASSA customers to the new Post-Office card
and are not reflective of the Group’s efforts, initiatives or good overall
business performance.

Our materially increased US$ revenue from our operations in the United States
of America and Canada, strong cash flows and substantial cash and cash
equivalent reserves helped us to weather the storm in South Africa.

During the period under review:

   •   Total Assets   increased   by   8.8%   to   R3.42   billion   (Feb   2018*:   R3.15
       billion).

   •   Net Assets increased by 58.3% to R1.65 billion (Feb 2018*: R1.04 billion).

   •   Cash and Cash Equivalents increased by 19.8% to R765.520 million (Feb
       2018: R639.195 million)

   •   Revenue from continuing operations increased by 8.2% to R2.58 billion
       (Feb 2018: R2.38 billion).

   •   US $ contribution to Revenue and Headline Earnings increased to 64.2% and
       84.1% respectively.

   •   Earnings before interest, taxation, depreciation and amortisation
       (EBITDA) decreased by 39.7% to R420.8 million (Feb 2018*: R697.8 million).

   •   Number of loans advanced contracted by 9.6% to 1,700,255 (Feb 2018:
       1,880,108).

   •   Value of loans advanced decreased by 3.8% to R5.21 billion (Feb 2018:
       R5.42 billion).

   •   Cash received from customers remained stable at R7.18 billion (Feb 2018:
       R7.19 billion).

   •   We expanded our overall branch network by 3.3% to 694 branches (Feb 2018:
       672), of which 435 branches are in South Africa (Feb 2018: 415) and 259
       are the United States of America (Feb 2018: 257).

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
business that creates long term economic value. The bulk of the increased
expenses during the period under review relates to increasing capacity and
improving risk management functions and processes within the Group.

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.

ABNORMAL ONCE-OFF FAIR VALUE ADJUSTMENTS and SASSA

Finbond’s Performance for the period under review was adversely affected by
external events and skewed by anomalous once-off fair value adjustments:

      A. An abnormal downward fair value adjustment of R129.6 million relating to
         Finbond’s Property Development Assets in Mpumalanga and Gauteng.

      B. The transition of SASSA customers to the South African Post Office card
         as set out in more detail hereinafter.


A.)       FAIR VALUE ADJUSTMENT OF INVESTMENT PROPERTIES

As part of the Boards annual valuation process Finbond obtained 4 Independent
External Valuers (duly registered with the South African Institute of Valuers)
to independently value Finbond’s Zwartkoppies Property. This highly specialized
property consists of the following value forming attributes:

      -   Mineable Land,
      -   Development rights for the development of a 6 star boutique hotel, golf
          estate, polo estate, fly fishing estate and a dairy estate (RoD
          development rights),
      -   Agricultural Land,
      -   Standing Timber.

Valuers valued the Farm Zwartkoppies as follows:

      •   R173 million (RoD Development Rights Only) – Mr. V.P. Mnguni (Professional
          Associated Valuer (South Africa)) of APG Valuations.
      •   R270 million (RoD Development Rights, Minable Land, Agricultural Land and
          Standing Timber)- Mr. F.P. Grobbelaar (NDip (Prop Val) MIV(SA)) of
          Gojemaso Enterprises.
      •   R240 million (RoD Development Rights, Minable Land, Agricultural Land and
          Standing Timber) – Mr. H.N. Hartman (NDip (Prop Val) MIV(SA)) of Hartman
          Professional Enterprises.
      •   R70 million (RoD Development Rights only). - Mr. D. Jendrzejewshi
          (Professional Valuer) of Alfa Valuations.

Given the economic headwinds in the South African Property Sector, policy
uncertainty around land expropriation and low probability of successful
development or sale in the current market resulted in the Finbond Board adopting
a conservative position of R70 million for the Zwartkoppies property that lead
to an abnormal downward fair value adjustment of R129.6 million relating to
Finbond’s Property Development Assets in Mpumalanga, as well as Gauteng.


B.)       SOUTH AFRICAN SOCIAL SECURITY AGENCY (SASSA) SWITCH TO THE SOUTH AFRICAN
          POST OFFICE (SAPO)

A large portion of Finbond’s South African SASSA client base transitioned to
the new “SAPO” card resulting in a more than 68% reduction in our SASSA customer
base. This card was launched by SAPO and SASSA on 3 May 2018, but did not avail
the functionality to load EFT debits or stop orders, which limited our ability
to effectively collect amounts due and payable from this segment of the market.

Consequently asset quality deteriorated with first strike collection rates in
South Africa significantly decreasing by 9% from 90% to 81% at the end of
September 2018 and average monthly write offs increasing from approximately R16
million to R30 million between August 2018 and February 2019.

We took John Maxwell’s advice that “The pessimist complains about the wind. The
optimist expects it to change. The leader adjusts the sails” and took swift
action by significantly increasing credit granting criteria and only lending to
SASSA customers if they have active Finbond Mutual Bank accounts.

First strike collection rates has since stabilised at 87% at the end of April
2019 and the average monthly write off has recovered to a normal range of
between R15 million and R18 million per month as at the end of April 2019.

PROFIT AND PROFITABILITY

Despite these adverse developments in South Africa, Finbond achieved a turnover
of R2.58 billion, an increase of 8.2% over 2018. Interest revenue increased by
17.4% from R1.54 billion to R1.81 billion.

The majority of profit for the year was derived from unsecured personal loans.

The operating Cost to Income ratio increased to end the financial year at 62.7%
(Feb 2018: 59.6%).
84.1% or R115.8 million of Headline earnings was generated in North America
while 15.9% of Headline Earnings or R21.9 million was generated in South Africa.

* Results for the 2018 financial year have been restated. Please see additional
information in the consolidated financial statements and notes thereto.

CONTINUED FOCUS ON SHORT TERM LOANS

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 8.4% to R2.55 billion (Feb 2018: R2.35 billion).

Despite continued strong competition in the short term loan market over the
past 12 months our share of the 1 to 6 month short term unsecured market [loans
below R8,000 with a tenure of between 30 days and 180 days] remains above 25%.

During the period under review, Finbond’s average loan size in South Africa was
R1,668 with an average tenure of 3.9 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 February
2019 Finbond granted R1.43 billion worth of loans and received cash payments of
R2.31 billion from customers in South Africa. The whole loan portfolio turns
over 3 times a year.

Finbond’s average loan period is substantially 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
market. Finbond’s historic data and vintage curves indicate that shorter term
loans offer lower risk as consumers are more likely to pay them back as opposed
to longer term loans.

As at February 2019, 66% of sales were 0 to 1 month loans. The focus remains on
high quality, small, short-term loans. This is supported with an average loan
term of 3.9 months in South Africa and 6 months in North America and an average
loan size across all loan type sales in North America being $348 and R1,656 in
South Africa.

One of the key value drivers is the quality of new business. Without quality,
new business growth is meaningless and not sustainable. An impressive average
overall collection experience for the year of 97% and a minimum average
individual business line collection experience of 84% reaffirms that high
quality loans are added to the portfolio and furthermore that no individual
business line is dragging on performance.

CONSERVATIVE UPFRONT CREDIT SCORING PRACTICES

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 76% and
91% for our 12-24 month product at the end February 2019.

High and stable Capital Weighted Scores (“CWS”) in our South African loan book
data support the notion that Finbond is extending loans to clients of higher
credit quality.

The capital distribution of new loans compared to historic loans shows a shift
in distribution when considering the exposure that each approved application
presents. Finbond is granting larger loans to clients with higher credit scores
or alternatively smaller loans to clients with lower credit scores. This is a
crucial element of Finbond’s credit risk management methodology that is designed
to increase/decrease the size of the risk (loan) as the probability of default
decreases/increases.

GROWTH IN TRANSACTIONAL BANKING CUSTOMERS

We continued the evolution to turn Finbond Mutual Bank into a retail bank in
South Africa. Although this is taking longer than expected we continue to move
forward.

The cost of running Finbond Mutual Bank increased further during the past
financial year. Current expenditure increased by 11.9% to R339.5 million. Little
of this was unexpected, as it is expensive to implement what we’re doing.
Strategically, we support the cost of building a mass market retail bank on the
back of our short term loans business in South Africa.

Our transactional banking customers grew from 82 606 to 224 127 during the year.
Our savings accounts have some of the lowest cost and pay the highest interest
rates in South Africa. An ATM withdrawal costs only R10.00, and we pay 6%
interest on savings accounts with a maximum balance of R20 000. Our debit card
is a full MasterCard, giving our customers access to all Saswitch ATMs and can
be used for purchases at all linked shops. At Finbond Mutual Bank a debit order
costs only R2.50. We have few products, but those we have are the simplest,
best and most affordable of their kind in South Africa.

During 2019 we will be launching our Afrikaans focused online 24/7 bank offering
“Finbond Platinum”. To be a serious player in the market for basic banking, we
aim for one million customers. We still have a long way to go but remain on
track to build something unique: a low-cost, full-service retail bank in South
Africa with offerings to both the mass market and Afrikaans market through
Finbond Mutual Bank and Finbond Platinum respectively.
As we build our retail market bank in South Africa, costs will continue to rise.
We remain conservative in spending money and cautious in ensuring that the bank
always has enough of it.

RELATIVE TO THE SIZE OF OUR BUSINESS WE HAVE SIGNIFICANT CASH RESERVES

Finbond’s net cash, cash equivalents and liquid investments increased by 19.8%
to R765.520 million (Feb 2018: R 639.195 million).

Our business generates substantial positive cash-flow. We collected R 7.18
billion cash from customers over the past year.

Cash Received as a percentage of Cash Granted for the period under review
improved by 5% to an average of 138% (Feb 2018: 133%).

By the end of February 2019 the deposit and commercial paper portfolio in South
Africa amounted to R1.43 billion [Feb 2018: R1.31 billion]. The average deposit
size is R387,439, the average term 23.9 months and the average interest rate is
9.91%. The average commercial paper investment is R1 million the average term
5 years and the average interest rate 11%. Finbond is not exposed to the
uncertainty that accompanies the use of corporate call deposits as a funding
mechanism since Finbond only accepts 6 to 72 month fixed and indefinite term
deposits and 60 months commercial paper investments.

Given the long term nature of Finbond’s liabilities [fixed term deposits with
an average term of 23.9 months and commercial paper with an average term of 60
months] and the short term nature of its assets (short term micro loans with an
average term of 3.9 months in South Africa), Finbond possesses a low risk
liquidity structure.

FINBOND MUTUAL BANK 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.

Due to the once off abnormal fair value write downs to the Investment Property
Portfolio, as a result of a year-end adjustment, retroactively after year end,
Finbond Mutual Bank’s minimum regulatory capital requirement as at 28 February
2019 reflected a shortfall of R40.3 million to the R202.3 million (25% of Risk
Weighted Assets) required by the Prudential Authority, and an excess of R81.0
million over and above the required qualifying regulatory capital per Basel
III. Although Finbond as a Mutual Bank is not subject to the Basel III
requirements, Finbond already complies with, and exceeds, all Basel III
requirements. As at 28 February 2019, Finbond’s:

•    internally calculated liquidity coverage ratio was 290% (190% more than
     required);
•    internally calculated net stable funding ratio was 805% (705% more than
     required); and
•    capital adequacy ratio was 20.01% (10.01% more than required under Basel
     III), but 4.99% below the minimum prudential limit required by the
     Prudential Authority.

In order to immediately address and rectify the reduction in capital caused by
the once off abnormal fair value adjustment to Investment Properties, Finbond
Group Limited recapitalized Finbond Mutual Bank, in the amount of R 40 million,
at the end of May 2019. Following the recapitalization, Finbond Mutual Bank’s
required qualifying regulatory capital (based on 30 April 2019 DI returns),
reflected an excess of R28.3 million to the R194.0 million (25% of Risk Weighted
Assets) required by the Prudential Authority, and an excess of R144.7 million
over and above the required qualifying regulatory capital per Basel III.
Following the May 2019 recapitalization (and based on 30 April 2019 DI returns),
Finbond’s:

•    internally calculated liquidity coverage ratio was 168% (68% more than
     required);

•    internally calculated net stable funding ratio was 647% (547% more than
     required); and

•     capital adequacy ratio was 28.64% (18.64% more than required in terms of
      Basel III), and 3.64% above the minimum prudential limit required by the
      Prudential Authority.

INVESTMENT GRADE CREDIT RATING AFFIRMATION

In December 2018, Global Credit Ratings affirmed the Investment Grade long term
national scale rating of Finbond Group Limited of BBB(ZA) and the short term
national scale rating of A3(ZA); with the outlook accorded as Stable.
Furthermore, Global Credit Ratings affirmed the long-term international scale
local currency rating assigned to Finbond Group Limited of B+; with the outlook
accorded as Stable.

FINBOND RATED SECOND BEST BANK IN SOUTH AFRICA AND ELEVENTH BEST BANK IN THE
WORLD

In October 2018, the London based Lafferty Group awarded Finbond with a 4-star
quality award as a high quality bank in the Lafferty Banking 500 global
benchmarking study.

Finbond is one of some 174 banks among 500 of the largest banks worldwide to
achieve 4 or 5-star ratings. Two-thirds of the banks are rated 3-star or lower.
The highest-quality banks are given 4 and 5-star ratings, while the lowest are
rated as a 1-star or a 2-star.

Finbond is the second highest ranked bank in South Africa and has been named as
one of the leading banks globally, ranking 11th in the world.

Institutions from 72 markets across all global regions are included in the
survey, ranging from large global banks to small regional institutions. Lafferty
Banking 500 is not one report but a vast database of 500 banks with 19 individual
metrics for each of them. Lafferty’s approach reveals a very different picture
of world banking from that given by traditional ratings and rankings. It goes
far beyond financial comparisons. Lafferty’s proprietary methodology, which is
entirely based on bank annual reports, takes account of multiple qualitative
metrics such as strategy, culture, living the brand, digital advancement,
management experience and customer satisfaction – as well as more traditional
financial criteria such as capital, loan/deposit ratios and return on assets.

SERIOUS INVESTMENT IN DISTRIBUTION AND PEOPLE

During the past financial year Finbond increased its overall branch network by
a further 22 branches to 694 branches [March 2018: 672]

In South Africa Finbond increased its branch network by 20 branches to 435
branches in South-Africa of which 167 are located in Gauteng, North West,
Limpopo and Mpumalanga, 67 in KwaZulu-Natal, 76 in the Western Cape, 60 in the
Eastern Cape and 65 in the Free State and Northern Cape.

In the United States of America and Canada Finbond increased its branch network
from 257 branches to 259 branches of which 29 are located in California, 53 are
located in Louisiana, 61 are located in Illinois, 5 are located in Indiana, 2
are located in Florida, 1 is located in Utah, 15 are located in Missouri, 13
are located in Ontario (Canada), 5 are located in Michigan, 13 are located in
Mississippi, 12 are located in Alabama, 9 are located in Wisconsin, 22 are
located in Tennessee, 9 are located in Oklahoma, 8 are located in South Carolina,
1 is located in New Mexico and 1 is located in Nevada.

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

Approximately 84% of Finbond’s headline earnings are currently denominated in
US$. The significantly higher percentage for the current year relates to the
South African SASSA transition issue described earlier. The intention is to
grow US$ earnings from a normalized 65% to approximately 80% of net headline
earnings in 3 to 5 years.

Finbond North American sales are well diversified across the various states
with limited exposure to concentration risk.

REGULATION AND COMPLIANCE

Finbond Group and Finbond Mutual Bank have a good, transparent and trusting
relationship with its regulators which include the Prudential Authority, the
National Credit Regulator, the Financial Sector Conduct Authority, the
Johannesburg Stock Exchange and the Financial Intelligence Centre.

The increasingly more-stringent regulatory environment impacting the financial
services sector constantly challenges banks to comply with regulatory
requirements.
Finbond’s compliance universe consists of all the statutory and regulatory
requirements of all relevant legislation, regulation codes applicable to the
business activities of the Group and the Bank.

During the period under review the Compliance function focused on the following
key areas:

   •   the identification of new regulatory requirements; employee awareness
       relating to regulatory requirements; and combating unethical behaviour;
   •   improved compliance risk monitoring;
   •   compliance training in all areas;
   •   continued high levels of compliance with the National Credit Act;
   •   continued high levels of compliance with the FAIS and FICA Acts.

Compliance risk is managed through internal policies and processes which include
legal, regulatory and business-specific requirements. Regular training and
advice is provided to ensure that all employees are familiar with their
compliance obligations.

The Finbond Mutual Bank Contact with Regulators Policy provides a framework
that guides ad hoc contact with any financial services regulatory authority
relevant to the Group and the Bank, ensuring that communication with regulators
is handled promptly and professionally. In terms of the policy the Compliance
division is responsible for providing guidance to business before and during
meetings with regulators, for maintaining a log of all commitments made to
regulators and for monitoring the progress of commitments.

UNINTENDED CONSEQUENCES OF THE PROPOSED SOUTH AFRICAN DEBT RELIEF BILL

Over-indebtedness is a serious economic and social challenge in South Africa.
The Banking Association South Africa (BASA) supports debt intervention to assist
low-income consumers whose circumstances have changed for the worse, through no
fault of their own, and when formal debt-counselling processes provide
inadequate relief.

However, the National Credit Amendment Bill, which has been provided to the
president to sign into law, is not a sustainable debt-intervention measure and
threatens the ability of banks to extend credit to low-income consumers –
hindering efforts to offer inclusive financial services to all South Africans.
This is a result of the bill failing to balance the rights of consumers and
credit providers and limiting the ability of banks to safeguard the savings and
salaries entrusted to them by South Africans. Specifically: The National
Consumer Tribunal and the courts are to be granted the power to make debt
restructuring orders – which reduces the interest rate, fees and charges for
credit agreements in debt intervention and debt review processes – to zero for
a period of five years or longer. This effectively legislates for the granting
of concessions to all consumers seeking debt intervention or who can enter the
debt review process.

It also means that secured credit agreements, such as mortgages, could be
restructured to an interest rate of 0%, which is unsustainable for banks and
consumers who hope to earn interest on their savings.

The unintended consequences of this provision is that access to credit for homes
and movable assets, like vehicles – which can be sources of income and wealth
creation – will become more difficult and the cost of credit is likely to
increase. Banks have a fiduciary duty to protect the deposits of their savers
and investors, which are used to extend credit.

The scope of application of the proposed legislation is too broad. Those
qualifying for debt intervention must have an average monthly gross income of
under R7 500 and total outstanding unsecured debt of R50 000. Their debt can be
extinguished after a period of up to 24 months, during which the levying of
interest, fees and charges and the obligation to make payment towards the debt,
will be suspended.

The powers given to the Minister to review and increase the income and unsecured
debt thresholds are deemed to be an unlawful delegation of legislative power.
They do not provide stakeholders with an opportunity to publicly participate in
the process, making it procedurally unfair.

This creates uncertainty for credit providers who will not be able to accurately
assess the risk of loans not being repaid. The consequences of the proposed
broadened scope of the Bill for consumers, the economy and sectors such as
banking, retail and micro-lending, have not been subjected to an in-depth social
and economic impact assessment and engagement with relevant stakeholders.

BASA has urged the portfolio committee to act in the interests of all South
Africans by addressing the unintended consequences of the Bill and helping to
ensure that the credit market can continue to provide financial services to
those in need, in a sustainable and fair manner.

LOOKING AHEAD

Although 60% of our revenue is generated in US$, South Africa still contributes
a significant portion of total revenue. The challenging and difficult South
African macro-economic environment as well as the adverse market conditions in
the South African market within which Finbond operates are not expected to abate
in the short and medium term.

However, we remain confident that we have the required resources and depth in
management to efficaciously overcome these challenges and remain optimistic
about our prospects for the future due to Finbond’s: management expertise;
strong cash flow; strong liquidity and surplus cash position; uniquely
positioned 435 branch network in South Africa and 259 branches in North America;
superior asset quality; access to funding and conservative risk management
practices in South Africa and North America.

We believe that the evolution from a short term micro finance institution to a
retail 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 and long term.

Our business is in a development and growth phase and, as with all growing
businesses, real risks remain.

DIVIDEND

The board has approved the declaration of a gross dividend from retained
earnings of 1.55 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 declaration data announcement will be released on SENS and the circular
relating to the Cash Dividend and Capitalisation Issue Alternative will be
distributed to shareholders 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 1.24 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.


AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
                                   28       28 February               1 March
                                February        2018*                  2017*
                                  2019       (Restated)    Change   (Restated)
R'000

Assets
Cash and cash equivalents         532,429       422,339     26%        547,351
Other financial assets            233,091       216,856      7%        207,717
Unsecured loans and other
advances to customers             804,533       741,664      8%        619,017
Trade and other receivables       131,246       158,177    (17%)       139,850
Other assets                       19,288        12,632     53%            760
Derivative financial
instrument                          4,920             -      -               -
Secured loans and other
advances to customers             208,903       210,977     (1%)       220,958
Property, plant and
equipment                         195,184       131,816     48%        113,800
Investment property               137,200       266,771    (49%)       278,185
Deferred taxation                  50,720        14,215     257%        20,115
Goodwill                          987,872       862,609     15%        782,301
Intangible assets                 116,838       108,035      8%        115,064
Total assets                    3,422,224     3,146,091      9%      3,045,118

Equity
Capital and reserves
Share capital                   1,150,684       724,525      59%       715,667
Reserves                            5,530      (193,715)   (103%)      (72,350)
Retained income                   332,144       383,860     (13%)      205,529
Share capital and reserves
attributable to ordinary
shareholders                    1,488,358       914,670       63%      848,846
Non-controlling interest          163,747       128,689       27%      194,807
Total equity                    1,652,105     1,043,359       58%    1,043,653


Liabilities
Bank overdraft                     90,620        91,033        0%       27,725
Trade and other payables          121,744       124,029       (2%)      81,428
Other liabilities                  10,668        11,757       (9%)      10,105
Current tax payable                22,235        42,073      (47%)      40,456
Derivative financial
instrument                              -        47,430        -             -
Loans from shareholders            84,970       470,586      (82%)     508,440
Purchase consideration
payable                                 -             -        -       213,375
Fixed and notice deposits         998,604     1,027,114       (3%)   1,098,609
Deferred taxation                   5,782         9,882      (41%)      21,327
Commercial paper                  435,496       278,828       56%            -
Total liabilities               1,770,119     2,102,732      (16%)   2,001,465


Total equity and liabilities    3,422,224     3,146,091        9%    3,045,118


AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended

                                                                28 February
                                              28 February           2018*
                                                  2019           (Restated)      Change
R'000


Interest income                                  1,809,953        1,541,716        17%
Interest expense                                  (193,876)        (208,231)      (7%)
Net interest income                              1,616,077        1,333,485        21%


Fee income                                         466,407          458,540        2%
Management fee income                                  467           66,971      (99%)
Other operating income                             301,470          315,783       (5%)
Fair value adjustments                             (74,513)          (6,872)      984%
Foreign exchange gain/(loss)                       (57,902)          52,318      (211%)
Net impairment charge on loans and
advances                                          (593,694)        (500,416)       19%
Operating expenses                              (1,495,503)      (1,296,444)       15%
Profit before taxation                             162,809          423,365       (62%)
Taxation                                            (9,821)        (102,164)      (90%)
Profit after taxation                              152,988          321,201       (52%)

Other comprehensive income to be
reclassified to profit or loss
Foreign currency translation
difference for foreign operations                  260,318         (136,174)  (291%)
Total comprehensive income for the
year                                               413,306          185,027     123%


Profit attributable to:
Owners of the company                               36,909          227,441    (84%)
Non-controlling interest                           116,079           93,760     24%
Profit for the period                              152,988          321,901    (52%)

Total comprehensive income
attributable to:
Owners of the company                              230,367          112,930     104%
Non-controlling interest                           182,939           72,097     154%
Total comprehensive income                         413,306          185,027     123%


Earnings per share
Earnings per share (cents)
   Basic                                   4.1       30.4    (86%)
   Diluted                                 4.1       29.1    (86%)

Headline earnings per share (cents)
   Basic                                  15.4       32.8    (53%)
   Diluted                                15.4       31.0    (50%)

Total number of ordinary shares
outstanding                            923,727    748,547     23%

Weighted average number of ordinary
shares outstanding                     895,886    748,570     20%
Effect on conversion of shareholders
loans into equity                       54,435    204,131    (73%)
Weighted average number of ordinary
shares (diluted) at 28 February        950,321    952,701     (0%)

Profit attributable to owners of the
Company                                 36,909    227,441    (84%)
Adjusted for:
Interest on shareholders loans          14,374     49,284    (71%)
Fair value adjustment on foreign
exchange derivative                    (7,085)     34,150    (121%)
Foreign exchange gain on loans from
shareholders                             7,085    (34,044)   (121%)
Diluted earnings                        51,283    276,831     (81%)
Net profit attributable to ordinary
equity holders of the parent            36,909    227,441     (84%)
Adjusted for:
Loss on disposal of property, plant
and equipment                              226      1,755     (87%)
Fair value changes of investment
properties                             100,575     16,639     504%
Headline earnings                      137,710    245,835     (44%)
Adjusted for:
Interest on shareholders loans          14,374     49,284     (71%)
Fair value adjustment on foreign
exchange derivative                     (7,085)    34,150    (121%)
Foreign exchange gain on loans from
shareholders                             7,085    (34,044)   (121%)
Diluted headline earnings              152,084    295,225     (48%)


AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended

                                                             28 February
                                           28 February           2018*
                                               2019           (Restated)     Change
R'000

Cash flows from operating activities
Cash generated from operations                  341,850           71,004      381%
Taxation paid                                   (67,085)        (105,872)     (37%)
Net cash from operating activities              274,765          (34,868)    (888%)

Cash flows from investing activities
Purchase of property, plant and
equipment                                       (89,559)         (57,050)      57%
Capital expenditure of investment
property                                            (36)         (10,029)    (100%)
Purchase of other intangible assets             (12,903)               -         -
Purchase of financial assets                    (13,469)         (20,238)     (33%)
Sale of financial assets                              -           52,863        -
Acquisition of subsidiaries net of cash
acquired                                              -         (213,498)       -
Net cash from investing activities             (115,967)        (247,952)    (53%)


Cash flows from financing activities
Buy back of shares                                    -          (43,478)       -
Issue of share capital                           32,708                -        -
Repayment of shareholders loan                  (69,730)          (5,565)   1,153%
Proceeds from commercial paper                  156,668          278,828      (44%)
Finance lease payments                           (2,867)          (2,525)      14%
    Dividends paid                             (197,012)        (101,945)      93%
    Net cash from financing activities          (80,233)         125,315     (164%)


    Total cash movement for the year             78,565         (157,505)    (150%)
    Cash at the beginning of the year           331,306          519,626      (36%)
    Effect of movements in exchange rates on
    cash held                                    31,938         (30,815)     (204%)
    Total cash at end of the year               441,809         331,306        33%


   AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
   for the year ended

                                                        28
                                                     February       28 February 2018*
                                                       2019             (Restated)
    R'000

    Total equity at the beginning of the year
    as previously presented                          1,043,359               1,161,917
    Correction of error                                      -                (118,264)
    Total restated equity as at the beginning
    of the year                                      1,043,359               1,043,653
    Change in accounting policy – IFRS 9                (3,818)                      -
    Restated total equity as at 1 March              1,039,541               1,043,653
    Change in share capital
        Issue of shares                                426,159                  54,049
        Buy-back of shares                                   -                 (45,191)
    Change in reserves
        Total comprehensive income for the year        230,367                 112,930
        Equity settled share based payment               5,787                  (6,854)
        Change in control                               15,191                       -
        Dividends paid                                 (93,640)               (154,281)
    Change in non-controlling interest
        Total comprehensive income for the year        182,939                  72,097
        Change in control                              (15,191)                 (8,992)
        Business combination                                 -                 (24,052)
        Dividends paid                                (139,048)                      -
    Total equity at the end of the year              1,652,105               1,043,359


   AUDITED CONSOLIDATED SEGMENTAL INFORMATION
   OPERATING SEGMENTS

R'000
                 Investment                 Property    Transactional
28 February                                Investment    
2019             Products      Lending                   Banking  Other         Total
Interest
income            21,751     1,784,341            -         -     3,861       1,809,953
Interest
expense         (139,713)      (34,603)           -     (437)   (19,123)      (193,876)
Net interest
income          (117,962)    1,749,738            -     (437)   (15,262)      1,616,077
Fee income             -       450,521            -    15,883         3         466,407
Management
fee income             -             -            -         -       467             467
Other
operating
income               185       294,711            -         -     6,574         301,470
Fair Value
adjustments            -         2,744    (129,607)         -    52,350        (74,513)
Foreign
exchange gain          -             -            -         -   (57,902)       (57,902)
Net
impairment
charge on
loans and
advances               -      (585,260)           -      (310)   (8,124)       (593,694)
Operating
expenses          (3,726)   (1,363,771)     (2,251)   (26,901)   (98,854)     (1,495,503)
Profit/(loss)
before
taxation        (121,503)      548,683    (131,858)   (11,765)  (120,748)        162,809
Taxation          15,252       (58,259)     16,552      1,477     15,157          (9,821)
Profit/(loss)
after
taxation        (106,251)      490,424    (115,306)   (10,288)   (105,591)       152,988

Significant
segment
assets
Cash and cash
equivalents      192,027       298,068            -     8,949    33,385         532,429
Other
financial
assets           233,091             -            -         -            -      233,091
Unsecured
Loans and
other
advances to
customers              -       804,533            -         -        -          804,533
Secured Loans
and other
advances to
customers              -       208,903            -         -        -          208,903
Trade and
other
receivables            -        66,985            -         -    64,261         131,246
Property,
plant and
equipment              -       177,094            -       751    17,339         195,184
Investment
property               -                     137,200        -         -         137,200
Goodwill               -       987,872             -        -         -         987,872
Intangible
assets                 -       116,838             -        -         -         116,838
Significant
segment
liabilities
Fixed and
notice
deposits         998,604                           -          -            -      998,604
Commercial
Paper            435,496                           -          -            -      435,496
Loans from
shareholders           -               -           -          -     84,970         84,970

28 February     Investment                   Property    Transac
2018*                                      Investment     tional
(Restated)      Products     Lending                     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
adjustment             -        62,086       (21,443)         -    (47,515)        (6,872)
Foreign
exchange gain                                                       52,318         52,318
Net
impairment
charge on
loans and
advances               -      (490,905)            -         27     (9,538)      (500,416)
Operating
expenses          (2,271)   (1,230,178)       (1,999)    (2,306)   (59,690)    (1,296,444)
Profit/(loss)
before
taxation        (89,864)       501,562      (23,442)      3,043     32,066        423,365
Taxation          32,668      (130,591)        8,522     (1,106)   (11,656)      (102,163)
Profit/(loss)
after
taxation         (57,196)      370,971       (14,920)     1,937     20,410        321,202

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                -    741,664               -         -          -        741,664
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                 -    862,609               -         -           -       862,609
Intangible
assets                   -    108,035               -         -           -       108,035
Significant
segment
liabilities
Fixed and
notice            1,027,11
deposits                 4                          -          -          -      1,027,114
Commercial
Paper              278,828                          -          -          -        278,828
Loans from
shareholders             -          -               -          -    470,586        470,586



     GEOGRAPHICAL SEGMENTS
    28 February 2019
     R'000                        South Africa          North America     Total


     Interest Income                 236,105           1,573,848        1,809,953
     Interest expense               (160,539)            (33,337)        (193,876)
     Net interest income              75,566           1,540,511        1,616,077
     Fee income                      403,761              62,646          466,407
     Management fee income               376                  91              467
     Other operating income          282,957              18,513          301,470
      Fair value adjustment          (75,029)                516          (74,513)
 Foreign exchange                    (57,443)               (459)         (57,902)
gain/(loss)
 Net Impairment charge on           (227,274)           (366,420)        (593,694)
loans and advances
 Operating expenses                 (493,030)         (1,002,473)      (1,495,503)
 Profit before taxation              (90,116)            252,925          162,809
 Taxation                             11,313             (21,134)          (9,821)
 Profit for the year                 (78,803)            231,791          152,988


 Significant segment assets
 Cash and cash equivalents            280,489            251,940        532,429
 Other financial assets               233,091                  -        233,091
 Unsecured loans and other            267,269            537,264        804,533
 advances to customers
 Secured loans and other              181,633             27,270        208,903
 advances to customers
 Trade and other receivables           86,476             44,770        131,246
 Property, plant and                   64,375            130,809        195,184
equipment
 Investment property                  137,200                  -        137,200
 Goodwill                             196,787            791,085        987,872
 Intangible assets                        171            116,667        116,838


Significant segment
liabilities
 Fixed and notice deposits            998,604                  -        998,604
 Commercial Paper                     435,496                  -        435,496
 Loans from shareholders               84,970                  -         84,970


28 February 2018*
(Restated)
 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          66,909               62       66,971
income
 Other operating        271,565           44,218      315,783
  income
 Fair value             (68,958)          62,086       (6,872)
adjustment
 Foreign exchange        52,355              (37)      52,318
gain/(loss)
 Net Impairment        (158,077)        (342,339)    (500,416)
charge on loans and
 advances
 Operating expenses    (475,112)        (821,332)  (1,296,444)
 Profit before          194,188          229,177      423,365
taxation
 Taxation               (70,498)         (31,666)    (102,164)
 Profit for the year    123,690          197,511      321,201


 Significant segment
assets
 Cash and cash           248,575         173,764       422,339
equivalents
 Other financial         216,709             147       216,856
assets
 Unsecured loans and     354,768         386,896       741,664
 other advances to
 customers
 Secured loans and       185,389          25,588       210,977
 other advances to
 customers
 Trade and other         137,440          20,737       158,177
receivables
 Property, plant and      68,629          63,187       131,816
equipment
 Investment property     266,771               -       266,771
 Goodwill                196,787         665,822       862,609
 Intangible assets           171         107,864       108,035


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


    * Results for the 2018 financial year have been restated due to an error in
    the fair value measurement of the previously written-off portfolio affecting;
    Unsecured loans and advances to customers, Deferred taxation, Goodwill, Non-
    controlling interest and Retained income. Please see additional information in
    the notes to the consolidated financial statements to follow.

Notes to the audited consolidated financial statements

Finbond Group Limited is a company domiciled in South Africa. The audited
consolidated financial statements of the Company as at and for the twelve months
ended 28 February 2019 comprise the Company and its subsidiaries (together
referred to as the “Group”).

Basis of preparation

The audited 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 audited consolidated
financial statements have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standards (“IFRS”).

The accounting policies applied by the Group in the audited consolidated
financial statements are consistent with those accounting policies applied in
the preparation of the previous consolidated annual financial statements except
for the adoption of new and amended standards as set out below.

The consolidated financial statements were prepared under the supervision of Mr
GW Labuschagne CA, CPA, in his capacity as chief financial officer.

Financial information and notes in this announcement are extracted from the
Group’s audited financial statements and are not themselves audited. The
directors take full responsibility that the financial information and notes as
presented have been correctly extracted from the Group’s audited financial
statements.

a) New and amended standards adopted by the Group
Several new or amended standards became applicable for the current reporting
period and the Group had to change its accounting policies and make
retrospective adjustments as a result of adopting the following standards:

•      IFRS 9 Financial Instruments, and
•      IFRS 15 Revenue from Contracts with Customers.

The impact of the adoption of these standards and the new accounting policies
are disclosed below. The other standards did not have any impact on the Group's
accounting policies.

b) Impact of standards issued but not yet applied by the Group
IFRS 16 Leases

IFRS 16 will replace IAS 17 Leases and three related Interpretations. It
completes the IASB's long running project to overhaul lease accounting. Leases
will be recorded in the statement of financial position in the form of a right-
of-use asset and a lease liability. There are two important reliefs provided by
IFRS 16 for assets of low value and short-term leases of less than 12 months.

Management is in the process of assessing the full impact of the Standard. The
Group believes that the most significant impact will be the recognition of a
right of use asset and a lease liability for the office and production buildings
currently treated as operating leases and concludes that there will not be a
significant impact to the finance leases currently held on the statement of
financial position.

At 28 February 2019 the future minimum lease payments amounted to R118,8
million. The nature of the expense of the above cost will change from being an
operating lease expense to depreciation and interest expense.

The Group adopted IFRS 16 on 1 March 2019 using the Standard's modified
retrospective transition method approach. Under this approach the cumulative
effect of initially applying IFRS 16 is recognised as an adjustment to equity
at the date of initial application. Comparative information is not restated.

The Group has elected to present right-of-use assets separately and lease
liabilities will be included in finance liabilities in the statement of
financial position.

Use of judgements and 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 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 2018 except where the implementation of IFRS 9 requires a different
approach to the accounting previously applied, such as estimating the lifetime
losses of short-term receivables for the purposes of IFRS 9's expected credit
loss model.

Changes in significant accounting policies

The changes in accounting policies are also reflected in the Group’s
consolidated financial statements as at and for the year ending 28 February
2019.

The Group has initially adopted IFRS 9 Financial Instruments (see A below) and
IFRS 15 Revenue from Contracts with Customers from 1 March 2018. A number of
other new standards are effective from 1 January 2018, but they do not have a
material effect on the Group’s financial statements.

The adoption of IFRS 15 Revenue from Contracts with Customers has had no impact
on the Group’s financial statements.
The effect of initially applying these standards is mainly attributed to an
increase in impairment losses recognised on financial assets (see A(ii) below).

A. IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring financial assets,
financial liabilities and some contracts to buy or sell non-financial items.
This standard replaces IAS 39 Financial Instruments: Recognition and
Measurement.

The following table summarises the impact, net of tax, of the transition to
IFRS 9 on the opening balance of unsecured loans and other advances to customers,
secured loans and other advances, reserves, retained earnings and NCI (for a
description of the transition method, see (iii) below).

Consolidated statement of financial position

R'000                                     28 February      IFRS 9       1 March
                                              2018       transition       2018
                                         as presented    adjustment     restated

Assets
Cash and cash equivalents                      422,339            -     422,339
Other financial assets                         216,856            -     216,856
Unsecured loans and other                      741,664       (2,874)    738,790
advances to customers
Trade and other receivables                    158,177            -     158,177
Other assets                                    12,632            -      12,632
Secured loans and other                        210,977       (5,109)    205,868
advances to customers
Property, plant and equipment                  131,816            -     131,816
Investment property                            266,771            -     266,771
Deferred taxation                               14,215            -      14,215
Goodwill                                       862,609            -     862,609
Intangible assets                              108,035            -     108,035
Total assets                                 3,146,091       (7,983)  3,138,108
Liabilities
Bank overdraft                                  91,033            -      91,033
Trade and other payables                       124,029            -     124,029
Other liabilities                               11,757            -      11,757
Current tax payable                             42,073            -      42,073
Derivative financial instrument                 47,430            -      47,430
Loans from shareholders                        470,586            -     470,586
Fixed and notice deposits                    1,027,114            -   1,027,114
Deferred taxation                                9,882       (4,165)      5,717
Commercial paper                               278,828            -     278,828
Total liabilities                            2,102,732       (4,165)  2,098,567
Equity
Capital and reserves
Share capital                                724,525              -     724,525
Reserves (deficit)                         (193,715)              -    (193,715)
Retained income                              383,860        (10,176)    373,684
Share capital and reserves                   914,670        (10,176)    904,494
attributable to ordinary
shareholders
Non-controlling interest                     128,689          6,358     135,047
Total equity                               1,043,359         (3,818)  1,039,541
Total equity and liabilities               3,146,091         (7,983)  3,138,108

Basic earnings per share                                       (1.1)
(cents)
Diluted earnings per share                                     (1.1)
(cents)

The adjustments to loans and other advances to customers could further be
explained as per the table below.
R'000                                   28 February     IFRS 9        1 March
                                            2018      transition        2018
                                       as presented   adjustment     restated



Unsecured Loans and advances              971,770              -      971,770
before impairment
Allowances for impairment to             (230,106)        (2,874)    (232,980)
loans and advances
Unsecured loans and other                 741,664         (2,874)     738,790
advances to customers

Secured Loans and advances                234,832               -     234,832
before impairment
Allowances for impairment to              (23,855)         (5,109)    (28,964)
loans and advances
Secured loans and other                   210,977          (5,109)    205,868
advances to customers



The total impact on the Group's Retained earnings as at 1 March 2018 is as
follows:
                                                                 R’000
Closing retained earnings at 28 February 2018 as presented                383,860
Increase in allowances for impairment for debt investments at             (7,983)
amortised cost
Decrease in deferred tax liability relating to impairment                   4,165
Non-controlling interest                                                  (6,358)
Opening retained earnings 1 March 2018 restated                           373,684


The details of new significant accounting policies and the nature and effect of
the changes to previous accounting policies are set out below.
(i) Classification and measurement of financial assets and financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the
classification and measurement of financial liabilities. However, it eliminates
the previous IAS 39 categories for financial assets of held to maturity, loans
and receivables and available for sale.

The adoption of IFRS 9 has not had a significant effect on the Group’s accounting
policies related to financial liabilities. The impact of IFRS 9 on the
classification and measurement of financial assets is set out below.

Under IFRS 9, on initial recognition, a financial asset is classified as
measured at: amortised cost; Fair Value through Other Comprehensive Income
(FVOCI) – debt investment; FVOCI – equity investment; or Fair Value through
Profit and Loss (FVTPL).

The classification of financial assets under IFRS 9 is generally based on the
business model in which a financial asset is managed and its contractual cash
flow characteristics.

A financial asset is measured at amortised cost if it meets both of the following
conditions and is not designated as at FVTPL:
   -  it is held within a business model whose objective is to hold assets to
      collect contractual cash flows; and
   -  its contractual terms give rise on specified dates to cash flows that are
      solely payments of principal and interest on the principal amount
      outstanding.
A financial asset (unless it is a trade receivable without a significant
financing component that is initially measured at the transaction price) is
initially measured at fair value plus, for an item not at FVTPL, transaction
costs that are directly attributable to its acquisition.

The following accounting policies apply to the subsequent measurement of
financial assets.
Financial assets at FVTPL  These assets are subsequently measured at fair
                           value. Net gains and losses, including any
                           interest or dividend income, are recognised in
                           profit or loss.


Financial assets at           These assets are subsequently measured at
amortised cost                amortised cost using the effective interest
                              method. The amortised cost is reduced by
                              impairment losses (see (ii) below). Interest
                              income, foreign exchange gains and losses and
                              impairment are recognised in profit or loss. Any
                              gain or loss on derecognition is recognised in
                              profit or loss.

The effect of adopting IFRS 9 on the carrying amounts of financial assets at 1
March 2018 relates solely to the new impairment requirements, as described
further below.

The following table and the accompanying notes below explain the original
measurement categories under IAS 39 and the new measurement categories under
IFRS 9 for each class of the Group’s financial assets as at 1 March 2018.
Financial Assets         Original         New               Original     New
                         classification   classification    carrying     carrying
                         under IAS 39     under IFRS 9      amount       amount
                                                            R'000        R'000


Cash and cash             Loans and        Amortised cost      422,339      422,339
equivalents   (a)        receivables
Other financial           Held to          Amortised cost      105,566      105,566
assets                   maturity
Other financial           Designated at    FVTPL               111,290      111,290
assets                   FVTPL
Unsecured loans and       Loans and        Amortised cost      741,664      738,790
other advances to        receivables
customers   (b)
Secured loans and         Loans and        Amortised cost      210,977      205,868
other advances to        receivables
customers
 Other receivables        Loans and        Amortised cost      109,477      109,477
                         receivables
 Total financial                                             1,701,313    1,693,330
assets

(a)      Cash and cash equivalents that were classified as loans and receivables
      under IAS 39 are now classified at amortised cost. These amounts were
      previously stated at cost which approximates fair value due to the short-
      term nature and consequently no adjustment was recognised in opening retained
      earnings at 1 March 2018 on transition to IFRS 9.

(b)      Unsecured loans that were classified as loans and receivables under IAS
      39 are now classified at amortised cost.

(ii) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit
loss’ (ECL) model. The new impairment model applies to financial assets measured
at amortised cost, contract assets and debt investments at FVOCI, but not to
investments in equity instruments.

The financial assets at amortised cost consist of unsecured loans, secured
loans, trade receivables, cash and cash equivalents, and corporate debt
securities.
Under IFRS 9, loss allowances are measured on either of the following bases:
   – 12-month ECLs: these are ECLs that result from possible default events
      within the 12 months after the reporting date; and
   – lifetime ECLs: these are ECLs that result from all possible default events
      over the expected life of a financial instrument.

The Group measures loss allowances at an amount equal to lifetime ECLs, except
for the following, which are measured as 12-month ECLs:
   -  debt securities that are determined to have low credit risk at the
      reporting date; and
   -   other debt securities and bank balances for which credit risk (i.e. the
       risk of default occurring over the expected life of the financial
       instrument) has not increased significantly since initial recognition.

The Group has elected to measure loss allowances for unsecured loans, secured
loans, trade receivables and contract assets at an amount equal to lifetime
ECLs.

When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Group’s historical experience and
informed credit assessment and including forward-looking information.

The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when:
   -  the borrower is unlikely to pay its credit obligations to the Group in
      full, without recourse by the Group to actions such as realising security
      (if any is held); or
   -  the financial asset is more than 90 days past due.

The maximum period considered when estimating ECLs is the maximum contractual
period over which the Group is exposed to credit risk.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at
amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when
one or more events that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.

Presentation of impairment

Loss allowances for financial assets measured at amortised cost are deducted
from the gross amount of the assets. Impairment losses related to loans and
advances are presented separately in the statement of profit or loss.

Impairment losses on other financial assets are presented under ‘finance costs’,
similar to the presentation under IAS 39, and not presented separately in the
statement of profit or loss and OCI due to materiality considerations.

Impact of the new impairment model
For assets in the scope of the IFRS 9 impairment model, impairment losses are
generally expected to increase and become more volatile. The Group has
determined that the application of IFRS 9 impairment requirements at 1 March
2018 results in an additional impairment allowance as follows.

                                                      Unsecured      Secured
                                                      loans         loans
                                                      R'000         R'000

Loss allowance at 28 February 2018 under IAS 39       230,106        23,855
Additional impairment recognised at 1 March 2018:       2,874         5,109
Loss allowance at 1 March 2018 under IFRS 9           232,980        28,964

The following analysis provides further detail about the calculation of ECLs
related to loans and advances on the adoption of IFRS 9. The Group considers
the model and some of the assumptions used in calculating these ECLs as key
sources of estimation uncertainty.

The ECLs were calculated based on historical actual credit loss experience as
well as forward looking information. The Group performed the calculation of ECL
rates separately at the portfolio and product level.

Exposures within each group were segmented based on common credit risk
characteristics such as product, geographic region and delinquency status.

ECLs were calculated in line with the stage as driven by the delinquency status
of the financial asset. There are three stages:
  - Stage 1 includes financial instruments where no significant increase in
     risk (SICR) is prevalent. A 12-month ECL assessment is implemented.
  - Stage 2 includes financial instruments where SICR is prevalent; a lifetime
     ECL assessment is implemented.
  - Stage 3 includes credit-impaired financial instruments where a lifetime ECL
     assessment is implemented.

ECLs were then calculated using the derivation of term structured probability
of default (PD), exposure at default (EAD) and loss given default (LGD)
parameters as well as the effective rate of interest for discounting. The PDs
and LGDs are calculated in accordance with the specific stage of allocation and
discounting is done using the average effective interest rate which is
incorporated into the LGDs.

The following table provides information about the exposure to credit risk and
ECLs for unsecured and secured loans as at 1 March 2018.

R'000                                    Weighted      Gross          Loss
                                          average    carrying      allowance
                                        loss rate     amount

Stage 1                                       10%       828,255       79,641
Stage 2                                       45%       259,405      116,880
Stage 3                                       55%       118,942       65,423
                                                      1,206,602      261,944
There were no significant changes during the period to the Group’s exposure to
credit risk.

(iii) Transition

Changes in accounting policies resulting from the adoption of IFRS 9 have been
applied retrospectively, except as described below.

   -   The Group has taken an exemption not to restate comparative information
       for prior periods with respect to classification and measurement
       (including impairment) requirements. Differences in the carrying amounts
       of financial assets and financial liabilities resulting from the adoption
       of IFRS 9 are recognised in retained earnings and reserves as at 1 March
       2018. Accordingly, the information presented for 2018 does not generally
       reflect the requirements of IFRS 9 but rather those of IAS 39.
   -   The following assessments have been made on the basis of the facts and
       circumstances that existed at the date of initial application.
             - The determination of the business model within which a financial
               asset is held.
             - The designation and revocation of previous designations of certain
               financial assets and financial liabilities as measured at FVTPL.
             - The designation of certain investments in equity instruments not
               held for trading as at FVOCI.
   -   If an investment in a debt security had low credit risk at the date of
       initial application of IFRS 9, then the Group has assumed that the credit
       risk on the asset had not increased significantly since its initial
       recognition.

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

 R’000                              Level 1         Level 2      Level 3       Total
 Assets and liabilities
 measured at fair value:
 Recurring
 Other financial assets                   -        121,031          358       121,389
 Investment property                      -              -      137,200       137,200
 Foreign exchange derivative on
 loans from shareholders                  -              -       (4,920)       (4,920)
                                          -        121,031      132,638       253,669


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.

R’000
                                                     Gains
                                                  recognized
                                   Opening         in profit   Capitalised     Closing
                                   Balance          or loss    expenditure     balance
Assets
Investment properties               266,771        (129,607)            36     137,200

Liabilities
Derivative financial instrument    (47,430)           52,350             -       4,920


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 year error
Under IAS 39 and in accordance with the policies and procedures governing the
Group, overdue loans and advances were written off and fully derecognised. This
written off portfolio was managed as a group and actively and constantly
evaluated in line with Group risk management strategy.

Management estimated future recoveries in reviewing the carrying value of the
written-off portfolio to be recognised in loans and advances based on historic
trends. Management used the Discounted Cash Flow methodology to value the
written-off portfolio by:

    •   Estimating future cash flows expected from collection efforts on the
        written-off portfolio;
    •   Estimating an appropriate discount rate based on the cost of equity; and
    •   Determining the net present value by discounting the expected future cash
        flows using an appropriate discount rate.

Under IAS 39, upon initial recognition, the written-off portfolio was designated
at fair value through profit or loss. The Group applied this policy consistently
between 2009 and 2018 on a fair value basis in accordance with a documented
risk management strategy. Information about the group was provided internally
on that basis to the entity's key management personnel.

IFRS 13 however requires selecting a valuation technique that maximises the use
of relevant observable inputs and minimises the use of unobservable inputs. The
reliability of a fair value measurement derived from a valuation technique is
dependent on both the reliability of the valuation technique and the reliability
of the inputs used.

•   When applying the fair value measurement, Finbond applied a discounted cash
    flow valuation technique to estimated cash flows that were no longer linked
    to the original counterparties to whom loans were advanced. The cash flows
    were estimated and not supported by the underlying contractual cash flows,
    hence estimates of possible collections based on past experience rather than
    known amounts and counterparties.
•   The valuation technique did not take into account appropriate risk adjusted
    inputs reflecting the nature of the counterparties and the significant
    measurement uncertainties relating to the cash flows.

This constitutes an error as a result of non-compliance with IFRS 13. The full
amount was considered an error because of insufficient data and impracticability
to quantify the amount relating to the error and the amount that would have
been transitioned to IFRS 9.

Finbond, as part of its earnings enhancing growth strategy, acquired a number
of short-term lending businesses in North America through business combinations
during the 2017 and 2018 financial years. American Cash Advance (100% interest
at acquisition), Cashbak LLC (56.13% interest at acquisition), AmeriCash Holding
LLC (50% interest at acquisition) and America's Financial Choice LLC (100%
interest at acquisition) included a written-off portfolio as a separately
identifiable asset on acquisition. Given the restatement, the net asset value
on acquisition of these entities decreased, resulting in an increase in goodwill
and a decrease in the non-controlling interest upon initial recognition.
The following tables summarise the impact on the Group's consolidated
financial statements for the years ended 28 February 2017 and 28 February
2018:

 2017                                       Impact of correction of error
                                             As
                                         previously   Adjustment      As
R'000                                     reported         s       restated

 Consolidated statement of financial position


 Unsecured loans and other advances to      800,599    (181,582)     619,017
customers
 Goodwill                                   752,699       29,602     782,301
 Other asset items                        1,643,800            -   1,643,800
 Total assets                             3,197,098    (151,980)   3,045,118


 Deferred taxation                           55,043     (33,716)      21,327
 Other liability items                    1,980,138            -   1,980,138
 Total liabilities                        2,035,181     (33,716)   2,001,465


 Retained income                            292,351     (86,822)     205,529
 Non-controlling interest                   226,249     (31,442)     194,807
 Other equity items                         643,317            -     643,317
 Total equity                             1,161,917    (118,264)   1,043,653


 2018                                       Impact of correction of error
                                             As
                                         previously   Adjustment      As
R'000                                     reported         s       restated

 Consolidated statement of financial position


 Unsecured loans and other advances to      937,391    (195,727)     741,664
customers
 Goodwill                                   830,077       32,532     862,609
 Other asset items                        1,541,818            -   1,541,818
 Total assets                             3,309,286    (163,195)   3,146,091


 Deferred taxation                           45,704     (35,822)       9,882
 Other liability items                    2,092,850            -   2,092,850
 Total liabilities                        2,138,554     (35,822)   2,102,732


 Retained income                            477,442     (93,582)     383,860
 Reserves                                 (194,581)         866     (193,715)
 Non-controlling interest                   163,346     (34,657)     128,689
 Other equity items                         724,525           -      724,525
 Total equity                             1,170,732    (127,373)  1,043,359


 Consolidated statement of comprehensive income


 Net impairment charge on loans and        (484,238)     (16,178)    (500,416)
advances
 Taxation                                  (104,582)        2,419    (102,163)
 Others                                      923,781            -      923,781
 Profit after taxation                       334,961     (13,759)      321,202
 Foreign currency translation              (140,825)        4,650    (136,175)
difference for foreign operations
 Total comprehensive income for the          194,136      (9,109)      185,027
year

 Profit attributable to :
 Owners of the company                       234,201      (6,759)      227,442
 Non-controlling interest                    100,760      (7,000)       93,760
                                             334,961     (13,759)      321,202


 Total comprehensive income attributable to :
 Owners of the company                       118,824      (5,894)      112,930
 Non-controlling interest                     75,312      (3,215)       72,097
                                             194,136      (9,109)      185,027

Events after the reporting period

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.

Due to the once off abnormal fair value write downs to the Investment Property
Portfolio, as a result of a year-end adjustment, retroactively after year end,
Finbond Mutual Bank’s minimum regulatory capital requirement as at 28 February
2019 reflected a shortfall of R40.3 million to the R202.3 million (25% of Risk
Weighted Assets) required by the Prudential Authority, and an excess of R81.0
million over and above the required qualifying regulatory capital per Basel
III. Although Finbond as a Mutual Bank is not subject to the Basel III
requirements, Finbond already complies with, and exceeds, all Basel III
requirements. As at 28 February 2019, Finbond’s:

•     internally calculated liquidity coverage ratio was 290% (190% more than
required);

•    internally calculated net stable funding ratio was 805% (705% more than
required); and
•     capital adequacy ratio was 20.01% (10.01% more than required under Basel
      III), but 4.99% below the minimum prudential limit required by the
      Prudential Authority.

In order to immediately address and rectify the reduction in capital caused by
the once off abnormal fair value adjustment to Investment Properties, Finbond
Group Limited recapitalized Finbond Mutual Bank, in the amount of R 40 million,
at the end of May 2019. Following the recapitalization, Finbond Mutual Bank’s
required qualifying regulatory capital (based on 30 April 2019 DI returns),
reflected an excess of R28.3 million to the R194.0 million (25% of Risk Weighted
Assets) required by the Prudential Authority, and an excess of R144.7 million
over and above the required qualifying regulatory capital per Basel III.
Following the May 2019 recapitalization (and based on 30 April 2019 DI returns),
Finbond’s:

•    internally calculated liquidity coverage ratio was 168% (68% more than
required);

•    internally calculated net stable funding ratio was 647% (547% more than
required); and

•     capital adequacy ratio was 28.64% (18.64% more than required in terms of
      Basel III), and 3.64% above the minimum prudential limit required by the
      Prudential Authority.


Independent auditor's opinion

The Group’s consolidated financial statements have been audited by the Company’s
auditors, SNG Grant Thornton, who have expressed an unmodified opinion. The
audited Group consolidated financial statements, as well as unmodified audit
opinion, are available for inspection at the Company’s registered office.


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



31 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* (BComHons (Unisa); Chief
Financial Officer: GW Labuschagne (CPA (CA), CA (SA), BCom (Hons Acc), BCom
(Fin Acc)(cum laude)); PA Naudé*(BCom (Marketing), Gaining Competitive
Advantage (Michigan), IEP (INSEAD))*; Adv. N Melville* (B Law, LLB (Natal) LLM
(Cum Laude)(Natal) SEP (Harvard); RN Xaba* (CA)(SA) BCompt, BCompt (Hons)
(Unisa); DJ 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

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