21st Nov 2005 07:01
Barclays PLC21 November 2005 BARCLAYS PLC 21 November 2005 Shareholders are advised that Absa, in which Barclays PLC has a shareholding ofover 56%, has today made the Profit and Dividend announcement as set out below. Text of Absa announcement made on Monday 21 November 2005. ABSA GROUP LIMITED - PROFIT AND DIVIDEND ANNOUNCEMENTIncorporated in the Republic of South Africa)Registration number: 1986/003934/06)("Absa")JSE Code: ASAIssuer code: AMAGBISIN Code: ZAE000067237 INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 SALIENT FEATURES Six months Year ended ended 30 September 31 March 2005 2004 Change % 2005 (Unaudited) (Unaudited) (Audited)Income statement (Rm) (Restated)* (Restated)*Headline earnings 3 008 2 415 24,6 5 394Profit attributable toequity holders 2 888 2 354 22,7 5 419Balance sheet (Rm)Total assets 381 147 311 510 22,4 347 163Loan and advances to 300 129 242 626 23,7 268 240customersDeposits due to customers 278 529 231 993 20,1 251 985Financial performance (%)Return on average equity 25,0 24,1 25,3Return on average assets,excluding acceptances 1,65 1,56 1,65Operating performance (%)Net interest margin onaverage assets 3,35 3,40 3,25Net interest margin onaverage interest- bearing assets 3,80 3,81 3,70Impairment losses on loansand advances as % of loans and advances to customers 0,35 0,55 0,52Non-performing advances as% of loans and advances to 1,8 3,0 2,2customersNon-interest income as % ofoperating income 49,7 51,8 53,8Cost-to-income ratio 59,9 59,0 56,6Share statistics (million)Number of shares in issue 666,9 651,1 655,1Weighted average number of 661,4 650,6 652,1sharesWeighted average diluted 693,0 665,5 677,3number of sharesShare statistics (cents pershare)Headline earnings per share 454,8 371,2 22,5 827,2Diluted headline earnings 434,9 363,6 19,6 797,9per shareEarnings per share 436,7 361,8 20,7 831,0Diluted earnings per share 417,6 354,5 17,8 801,6Dividends per sharedeclared, relating to income for 160,0 95,0 68,4 295,0the periodDividend cover (times) 2,8 3,9 2,8Net asset value per share 3 752 3 180 18,0 3 569Capital adequacy (%)Absa Bank 11,2 12,6 11,4Absa Group 11,7 13,2 12,0 *Restated for International Financial Reporting Standards (IFRS), we draw yourattention to our SENS announcement on 25 October 2005. GROUP INCOME STATEMENT Six months Year ended ended 30 September Change 31 March 2005 2004 % 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) Rm Rm RmNet interest income 6 249 5 162 21,1 10 431Interest and similar income 14 946 13 668 9,4 27 160Interest expense and similarcharges (8 697) (8 506) (2,2) (16 729)Impairment losses on loans andadvances (494) (637) 22,4 (1 284) 5 755 4 525 27,2 9 147Net fee and commission income 4 370 4 049 7,9 8 816Fee and commission income 4 846 4 441 9,1 9 599Fee and commission expense (476) (392) (21,4) (783)Net insurance premium income 1 234 1 012 21,9 2 051Insurance premium revenue 1 355 1 150 17,8 2 341Premiums ceded to reinsurers (121) (138) 12,3 (290)Net claims and benefits paid (522) (436) (19,7) (929)Gross claims and benefits paidon insurance contracts (597) (463) (28,9) (1 023)Reinsurance recoveries 75 27 177,8 94Gains and losses from bankingand trading activities 344 383 (10,2) 870Gains and losses frominvestment activities 880 412 113,6 1 228Transfer to Life Fund (729) (284) (156,7) (668)Other operating income 607 407 49,1 800Net operating income 11 939 10 068 18,6 21 315Operating expenses (7 890) (6 778) (16,4) (13 727)Other operating expenses (7 450) (6 318) (17,9) (12 785)Other impairments - (84) 100,0 (137)Indirect taxation (440) (376) (17,0) (805)Share of profit of associates 66 39 69,2 78Operating profit before income 4 115 3 329 23,6 7 666taxIncome tax expense (1 185) (934) (26,9) (2 172)Profit for the period after 2 930 2 395 22,3 5 494taxAttributable to:Equity holders 2 888 2 354 22,7 5 419Minority interest 42 41 2,4 75 2 930 2 395 22,3 5 494 DETERMINATION OF HEADLINE EARNINGS Six months Year ended ended 30 September 31 March 2005 2004 Change 2005 (Unaudited) (Unaudited) % (Audited (Restated) (Restated) Rm Rm RmProfit attributable toequity holders 2 888 2 354 22,7 5 419 Adjustments for:Net profit on disposal ofproperty and equipment (13) (5) >(100,0) (12) Net profit on disposal ofavailable-for-sale assets,strategic investments,associated undertakings and joint 115 (18) >100,0 (150) ventures and subsidiariesImpairment of strategic andavailable-for-saleinvestments,associated undertakings and 8 - 100,0 30 joint ventures and propertyAmortisation ofavailable-for-sale 10 - 100,0 - liquid assetsGoodwill impaired and - 84 (100,0) 107 written-offHeadline earnings 3 008 2 415 24,6 5 394 GROUP BALANCE SHEET Six months Year ended ended 30 September 31 March 2005 2004 Change 2005 (Unaudited) (Unaudited) % (Audited) (Restated) (Restated) Rm Rm RmAssetsCash, cash balances andbalances with central banks 12 642 11 264 12,2 13 183Statutory liquid asset 15 219 12 359 23,1 14 384portfolioLoans and advances to banks 3 099 3 981 (22,2) 2 847Trading assets 22 902 17 194 33,2 21 351Hedging derivative assets 870 351 >100,0 600Loans and advances to 300 129 242 626 23,7 268 240customersReinsurance contracts 327 95 >100,0 320Current tax assets 9 15 (40,0) 5Deferred tax assets 174 191 (8,9) 183Investments 13 694 13 174 3,9 13 599Investments in associatedundertakings and joint 562 643 (12,6) 607venturesIntangible assets 181 191 (5,2) 197Property and equipment 3 096 3 086 0,3 3 209Other assets 8 136 6 087 33,7 8 246Clients' liabilities underacceptances 107 253 (57,7) 192Total assets 381 147 311 510 22,4 347 163 LiabilitiesDeposits from banks 24 445 17 891 36,6 24 370Trading liabilities 21 684 16 215 33,7 20 028Hedging derivative liabilities 1 884 1 139 65,4 1 610Deposits due to customers 278 529 231 993 20,1 251 985Liabilities under investmentcontracts 5 644 3 041 85,6 4 325Liabilities under insurancecontracts 2 167 1 800 20,4 1 939Provisions 1 492 1 321 12,9 1 509Other liabilities 10 639 7 836 35,8 9 757Borrowed funds 7 039 7 220 (2,5) 5 590Current tax liabilities 485 728 (33,4) 493Deferred tax liabilities 2 010 1 216 65,3 1 860Liabilities to clients underacceptances 107 253 (57,7) 192Total liabilities 356 125 290 653 22,5 323 658EquityCapital and reservesattributable to equityholders: Share capital 1 325 1 301 1,8 1 310Share premium 1 857 1 443 28,7 1 611Retained earnings 21 118 17 115 23,4 19 967Other reserves 518 831 (37,7) 385 24 818 20 690 20,0 23 273Minority interest 204 167 22,2 232Total equity 25 022 20 857 20,0 23 505Total equity and liabilites 381 147 311 510 22,4 347 163 Contingent liabilities 17 189 20 500 (16,2) 16 630 GROUP STATEMENT OF CHANGES IN EQUITY 30 September 31 March 2005 2004 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) Rm Rm RmShare capital 1 325 1 301 1 310Opening balance 1 310 1 291 1 291IFRS adjustment - treasury shares AbsaLife (2) - -Shares issued 24 - 8Consolidation of treasury shares heldby Absa Life 1 - -Consolidation of Absa Group LimitedShare Incentive Trust (8) 10 11Share premium 1 857 1 443 1 611Opening balance 1 611 1 309 1 309IFRS adjustment - treasury shares AbsaLife (40) - -Shares issued 382 - 112Consolidation of treasury shares heldby Absa Life 10 - -Consolidation of Absa Group LimitedShare Incentive Trust (106) 134 190Other reserves 518 831 385Opening balance as previously reported 385 755 755IFRS adjustments applied retrospectively - 10 10Movement in foreign currencytranslation reserve (5) 8 30Movement in regulatory general creditrisk reserve 17 69 (332)Movement in available-for-sale assetsreserve (17) (67) (73)Movement in cash flow hedges reserve 12 19 (54)Movement in insurance contingencyreserve 19 21 31Movement in associated undertakingsand joint ventures' retained earningsreserve 66 3 (22)Movement in share-based paymentsreserve 41 13 40Retained earnings 21 118 17 115 19 967Opening balance as previously reported 19 967 15 995 15 995IFRS adjustments applied retrospectively - (424) (424)IFRS adjustments applied prospectively (302) - -Consolidation of Absa Group LimitedShare Incentive Trust and other - - (6)Transfer to insurance contingencyreserve (19) (21) (31)Transfer (to)/from associatedundertakings and joint ventures'retained earnings reserve (66) (3) 20Transfer (to)/from regulatory generalcredit risk reserve (17) (69) 332Profit attributable to equity holders 2 888 2 354 5 419Dividends paid during the period (1 333) (717) (1 338)Total shareholders' equity at end ofperiod 24 818 20 690 23 273Minority interest 204 167 232Opening balance as previously reported 232 171 171IFRS opening balance adjustmentsapplied retrospectively - 4 4Other reserve movements (70) (49) (18)Minority share of profit 42 41 75Total equity 25 022 20 857 23 505 GROUP CASH FLOW STATEMENT Six months Year ended ended 30 September 31 March 2005 2004 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) Rm Rm RmNet cash flow from operating activites 417 1 392 5 908Net cash flow from investingactivities (1 822) (1 029) (3 658)Net cash flow from financingactivities 459 (558) (2 526)Net decrease in cash and cashequivalents (946) (195) (276)Cash and cash equivalents at thebeginning of the period 6 796 7 077 7 077Other movements (5) (6) (5)Cash and cash equivalents at the endof the period 5 845 6 876 6 796 PROFIT CONTRIBUTION BY BUSINESS AREA Six months Year ended ended 30 September 31 March 2005 2004 Change 2005 (Unaudited) (Unaudited) % (Audited) (Restated) (Restated) Rm Rm RmBanking operationsRetail banking 1 317 1 067 23,4 2 397Absa Private Bank 99 78 26,9 221Retail Banking Services 211 161 31,1 404Flexi Banking Services 107 79 35,4 203Absa Home Loans andRepossessed 498 410 21,5 837PropertiesAbsa Card 244 197 23,9 441Small Business 158 143 10,5 290Commercial banking 800 602 32,9 1 403Business Banking Services 458 381 20,2 844Absa Vehicle and Asset 342 221 54,8 559FinanceWholesale banking andinternational operations 398 307 29,6 843African operations 70 43 62,8 71Corporate centre (103) (24) >(100,0) (288)Capital and funding centre 1 (39) >100,0 (159)Total banking 2 483 1 956 26.9 4 267Insurance, fiduciary andinvestment operations 645 459 40,5 1 127Costs relating to theBarclays (120) - >(100,0) -transactionTotal headline earnings 3 008 2 415 24,6 5 394 Profit commentary Sustained earnings growthAbsa Group Limited produced a solid performance for the six months under reviewwith all the business clusters delivering strong earnings growth. These resultsare the first the Group is reporting under International Financial ReportingStandards (IFRS). Headline earnings increased by 24,6% to R3 008 million incomparison with headline earnings of R2 415 million for the corresponding periodof the previous financial year. Headline earnings per share increased by 22,5%,from 371,2 to 454,8 cents per share. Retail banking, commercial banking and the bancassurance operations haveperformed particularly well in an environment characterised by buoyant retailmarket conditions and a strong domestic equity market. Retail banking liftedearnings by 23,4%. Commercial banking and bancassurance operations grew earningsby 32,9% and 40,5% respectively. Wholesale banking increased earnings by 29,6%in a challenging market. The Group delivered a return of 25,0% on average shareholders' equity (September2004: 24,1%). An interim dividend of 160 cents per share has been declared,representing an increase of 68,4% over the 95 cents per share declared inNovember 2004. The Group's sound capital position, together with the primary capitalrequirement for banks, which is expected to be reduced to 6% of risk-weightedassets from 1 January 2006, facilitated a lowering of the interim dividend coverto 2,8 times. The Barclays transactionBarclays Bank PLC acquired 53,96% of the Group's shares on 27 July 2005. It hassince increased its shareholding to 56,40% (30 September 2005). Management, withthe assistance of expertise obtained from Barclays, is progressing well with theimplementation programme aimed at delivering sustainable pre-tax synergybenefits amounting to R1,4 billion per annum four years after the completion ofthe transaction. Diluted headline earnings per shareThe appreciation in the share price and the resultant increase in value of theoptions issued to the Absa Group Limited Share Incentive Trust, the Absa ShareOwnership Trust and Batho Bonke Capital (Proprietary) Limited, Absa's blackeconomic empowerment partner, diluted headline earnings by 19,9 cents per shareto 434,9 cents per share. Accordingly, the growth in fully diluted headlineearnings per share was 19,6% compared with the same period of the previousfinancial year. Accounting policiesAbsa implemented IFRS with effect from 1 April 2005. The opening balance sheetsat 1 April 2004 and 1 April 2005 have been restated accordingly. The comparativeincome statement for the six months to September 2004 and the balance sheet atthat date have also been restated. The full impact of IFRS was set out in a separate announcement made to themarket on 25 October 2005 and is also contained in the interim financial resultsbooklet and on the Group's website (www.absa.co.za). As IFRS are implementedinternationally, evolving practices with regard to the interpretation andapplication of standards under IFRS could impact future reported results anddisclosure. Operating environmentDomestic demand conditions remained buoyant during the six months endedSeptember 2005 and the sales of motor vehicles and other durable goods showedrapid growth. Much of this was financed by credit and assisted by a further 50basis point reduction in interest rates. Consumers continued to take on debt and debt-to-disposable income is currentlyat 61,8%, the highest level on record since 1990. In a low interest rateenvironment this could go even higher. The rand weakened slightly from the very strong levels of below R6,00 to thedollar that were recorded during the first quarter of 2005. This aided therecovery of the primary and secondary sectors. Despite a strong increase in fixed capital formation, the economy has beenrunning at very high levels of capacity utilisation. This, together with theescalation in fuel prices, caused a pick-up in inflation. The moderately deteriorating inflation outlook, together with high levels ofcredit extension growth and a larger current account deficit, have prompted theauthorities to warn of a potential interest rate increase. This prospect isbound to ease the rate of growth in credit demand, although any interest rateincreases will most likely be too small to have a material impact on defaultrates. Group performanceNet interest income increased by 21,1% because of strong advances growth of23,7% and stable margins. The implementation of IFRS, which resulted in thereclassification of certain fee income as margin income, has countered themargin pressure that followed the change in the funding mix in favour ofwholesale deposits and the impact of increased competition on customer lendingrates. The Group's bad debt experience benefited from improved and prudent creditmanagement techniques as well as the relatively low and stable interest rateenvironment. The impairment ratio, which reflects the impairment losses on loansand advances as a percentage of average loans and advances to customers, of0,35% compares with 0,55% at 30 September 2004 and 0,52% for the full year toMarch 2005. Non-performing loans improved to 1,8% (September 2004: 3,0%) ofloans and advances. The levels of provisions held in the Group are prudent andadequately cover the risks of uncollectable amounts. Solid transaction volume growth and the continued increase in the retailcustomer base resulted in fee and commission income increasing by 9,1%. Thereclassification of certain fees as margin income and the moderate level ofprice increases impacted fee revenue growth. Insurance-related income grew strongly and treasury trading income increased by19,5%. Investment income benefited from the strong domestic equity market. Thegains for the six months amounted to R407 million, excluding gains attributableto policyholders, up 156,0% from the corresponding period. The IFRS reclassification of fees caused non-interest income as a percentage ofoperating income to decline to 49,7%, which is below the Group's objective ofmaintaining a ratio of 50% or more. The cost-to-income ratio increased to 59,9% after costs grew by 17,9% in theperiod under review. Investments have been made in the expansion and improvementof Absa's branch and ATM network. Regulatory compliance initiatives also droveup costs. The number of employees engaged in sales and customer serviceinitiatives has also been increased. The costs incurred as a result of theBarclays transaction amounted to R120 million (after taxation) and the Barclaysimplementation programme added a further R61,1 million (after taxation). Segmental reporting Retail banking - Headline earnings up 23,4%Retail banking increased its headline earnings contribution by 23,4%, withstrong performances from all business units. This strong performance resultedfrom a buoyant consumer and property market and the low interest rateenvironment. Gross advances growth was 31,1%. The main driver was mortgage loangrowth of 34,7%, well-supported by credit card and personal loan growth of 29,5%and 23,5% respectively. Fees in some instances remained unchanged and where fees were increased witheffect from April 2005, these were kept well below the inflation rate. Growth innon-interest income amounted to 10,8%, mainly as a result of increasedtransaction volumes. The growth in transaction volumes emanated from increasedactivities of existing customers and an increase in the number of customers from6,9 million in March 2005 to 7,4 million in September 2005. The credit impairment charge in the retail market declined to a historical lowof 0,13%. This charge reflects the quality of the advances portfolio and theimproved net worth of customers partly owing to the strong growth in residentialproperty values. During the six months under review, 20 new staffed outlets were opened, mainlyin previously disadvantaged areas, and a further 76 upgraded. An additional 390automated teller machines (ATMs) were installed. This, together with thebranches and ATMs rolled out during the previous financial year, resulted inrelatively high cost growth of 16,1%. This expansion of the Group's deliveryreach enhances the sustainability of future revenue growth and provides accessto financial services to a far greater proportion of the South Africanpopulation. Commercial banking - Headline earnings up 32,9%Commercial banking now contributes approximately one quarter of the Group'sheadline earnings. Gross advances and deposits were up by 18,8% and 19,5%respectively and were driven by the large and medium business segments and assetand vehicle financing. Business Banking Services experienced some margin pressure on selected advanceand deposit products, resulting in net interest growth of 9,4%. The creditimpairment charge was lower despite the solid advances growth. The impairmentratio stands at 0,69%. Management was able to restrict operating expendituregrowth to below 10% by focusing on a more streamlined operating model tooptimise operational costs by sharing resources and structures. During recent years, Absa Vehicle and Asset Finance (AVAF) has extended itsreach beyond the traditional markets of vehicle finance into other classes ofcommercial moveable assets. It has also extended its service offering in thearea of fleet management. This has been achieved through organic growth and the acquisition of UnionFinance (office automation finance) and Avena LeasePlan (fleet management) inrecent years. The full impact of these acquisitions is starting to reflect inthe results. These entities have been renamed Absa Technology Finance Solutionsand Absa Vehicle Management Solutions respectively. In AVAF's traditional market, low interest rates and a lack of vehicle priceincreases have boosted demand for vehicle sales to record highs, with acorresponding demand for vehicle finance. AVAF has also pursued a strategy of forming strategic alliances withmanufacturers and dealer groups, which is paying dividends. During the period,three new alliances were formed. AVAF is becoming a major force in the heavy and extra heavy truck financemarket. This growth, combined with the focus on generating fee-based income andcost containment emanating from the new business model introduced in recentyears and a low bad debt experience, contributed to the impressive headlineearnings growth. Wholesale banking - Headline earnings up 29,6%Earnings from merchant banking grew strongly following good deal flow in theareas of empowerment and project finance. Corporate credit demand remainssubdued but corporate banking benefited from low credit losses and a solidincrease in transactional banking. Revenue from treasury trading activities washigher as a result of an increase in equity-related and customer foreignexchange trading activities, which resulted in a lower risk profile and lessvolatility. The winding down of the Group's international operations in Singapore and Asiais almost complete. The net contribution of these two offices has been a loss ofR66 million. The business conducted in the London office has been scaled downand now focuses on the offshore needs of South African corporates and onsub-Saharan African transactions. Other African operations - Headline earnings up 62,8%The earnings from banking operations in other African countries are somewhatdistorted by an initiative to align their reporting periods with that of theAbsa Group. In the past, some of the earnings of these banks have been accountedfor in arrears. The periods are now fully aligned, with the effect that morethan six months of earnings are included in this period. If the impact of theadditional months are excluded, the growth in headline earnings would have been29,1%. The portfolio of banks has continued to perform according to expectations withstrong performances from the National Bank of Commerce in Tanzania and BankWindhoek in Namibia. Financial services - Headline earnings up 40,5%The Group's bancassurance activities performed exceptionally well, with verystrong operational and underwriting performances by both the life assurance andshort-term insurance operations. Buoyant equity markets also contributedhandsomely. The main drivers of Absa Life's earnings were improved product sales, favourableclaims and lapse experiences and operational efficiency gains. A mild winter andgenerally stable weather conditions contributed to good profitability onshort-term property insurance. The Absa money market fund grew by R1,8 billion to R38,2 billion. Absa Brokers posted an improved performance, resulting mainly from benefitsderived from short-term broking through e-delivery business as well as theoperationalisation of the data brokers where strong sales growth wasexperienced. Net asset value and capital adequacyAbsa's strong operational performance increased the net asset value of the Groupby 18,0% from 3 180 cents per share to 3 752 cents per share. On the basis of the prescribed consolidated capital requirements of the SouthAfrican Reserve Bank (SARB), the Group's capital stood at 11,7% of risk-weightedassets at 30 September 2005 (March 2005: 12,0%). Absa Bank's primary capitalratio was 7,5% (March 2005: 8,0%) and the secondary capital ratio was 3,7%(March 2005: 3,4%). ProspectsConsumer demand for credit is expected to remain strong for the near-term,albeit not as buoyant as over the past 18 months. Inflation is expected toremain within the government's target of 3-6% and interest rates are likely toincrease slightly over the next year. Interest margins are expected to contract further as a result of the competitivelandscape and an increased reliance on wholesale funding. Credit quality is expected to remain sound and the charge to the incomestatement relatively low. The Group expects earnings growth momentum to be maintained for the remainder ofthe current financial reporting period ending 31 December 2005. On behalf of the board D C Cronje S F Booysen Chairman Group chief executive21 November 2005 Declaration of ordinary dividend number 38Shareholders are advised that an interim dividend of 160 cents per ordinaryshare was declared on Monday, 21 November 2005, and is payable to shareholdersrecorded in the register of members of the company at the close of business onFriday, 23 December 2005. In compliance with the requirements of STRATE, theelectronic settlement and custody system used by the JSE, the following salientdates for the payment of the dividend are applicable:Last day to trade cum dividend Thursday, 15 December 2005Shares commence trading ex dividend Monday, 19 December 2005Record date Friday, 23 December 2005Payment of dividend Tuesday, 27 December 2005 Share certificates may not be dematerialised or rematerialised between Monday,19 December 2005, and Friday, 23 December 2005, both dates inclusive. OnTuesday, 27 December 2005 the dividend will be electronically transferred to thebank accounts of certificated shareholders who use this facility. In respect ofthose who do not, cheques dated 27 December 2005 will be posted on or about thatdate. The accounts of shareholders who have dematerialised their shares (whichare held at their central securities depository participant or broker) will becredited on Tuesday, 27 December 2005. On behalf of the board W R SomervilleGroup secretary 21 November 2005 Inquiries:Jacques Schindehutte 2711 350-4850Eric Wasserman 2711 350-5887Grant Lewis 2711 350-5386 Issued by:Sue SteynInvestor RelationsAbsa Group Limited4th floor, Absa Towers East, 170 Main Street, Johannesburg.Tel: 2711 350-4394. Fax: 2711 350-6487E-mail: [email protected]: 21 November 2005 For further information, please contact: Barclays PLCInvestor Relations Media RelationsMark Merson/James S Johnson Chris Tucker/Jo Thethi+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6223/6217 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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