African Bank interim results

Let us start with African Bank results, seeing as they are a widely owned share here at Vestact. We first started buying this companies stock back in August of 2003, when the price was comfortably below 8 ZAR a share. They were unloved by the market and perhaps justifiably so because of the implosions of Saambou (where ABIL picked up a part of their loan book for what turned out to be nothing) and Unifer. Friday was another tough day for ABIL, down over three percent, the market really was expecting a whole lot more than the trading update suggested ---> ABIL trading update.

So here goes, let us hit the numbers. "Headline earnings increased by 20% to R1 095 million (H1 2010: R914 million), as did headline earnings per share to 136,3 cents (H1 2010: 113,7 cents)." "An interim ordinary dividend per share of 85 cents" which is unchanged on the payout from last year. The banking business unit grew headline earnings by 24 percent, whilst the retail business unit grew headline earnings by 30 percent. Net advances surged 34 percent to 30.262 billion ZAR, and I guess it goes without saying that bad debt charges also grew, by 17 percent to 1.725 billion ZAR. Operating costs increased by 9 percent, that is worth posing a question to the fellows when the results are presented. We will have a closer look and write up some more tomorrow.

How is/was it out there over their first half to March? "The trading environment during this period was characterised by moderately improving economic conditions, a modest growth in employment, unemployment claims remaining high but stabilising and intense competition in both the credit and retail segments." Interesting to see that ABIL are utilising the Ellerines businesses in the way that they said (and we thought) they would. See next paragraph from the commentary:

"We have opened 122 kiosks and 12 carve-out branches to date, which generated R572 million of additional non furniture credit sales. The objective is to substantially increase the number of carve-outs and kiosks over the next two years. Significantly, the incremental costs related to this business are low given that the infrastructure and staff are already in place in EHL."

And what does the balance of the year look like? "It is expected that the subdued external trading environment will continue for the rest of the financial year. Innovation and renewed energy have resulted in strong levels of activity in the first half of the year and these are expected to continue into the second half." I love that, renewed energy. What you might, or might not know, is that the corporate culture at ABIL is great, the energy levels are actually high and it seems like a good place to work. And the results to me seem decent enough, very good in fact. More analysis tomorrow, like we said earlier.