ABIL full year numbers

ABIL came out with their full year results on Monday, the same day that the stock went ex-rights. From a results point of view, it looks like they through the kitchen sink at it, and have tried to get all the bad news out the way. I hope that is the case because, I thought they threw the kitchens sink at it earlier in the year.


Part of the kitchen sink is a R4.6 billion write down in goodwill, and a R600 loss due to a change in their accounting definitions, when it comes to loan impairments. Their headline earnings were 88% down from a year earlier, brought down by their EHL division making a loss and the banking division making a smaller profit due to poor quality loans made during 2012.


The EHL division is their retail division that includes the brands Ellerines, Bears, Furniture City, Geen & Richards, Wetherlys and Dial-a-bed. Sales have been dropping at EHL since 2012, and are now down almost 30% year-on-year. A reason for the dropping sales has been in part due to them not granting as much credit as they have in the past, which I suppose shows that they are ready to do what it takes to improve the quality of their loan book.


In the release they do say that their loan approval rate did drop from 75% to 70%, but that in hind sight, it wasn't aggressive enough. The risk profile of their client base has also changed where low risk clients are now 60% from 51.9% and the medium/high risk clients are 6.2% from 9.4%.

The rights issue is set to raise R5.5 billion, which will improve their capital adequacy ratio and allow for further growth. The money raised will, improve the strength of ABIL's balance sheet, which makes issuing bonds easier and cheaper when they need to, which is a good thing.


As far as the share price goes, it has been higher than the closing price of R18.00 on Friday, which to me says that the market expected the poor results, and they also think that this is the last kitchen sink that they will see. As I write the ordinary share price is sitting at R13.90 and the 'N' shares are at R5.90, giving you an effective price of R18.86. As I said in one of my previous pieces, the stock price will probably stay suppressed for as long as there is a negative perception surrounding the company, and obviously by extension their share price.