Abc holdings results 2014

ABC Holdings Limited (Incorporated in the Republic of Botswana)
(Registration number 99/4865)
Ordinary share code: ABCH ISIN: BW0000000017
ABC Holdings Limited
Unaudited interim group results
FOR THE SIX MONTHS ENDED 30 JUNE 2014
The Group posted a set of results that were less than satisfactory, particularly when compared
to prior year. This was largely due to a combination of high impairments, reduced business
volumes and a squeeze in margins. This was exacerbated somewhat by the fact that huge
investments were made in people, systems and infrastructure on the back of projected
increase in business volumes. Consequently costs have increased at a higher pace than
revenue which was broadly fl at when compared to the previous year.
Group pre-tax profi t at BWP100 million was 41% below BWP169 million achieved in the prior
year. Attributable profi t to shareholders at BWP63 million was 56% lower than BWP143 million
posted in the comparative period last year. However, total assets at BWP16.3 billion were 4%
ahead of the December 2013 position of BWP15.8 billion. Balance sheet growth was not as
expected largely due to lower growth in Botswana and Zimbabwe. In a bid to improve liquidity,
a decision was taken to curtail lending in Botswana during the fi rst quarter of this year,
whereas tough economic conditions in Zimbabwe meant that we had to be very conservative
on lending hence the low growth in loans and advances. When compared to June 2013, total
assets increased by 27%. The Group has expanded its physical outlets to 161 branches and
agencies compared to 65 in the prior year and 73 as at end of December 2013.
OVERVIEW
Net asset value (BWP m) and NAV per share (BWP)
2.87 3.09
420 453
4.35
650
5.54 5.64 5.61
1 422 1 450 1 441
Jun 10 Jun 11 Jun 12 Jun 13 Dec 13 Jun 14
Net asset value Net asset value per share
Attributable profit (BWP m) and ROE (%)
14%
17% 18%
28 37
56
143
63
22%
9%
Jun 10 Jun 11 Jun 12 Jun 13 Jun 14
Attributable profit (BWP m) ROE (%)
Financial performance
Net interest income
Net interest income of BWP472 million was marginally lower than BWP476 million achieved in
prior year. All the banking subsidiaries, with the exception of BancABC Zambia and BancABC
Mozambique, posted growth in net interest income when compared to prior year. However,
BancABC Zambia had a reduction in net interest margins largely due to an increase in deposit
interest rates in that market during the fi rst half of the year. This put pressure on the funding
cost of the bank and consequently net interest margins. BancABC Mozambique posted a
marginally lower net interest income largely due to the decline in rates that has been taking
place for some time now. As a result overall margins were lower. In addition the centre also
posted a larger net interest expense during the period largely due to having funded the re-capitalisation
of BancABC Zambia, BancABC Zimbabwe and BancABC Tanzania during H2-13
using debt ahead of the closure of the capital raising initiatives.
Impairment losses on loans and advances
Net impairments of BWP152 million were 4% higher than BWP146 million charged in the prior
year. The Group continued to have an increase in non-performing loans mostly from the
Zimbabwean market which has had liquidity constraints that limited the ability of most
corporates from repaying their debts on time. BancABC Zimbabwe constituted 42% of the loan
impairment charge with the balance shared almost equally amongst BancABC Botswana,
BancABC Mozambique and BancABC Zambia. Gross non-performing loans increased from
9.8% as at 31 December 2013 to 14.9% as at 30 June 2014. Non-performing loans as at 30
June 2013 were 8.7%. However, the credit loss ratio of 2.9% in the current period was
marginally lower than 3.1% in the prior year.
Non interest income
Non-interest income of BWP363 million was 2% lower than BWP371 million achieved in 2013.
Trading income in BancABC Tanzania was lower than prior year due to a reduction in volumes
of government securities traded. Head offi ce also had a reduction in mark-to-market gain in
equity investments with a loss of BWP5 million being registered in the current period
compared to a gain of BWP54 million in the comparative period. However, fees and
commissions increased by 32% from BWP187 million in 2013 to BWP247 million in the current
period. This demonstrates the vast improvement in the quality of this income line as the Group
reaps the rewards of expanding its retail foot print to increase customer transactions.
Operating expenditure
Operating expenses of BWP584 million were 10% higher than BWP529 million recorded in
prior year. The Group continued to expand its Retail banking footprint thereby resulting in
higher costs. The total number of physical outlets (branches and agencies) now stands at 161,
compared to 65 as at 30 June 2013. The growth in the Group’s revenues was lower than the
growth in costs and this contributed to the cost to income ratio increasing from 62% in the
prior year to 70% in the current period. We believe that this increase is temporary and we
should see an improvement in the cost to income ratio as the change in strategy begins to bear
fruit. BancABC Botswana, BancABC Zambia and BancABC Zimbabwe were not too far from
the Group target cost to income ratio of 50%.
Cost income ratio
77% 77%
72% 74%
62%
71%
75%
70%
66%
Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14
Taxation
The Group’s tax charge at BWP40 million was not too different from prior year despite the
reduction in profi tability. This increased the effective tax from 24% in the prior year to about
40% in the current period and this was largely due to higher dividends that were paid by
subsidiaries in 2014 compared 2013 where virtually nothing was paid. Dividends attract
withholding tax when paid in the respective jurisdictions.
Balance sheet
The balance sheet increased to BWP16.3 billion (US $1.9 billion) compared to BWP13.7 billion
(US $1.6 billion) as at 30 June 2013 and BWP15.8 billion (US $1.8 billion) as at 31 December
2013. Loans and advances only increased marginally to BWP10.58 billion from BWP10.55
billion as at 31 December 2013 but increased by 7% from BWP9.85 billion as at 30 June 2013.
All entities had some growth in loans and advances during the period with the exception of
BancABC Tanzania and BancABC Zimbabwe where market conditions were not conducive for
credit expansion. Deposits increased to BWP12.9 billion from BWP12.2 billion in December
2013 (6%) and BWP10.9 billion (18%) as at 30 June 2013.
Attributable profit
Attributable profi t from banking operations was BWP147 million which was a 15% reduction
from the BWP172 million achieved in prior year. BancABC Zambia and BancABC Zimbabwe
posted attributable profi ts that were better than prior year. However, BancABC Botswana,
BancABC Mozambique and BancABC Tanzania had declines due to a combination of high
impairments, reduction in trading income and increased operating expenses as a result of
business expansion in retail banking.
Attributable profit (BWP m)
59
1
9 1
(17)
35
69
81
33
48
ABC Botswana ABC Mozambique ABC Tanzania ABC Zambia ABC Zimbabwe
2014 2013
Total assets by entity – June 2014 Total assets by entity – June 2013
29% BancABC Zimbabwe
33% BancABC Botswana
15% BancABC Mozambique
7% BancABC Tanzania
16% BancABC Zambia
31% BancABC Zimbabwe
38% BancABC Botswana
12% BancABC Mozambique
7% BancABC Tanzania
12% BancABC Zambia
Operational performance
Botswana
BancABC Botswana’s performance was lower than that achieved in the prior year largely due
to increased impairments. Attributable profi t declined by 27% from BWP81 million earned in
the prior year to BWP59 million in the current period. Net interest income at BWP191 million
was the same as in the prior period, but non-interest income increased by 6% from BWP36
million for the six months to 30 June 2013 to BWP39 million in the current year. The increase
in non-interest income was on the back of an increase in volumes of customer transactions.
Impairment charges of BWP32 million in the current period were signifi cantly higher than the
charge of BWP11 million in prior year. Gross non-performing loans increased to 3.4%
compared to 1.8% as at 30 June 2013 with the bulk of the NPLs emanating from wholesale
banking.
Operating expenses increased by 8% from BWP112 million in prior year to BWP122 million in
the current period, due to increased business activity from the expansion of retail outlets that
the subsidiary has been undertaking. The cost to income ratio increased marginally from 49%
in the prior year to 53% in the current year. The ratio is marginally higher than the Group’s short
term target of 50%.
Loans and advances at BWP3.8 billion were fl at compared to the December 2013 position but
marginally higher than BWP3.7 billion recorded in June 2013. Deposits increased from BWP4.8
billion in June 2013 to BWP5.0 billion as at 30 June 2014 and they were at BWP4.7 billion in
December 2013.
Mozambique
BancABC Mozambique’s profi tability decreased from BWP9 million in 2013 to BWP0.6 million
in the current period. This was mainly due to an increase in impairments and operating
expenses during the current year. Impairments increased by 27% from BWP18 million in 2013
to BWP22 million in 2014. Impairments in the current period were driven by a mix of both
corporate and retail clients. However, gross non-performing loans improved in the current
period from 12.8% in June 2013 to 8.0%. The gross NPL ratio at this level remains very high
and management is working hard to lower this further in the coming reporting periods.
Operating expenses increased by 33% from BWP66 million in prior year to BWP88 million in
the current period. This was largely due to increased number of staff and increased branch-related
expenses from the expansion the subsidiary has been embarking on. BancABC
Mozambique plans to be represented in most of the key economic hubs within the country and
hence the aggressive expansion of retail outlets. The new branches always have a time-lag
between the time costs start being incurred and when a critical mass is achieved in terms of
revenue and this negatively impacts profi tability in the short-term. Cost to income ratio
increased from 67% in the prior year to 79% in the current period.
Net interest income of BWP56 million was marginally lower than prior year’s BWP57 million
largely due to a squeeze in margins as market interest rates continued to decline. The balance
sheet size, however, increased dramatically with loans and advances increasing from BWP1
billion in June 2013 to BWP1.7 billion in June 2014. Loans and advances were BWP1.5 billion
in December 2013. Deposits increased from BWP1.6 billion in June 2013 to BWP2.3 billion as
at 30 June 2014 the same level as at December 2013.
Non-interest income increased by 36% from BWP40 million in prior year to BWP55 million in
the current period largely due to increased trade fi nance fees and commissions.
Tanzania
BancABC Tanzania posted an attributable loss of BWP17 million which was a deterioration
from the BWP0.6 million attributable profi t posted in the prior year. Income was lower than in
prior period largely due to a reduction in bond and foreign exchange trading income from
reduced volumes traded. As a consequence, non-interest income declined by 36% from
BWP39 million registered in the prior year to BWP25 million in the current period. Net interest
income grew by 11% from BWP17 million to BWP19 million on the back of an increase in retail
loans and advances during the period. However, loans and advances in total only marginally
increased from BWP592 million in June 2013 to BWP610 million in June 2014. Loans and
advances were BWP575 million in December 2013. Deposits increased marginally from
BWP1,181 million in June 2013 to BWP1, 227 million in June 2014. Deposits were BWP1,299
million in December 2013.
Operating expenses increased by 18% from BWP58 million in the prior year to BWP68 million
as a result of the expansion of the business to grow the retail reach of the business. BancABC
Tanzania has followed a low cost model to open 87 agencies during the current period in order
to utilise the payroll deduction code to under-write consumer loans across the country.
Zambia
BancABC Zambia’s profi tability grew by 8% from BWP33 million in the prior year to BWP35
million in the current year. The exceptional increase in total income was negated by an increase
in impairments during the period. Business volumes continued to increase across the board
and this had a positive impact on total income. However, net interest income decreased by
20% from BWP42 million in 2013 to BWP34 million in the current period. The increase in
market interest rates during the period pushed up the bank’s funding costs and this had a
negative impact on net interest margins as the pricing of assets did not change in line with the
interbank funding rates. The bank’s balance sheet continued growing in Botswana Pula terms
despite the rapid depreciation of the local currency during the period. Loans and advances
increased from BWP1.1 billion in June 2013 to BWP1.4 billion in June 2014. Loans and
advances were fl at compared to December 2013 when the Zambian Kwacha was 12%
stronger than in June 2014. Deposits also increased from BWP1 billion in June 2013 to
BWP1.4 billion in June 2014. They were BWP1.2 billion in December 2013.
The quality of the loan book deteriorated with gross non-performing loans worsening from
4.3% in June 2013 to 15.9% in June 2014 due to a few large corporate customers being
adversely classifi ed during the period as they did not perform in line with facility agreements.
The consumer loan book remained relatively sound with minimal impairments and low
accounts in arrears. Impairment charges for the current period were BWP33 million compared
to a net write-back in prior year of BWP1 million.
Non-interest income increased by 72% from BWP79 million in the six months to June 2013 to
BWP135 million in the current period. The increase was driven largely by increased foreign
currency and government bond trading income. The volumes of government bonds traded
increased and the volatility in the currency market widened margins as the value of the
currency at some point was rapidly depreciating before it rapidly appreciated once again.
Operating expenses increased by 15% from BWP72 million in the prior year to BWP82 million
in the current period. The increase is mainly from the business expansion that the subsidiary
has been undertaking as it grew the capacity of some of the smaller branches to make them
fully fl edged branches offering the full bouquet of products to the customers. However, the
cost to income ratio continued to decline from 59% in the prior year to 49% in the period under
review as income grew strongly compared to the increase in costs.
Zimbabwe
BancABC Zimbabwe’s attributable profi t of BWP69 million was 42% higher than BWP48
million achieved in the prior year. The subsidiary continued growing all its major income
streams despite the tough operating environment in that market which has seen the liquidity
crunch continue to worsen. Despite the challenging operating environment, net interest
income increased by 22% from BWP182 million in 2013 to BWP222 million in the current
period on the back of the growth in the higher yielding consumer loan book and lower cost of
funds as growth in other asset categories was restricted due to increasing bad debts in the
economy. The loan book in total declined marginally from BWP3.1 billion in June 2013 to
BWP3.0 billion in June 2014. The loan book was BWP3.1 billion in December 2013. Deposits,
however, increased from BWP2.3 billion in June 2013 to about BWP3 billion in June 2014 – the
deposits were BWP2.7 billion in December 2013.
Gross non-performing loans increased from 9.1% in June 2013 to about 25% in June 2014.
This is a refl ection of the diffi culty that the whole fi nancial services industry is going through.
Impairment charges increased from BWP57 million in prior year, which was mostly from one
client, to BWP64 million in the current period from a diverse number of different clients.
Management is determined to reduce impairments through both collection on delinquent
customers as well as restricting lending primarily to industry leaders in each sector.
Non-interest income grew by 16% from BWP99 million in the prior year to BWP115 million in
the current period from increased volumes of retail transactions. Operating expenses increased
by 10% from BWP166 million in prior year to BWP183 million in the current year, most of
which was due to infl ation. The cost to income ratio declined from 59% in prior year to 54%
in the current year.
Retail and SME banking
The Group continued its rollout of the branch and agency network which now stands at
161 physical outlets compared to 65 in June 2013. The Group’s retail performance in
Botswana, Zambia and Zimbabwe remained strong and both Mozambique and Tanzania are
also making headways in establishing profi table retail businesses in the two respective
entities. The Group has payroll deduction codes in all the markets except in Mozambique. Most
of the consumer loans are therefore either payroll deduction loans or group scheme loans for
staff of large corporates or respective governments in each of our markets.
Dividend
The Directors do not recommend the payment of dividend owing to the imminent fi nalisation
of the acquisition of the Group by Atlas Mara.
Offer to minorities
During the month of August 2014, Atlas Mara Co-Nvest Limited (ATMA) obtained all the regulatory
approvals to acquire the shares of the Group. ATMA has secured 95.84% benefi cial interest in
ABC Holdings Limited. In addition a mandatory offer has been made for the acquisition of
shares from all the minority shareholders in line with the Botswana Stock Exchange regulations.
Outlook
The economies in presence countries continue to grow at a reasonable pace. We anticipate
the business environment to continue being challenging in Zimbabwe but the Group’s
subsidiary in that market is expected to remain profi table despite the expected slow-down in
business. We are determined to arrest the increase in non-performing loans within the Group
and to this end, a special team comprising of senior members of staff that have several years
of experience in successfully collecting on defaulting loans, has been set-up to deal with this
challenge. Liquidity and capital management will remain key focus areas to ensure that the
business can grow at a sustainable pace with all subsidiaries being adequately capitalised.
Whilst the fi rst half has been challenging we are cautiously optimistic that the second half
results will show an improvement.
Acknowledgment
We would like to thank the Board, Management and staff for their resilience and commitment
despite the challenges.
H Buttery D T Munatsi
Chairman Chief executive offi cer
29th September 2014
ABC Holdings Limited company registration number: CO.99/4865

ê Total income down by 3%
from BWP701 million to
BWP684 million
é Operating expenses up 10%
BWP584 million due to continued
expansion of our retail outlets
é Cost to income ratio increased
to 70% (H113: 62%)
ê Net operating income down 42%
BWP100 million
ê Pre-tax profit 41% down from
BWP169 million to
BWP100 million
ê Attributable profit to
shareholders of BWP63 million
(H113: BWP143 million);
ê Basic EPS of 24.4 thebe
(H113: 59.1 thebe)
ê Shareholders’ funds declined by
1% since December 2013 to
BWP1.44 billion largely due
to the weakening of the Zambian
Kwacha during the period
ê NAV per share declined marginally
from BWP5.64 as at 31 December
2013 to BWP5.61. NAV per share
was BWP5.54 on 30 June 2013
é Deposits increased by 6% since
December 2013 and 18% from June
2013, to BWP12.9 billion
é Loans and advances
increased marginally by 0.2%
since December 2013 and
by 7% from June 2013, to
BWP10.6 billion
é Total assets increased by
4% since December 2013 and
by 19% from June 2013 to
BWP16.3 billion;
ê Average return on equity at
9% (H113: 22%)
continued overleaf
Consolidated income statement
FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2014
BWP’000s – (Presentation currency) Notes
Unaudited
30 Jun 2014
6 months
Reviewed
30 Jun 2013
6 months
Audited
30 Dec 2013
12 months
Interest and similar income 1,010,332 993,559 1,928,833
Interest expense and similar charges (538,141) (517,070) (918,502)
Net interest income before impairment
of advances 472,191 476,489 1,010,331
Impairment losses on loans advances (151,821) (146,055) (327,974)
Net interest income after impairment of
advances 320,370 330,434 682,357
Non interest income 3 363,300 370,892 692,094
Total income 683,670 701,326 1,374,451
Operating expenditure 4 (584,014) (529,377) (1,116,458)
Net income from operations 99,656 171,949 257,993
Share of results of associates – (2,826) (4,004)
Profit before tax 99,656 169,123 253,989
Tax (39,857) (40,555) (79,633)
Profit for the period 59,799 128,568 174,356
Attributable to:
Ordinary shareholders 62,791 142,878 198,454
Non-controlling interest (2,992) (14,310) (24,098)
Earnings per share (thebe) 24.4 59.1 79.6
Diluted earnings per share (thebe) 24.4 57.3 79.0
Dividend per share (thebe) 4.5 8.0 22.0
Weighted average number of shares (000’s) 256,886 241,635 249,344
Consolidated balance sheet
AS AT 30 JUNE 2014
BWP’000s – (Presentation currency) Notes
Unaudited
30 Jun 2014
Reviewed
30 Jun 2013
Audited
30 Dec 2013
ASSETS
Cash and short-term funds 2,262,632 1,478,562 2,304,283
Financial assets held for trading 1,840,106 861,034 1,260,049
Financial assets designated at fair value 261,156 250,394 261,552
Derivative financial assets 16,091 18,889 27,636
Loans and advances 5 10,575,540 9,854,372 10,554,699
Investment securities 66,977 63,173 67,975
Prepayments and other receivables 260,363 235,509 261,651
Current tax assets 30,905 17,863 32,992
Investment in associates 13,254 14,440 13,320
Property and equipment 729,579 712,342 756,832
Investment properties 27,616 0 0
Intangible assets 109,504 141,818 130,002
Deferred tax assets 142,447 89,595 112,664
TOTAL ASSETS 16,336,170 13,737,991 15,783,655
EQUITY AND LIABILITIES
Liabilities
Deposits 12,900,729 10,939,638 12,209,087
Derivative financial liabilities 31,094 5,554 37,640
Creditors and accruals 178,160 287,507 295,883
Current tax liabilities 15,531 28,140 12,917
Deferred tax liabilities 21,296 9,573 21,143
Borrowed funds 6 1,753,532 1,039,565 1,759,320
Total liabilities 14,900,342 12,309,977 14,335,990
Equity
Stated capital 781,025 781,025 781,025
Foreign currency translation reserve (204,093) (153,384) (143,899)
Non-distributable reserves 395,441 269,090 242,196
Distributable reserves 468,221 525,686 570,235
Equity attributable to ordinary
shareholders 1,440,594 1,422,417 1,449,557
Non-controlling interest (4,766) 5,597 (1,892)
Total equity 1,435,828 1,428,014 1,447,665
TOTAL EQUITY AND LIABILITIES 16,336,170 13,737,991 15,783,655
Guarantees and other credit
commitments 7 818,779 939,171 770,746
Consolidated statement of cash flow
BWP’000s – (Presentation currency)
Unaudited
30 Jun 2014
6 months
Reviewed
30 Jun 2013
6 months
Audited
30 Dec 2013
12 months
CASH FLOWS FROM OPERATING ACTIVITIES (193,115) (396,055) (227,584)
Cash generated from operating activities 311,615 383,538 715,013
Net profit before tax 99,656 169,123 253,989
Adjusted for:
Impairment of loans and advances 151,821 146,055 327,974
Depreciation and amortisation 60,539 53,669 114,175
Dividends receivable (208) (13) (5,266)
Net (gains)/losses on derivative financial
instruments (32) 12,238 19,085
Loss from associates – 2,826 4,004
Impairment of investment in associates – – 1,082
Profit on disposal of property and equipment (161) (360) (30)
Tax paid (58,995) (61,935) (135,628)
Net cash inflow from operating activities
before changes in operating funds 252,620 321,603 579,385
Net decrease in operating funds (445,735) (717,658) (806,969)
Increase in operating assets (1,265,318) (248,112) (1,573,392)
Increase/(decrease) in operating liabilities 819,583 (469,546) 766,423
CASH FLOWS FROM INVESTING ACTIVITIES (19,701) (73,879) (126,106)
Purchase of property and equipment (17,546) (34,835) (105,435)
Purchase of intangible assets (2,564) (34,904) (21,738)
Additions to associates – (4,849) (4,849)
Dividends received 208 13 5,266
Proceeds on disposal of property and equipment 201 696 650
CASH FLOWS FROM FINANCING ACTIVITIES (11,560) (150,850) 508,680
(Decrease)/increase in borrowed funds – (132,226) 563,268
Dividend paid (11,560) (18,624) (54,588)
(Decrease)/increase in cash and cash equivalents (224,376) (620,784) 154,990
Cash and cash equivalents at the beginning
of the period 1,597,662 1,314,895 1,314,895
Exchange adjustment on opening balance (48,173) 103,307 127,777
Cash and cash equivalents at the end
of the period 1,325,113 797,418 1,597,662
Cash and cash equivalents 1,325,113 797,418 1,597,662
Statutory reserves 937,519 681,144 706,621
Cash and short-term funds 2,262,632 1,478,562 2,304,283
Notes to the Income Statement
and Balance Sheet
1. Basis of presentation
1.1 Statement of compliance
This condensed consolidated financial information has been prepared in accordance with
International Financial Reporting Standards (“IFRS”), and the requirements of the Botswana
Companies Act (Chapter 42.01). Significant accounting policies have been applied consistently
from the prior year.
1.2 Functional and presentation currency
The financial statements are presented in Botswana Pula (BWP), which is the company’s
functional currency and the Group’s presentation currency. Except as indicated, financial
information presented in BWP has been rounded off to the nearest thousand.
2. Stated capital
During the period under review there were no changes in stated capital.
3. Non-interest income
BWP’000s
30 Jun 2014
6 months
30 Jun 2013
6 months
31 Dec 2013
12 months
Gains on financial assets at fair value through
profit or loss 13,006 80,583 84,769
Net losses on derivative financial instruments 32 (12,238) (19,085)
Dividends received 208 13 5,266
Fees and commission income 246,625 186,695 415,680
Forex trading income and currency revaluation 83,518 87,595 156,215
Loss on disposal of property and equipment 161 360 30
Rental and other income 19,750 27,884 49,219
363,300 370,892 692,094
4. Operating expenditure
BWP’000s
30 Jun 2014
6 months
30 Jun 2013
6 months
31 Dec 2013
12 months
Administrative expenses 256,581 226,853 488,407
Property lease rentals 23,294 17,926 43,948
Staff costs 221,906 210,924 435,237
Auditors’ remuneration 5,902 6,224 8,063
Depreciation and amortisation 60,539 53,669 114,176
Directors remuneration 15,792 13,781 25,545
Impairment of investment in associate – – 1,082
584,014 529,377 1,116,458
5. Loans and advances
BWP’000s 30 Jun 2014 30 Jun 2013 31 Dec 2013
Mortgage lending 401,555 308,021 349,044
Instalment finance 629,609 706,328 670,372
Corporate lending 5,099,582 5,254,548 5,381,767
Commercial and property finance 67,060 72,595 53,716
Consumer lending 5,086,130 4,011,648 4,711,160
Gross loans and advances 11,283,936 10,353,140 11,166,059
Less: impairments (708,396) (498,768) (611,360)
Net loans and advances 10,575,540 9,854,372 10,554,699
5.1 Analysis of impairments
Specific impairments 596,694 408,789 516,887
Portfolio impairments 111,702 89,979 94,473
708,396 498,768 611,360
5.2 Distribution of loans and
advances by credit quality
Neither past due nor impaired 8,446,063 8,465,460 8,652,045
Past due but not impaired 1,151,720 988,894 1,395,703
Individually impaired 1,686,153 898,786 1,118,311
Gross loans and advances 11,283,936 10,353,140 11,166,059
Less: Allowance for impairment (708,396) (498,768) (611,360)
Net loans and advances 10,575,540 9,854,372 10,554,699
5.2.1 Distribution of loans and advances
neither past due nor impaired
Corporate lending 3,376,919 3,809,080 3,639,197
Commercial and property finance 65,423 72,105 42,935
Consumer lending 4,299,373 3,855,109 4,253,488
8,446,063 8,465,460 8,652,045
5.2.2 Distribution of loans and advances past
due but not impaired
Corporate lending 459,271 794,424 967,944
Commercial and property finance 7,351 491 10,248
Consumer lending 617,732 70,167 294,262
1,151,720 988,894 1,395,703
5.2.3 Distribution of loans and advances
individually impaired
Corporate lending 1,256,500 651,044 901,403
Commercial and property finance 1,155 – 536
Consumer lending 299,148 86,370 163,043
1,686,153 898,786 1,118,311
6. Borrowed funds
BWP’000s
Convertible bond – – –
Other borrowed funds 1,753,532 1,039,565 1,759,320
1,753,532 1,039,565 1,759,320
(a) Convertible bond
Balance at beginning of the period – 97,950 97,950
Interest expense – 5,140 5,140
Principal repayment – (27,175) (27,175)
Interest paid – (2,399) (2,399)
Conversion into equity – (73,516) (73,516)
– – –
(b) Other borrowed funds
National Development Bank of Botswana
Limited 58,617 80,827 67,175
BIFM Capital Investment Fund One (Pty) Ltd 256,375 256,169 256,352
Afrexim Bank 854,269 361,732 821,765
Africa Agriculture and Trade Investment
Fund S.A. 217,391 – 216,843
Norsad Finance Limited 115,311 62,825 131,738
Other 251,569 278,012 265,447
1,753,532 1,039,565 1,759,320
Consolidated income statement
USD’000s – (Convenience conversion)
30 Jun 2014
6 months
30 Jun 2013
6 months
31 Dec 2013
12 months
Interest and similar income 114,269 119,850 227,988
Interest expense and similar charges (60,864) (62,372) (108,567)
Net interest income before impairment of
advances 53,405 57,478 119,421
Impairment losses on loans advances (17,171) (17,619) (38,766)
Net interest income after impairment of advances 36,234 39,859 80,655
Non interest income 41,089 44,739 81,805
Total income 77,323 84,598 162,460
Operating expenditure (66,052) (63,857) (131,965)
Net income from operations 11,271 20,741 30,495
Share of results of associates – (340) (473)
Profit before tax 11,271 20,401 30,022
Tax (4,508) (4,892) (9,413)
Attributable to:
Non-controlling interest (339) (1,727) (2,848)
Earnings per share (cents) 2.8 7.1 9.4
Diluted earnings per share (cents) 2.8 6.7 9.3
Dividend per share (cents) 1.0 1.0 2.6
Weighted average number of shares (000’s) 256,886 241,635 249,344
Consolidated balance sheet
AS AT 30 JUNE 2014
USD’000s – (Convenience conversion) 30 Jun 2014 30 Jun 2013 31 Dec 2013
ASSETS
Cash and short-term funds 257,261 171,735 262,688
Financial assets held for trading 209,220 100,009 143,646
Financial assets designated at fair value 29,693 29,083 29,817
Derivative financial assets 1,830 2,194 3,151
Loans and advances 1,202,439 1,144,585 1,203,236
Investment securities 7,615 7,338 7,749
Prepayments and other receivables 29,604 27,355 29,828
Current tax 3,514 2,075 3,761
Investment in associates 1,507 1,677 1,518
Property and equipment 82,953 82,739 86,279
Investment properties 3,140 0 0
Intangible assets 12,451 16,472 14,820
Deferred tax assets 16,196 10,406 12,844
TOTAL ASSETS 1,857,423 1,595,668 1,799,337
EQUITY AND LIABILITIES
Liabilities
Deposits 1,466,813 1,270,639 1,391,836
Derivative financial liabilities 3,535 645 4,291
Creditors and accruals 20,257 33,395 33,731
Current tax liabilities 1,766 3,268 1,473
Deferred tax liabilities 2,421 1,112 2,410
Borrowed funds 199,377 120,745 200,563
Total liabilities 1,694,169 1,429,804 1,634,304
Equity attributable to ordinary shareholders 163,796 165,214 165,249
Non-controlling interest (542) 650 (216)
Total equity 163,254 165,864 165,033
TOTAL EQUITY AND LIABILITIES 1,857,423 1,595,668 1,799,337
Guarantees and other credit commitments 93,095 109,085 87,865
Consolidated statement of comprehensive income
FOR THE PERIOD ENDED 30 JUNE 2014
BWP’000s – (Presentation currency)
Unaudited
30 Jun 2014
Reviewed
30 Jun 2013
Audited
31 Dec 2013
Other comprehensive income to be reclassified
to profit or loss in subsequent periods: (60,076) 88,471 97,052
Exchange differences on translating foreign operations (58,686) 88,295 116,422
Net loss on hedge of net investment in foreign operations (1,390) – (16,343)
Share of reserves in associate companies – – 551
Movement in available-for-sale reserves – 176 (3,578)
Income tax relating to components of other
comprehensive income – – –
Other comprehensive income not
to be reclassified to profit or loss
in subsequent periods: – – 1,246
Revaluation of property – – 1,424
comprehensive income – – (178)
Other comprehensive income net of tax (60,076) 88,471 98,298
Total comprehensive income for the year (277) 217,039 272,654
Total comprehensive income attributable to:
Non-controlling interest (2,874) (13,443) (20,932)
(277) 217,039 272,654
Consolidated statement of comprehensive income
USD’000s – (Convenience conversion) 30 Jun 2014 30 Jun 2013 31 Dec 2013
Other comprehensive income to be reclassified
to profit or loss in subsequent periods: (6,794) 10,672 11,472
Exchange differences on translating foreign
operations (6,637) 10,651 13,761
Net loss on hedge of net investment in foreign
operations (157) – (1,931)
Share of reserves in associate companies – – 65
Movement in available-for-sale reserves – 21 (423)
comprehensive income – – –
Other comprehensive income not
to be reclassified to profit or loss
in subsequent periods: – – 147
Revaluation of property – – 168
comprehensive income – – (21)
Other comprehensive income net of tax (6,794) 10,672 11,619
Total comprehensive income for the year (31) 26,181 32,228
Total comprehensive income attributable to:
Ordinary shareholders 294 27,802 34,702
Non-controlling interest (325) (1,621) (2,474)
(31) 26,181 32,228

ABC Holdings Limited Unaudited interim group results
www.bancabc.com
FOR THE SIX MONTHS ENDED 30 JUNE 2014
6. Borrowed funds continued
BWP’000s 30 Jun 2014 30 Jun 2013 31 Dec 2013
(b) Other borrowed funds continued
Fair value
National Development Bank
of Botswana Limited 58,402 81,496 67,526
BIFM Capital Investment Fund One (Pty) Ltd 294,547 295,887 308,204
Afrexim Bank 854,248 362,398 822,511
Africa Agriculture and Trade
Investment Fund S.A. 238,714 – 244,919
Norsad Finance Limited 132,859 62,825 150,331
Other 251,569 278,012 265,449
1,830,339 1,080,618 1,858,940
National Development Bank of Botswana Limited (NDB)
The loan from National Development Bank of Botswana is denominated in Japanese Yen and
attracts interest at 3.53% per annum. Principal and interest is payable semi-annually on
15 June and 15 December. The loan matures on 15 December 2016.
BIFM Capital Investment Fund One (Pty) Ltd
The loan from BIFM Capital Investment Fund One (Pty) Ltd is denominated in Botswana Pula
and attracts interest at 11.63% per annum, payable semi-annually. The redemption dates for
the principal amount are as follows:
30 September 2017 – BWP62 500 000 30 September 2018 – BWP 62 500 000
30 September 2019 – BWP62 500 000 30 September 2020 – BWP 62 500 000
Afrexim Bank Limited
The loans from Afrexim Bank Limited consist of US$60 million advanced to ABC Holdings
Limited (ABCH) and US$33 million advanced to ABC Zimbabwe Limited. The US$60 million
short-term credit facility was advanced to ABCH in July 2013. The loan attracts interest at
3 months LIBOR +5% and it is repayable on 31 December 2014, but with a provision to
extend it for a further, mutually agreeable period.
The US$60 million advanced to ABCH was designated as a hedge in the net investment by
the Group in BancABC Zimbabwe.
The US$33 million trade finance facility was availed to ABC Zimbabwe by Afrexim Bank
Limited from December 2013 to December 2016.
It attracts interest at LIBOR +4.5% and it is repayable on the earlier of when the underlying
customers funded repay their respective loans or in December 2016.
Africa Agriculture and Trade Investment Fund S.A. (AATIF)
The loan from AATIF is denominated in US Dollars and attracts interest at 3 months LIBOR
+6.25%. Interest is payable quarterly on 31 March, 30 June, 30 September and 31 December.
The loan matures on 21 December 2018 when the full principal amount is due for repayment
in one instalment.
Norsad Finance Limited
The loans from Norsad Finance Limited were advanced to ABC Holdings Limited (ABCH) as
well as BancABC Zambia and BancABC Zimbabwe.
The US$10 million loan advanced to ABCH is a subordinated loan denominated and attracts
interest at 6 months LIBOR +7.5%. Interest is payable semi-annually on 30 June and
31 December. The loan matures on 9 October 2020 when the full principal amount is due for
repayment in one instalment. The loans advanced to BancABC Zambia and BancABC
Zimbabwe are also denominated in US dollars and attract interest of between 7% and 12%
per annum and they mature between 2014 and 2015.
Other borrowings
Other borrowings relate to medium to long term funding from international financial
institutions for onward lending to BancABC clients. Fair value is equivalent to carrying amounts
as these borrowings have variable interest rates.
BWP’000s 30 Jun 2014 30 Jun 2013 31 Dec 2013
Maturity analysis
On demand to one month 528,363 437,670 535,289
One to three months 18,513 24,192 21,025
Three months to one year 312,987 110,112 78,762
Over one year 893,669 467,591 1,124,244
1,753,532 1,039,565 1,759,320
7. Contingent liabilities
BWP’000s 30 Jun 2014 30 Jun 2013 31 Dec 2013
Guarantees 728,462 771,371 671,224
Letters of credit and other contingent liabilities 90,317 167,800 99,522
818,779 939,171 770,746
Maturity analysis
Less than one year 640,589 915,065 578,187
Between one and five years 178,190 24,106 192,559
818,779 939,171 770,746
8. Exchange rates
The exchange rate to BWP1 were as follows:
Closing
30 Jun
2014
Average
30 Jun
2014
Closing
30 Jun
2013
Average
30 Jun
2013
Closing
31 Dec
2013
Average
31 Dec
2013
United States Dollar 0.114 0.113 0.116 0.121 0.114 0.118
Tanzanian Shilling 188.433 185.721 188.745 195.890 180.839 191.116
Zambian Kwacha 0.711 0.699 0.637 0.649 0.629 0.640
Mozambican Metical 3.560 3.555 3.481 3.645 3.428 3.560
South African Rand 1.207 1.210 1.162 1.131 1.203 1.154
Consolidated statements of changes in equity
BWP’000s
ATTRIBUTABLE TO OWNERS OF THE PARENT
Non-controlling
interest
Total
Equity
Stated
capital
Foreign
currency
translation
reserve
Regulatory
general
credit
risk
reserve
Property
revaluation
reserve
Available
for sale
reserve
Statutory
reserve
Convertible
bond
Treasury
shares
reserve
Distri-butable
reserves Total
Balance as at 1 January 2013 663,401 (240,812) 38,559 161,214 3,030 90,779 44,109 – 376,764 1,137,044 19,040 1,156,084
Comprehensive income:
Profit for the period – – – – – – – 142,878 142,878 (14,310) 128,568
Other comprehensive income: – 87,428 – – 176 – – – – 87,604 867 88,471
Foreign currency translation differences – 87,428 – – – – – – – 87,428 867 88,295
Movement in available for sale reserves: – – – – 176 – – – – 176 – 176
– Arising in current period – – – – 176 – – – – 176 – 176
TOTAL COMPREHENSIVE INCOME – 87,428 – – 176 – – – 142,878 230,482 (13,443) 217,039
Transfers within equity
Movement in general credit risk reserve – – (24,668) – – – – – 24,668 – – –
Total transfers within equity – – (24,668) – – – – – 24,668 – – –
Transactions with owners
Dividends paid – – – – – – – – (18,624) (18,624) – (18,624)
Shares issued during the period 117,624 – – – – – (44,109) – 73,515 – 73,515
Total transactions with owners 117,624 – – – – – (44,109) – (18,624) 54,891 – 54,891
Balance as at 30 June 2013 781,025 (153,384) 13,891 161,214 3,206 90,779 – – 525,686 1,422,417 5,597 1,428,014
Profit for the period – – – – – – – – 55,576 55,576 (9,788) 45,788
Other comprehensive income: – 9,485 – 869 (3,754) 551 – – 377 7,528 2,299 9,827
Foreign currency translation differences – 25,828 – – – – – – – 25,828 2,299 28,127
Net loss on hedge of net investment
in foreign operations – (16,343) – – – – – – – (16,343) – (16,343)
Revaluation of property net of deferred tax – – – 869 – – – – 377 1,246 – 1,246
Share of reserves in associate companies – – – – – 551 – – – 551 – 551
Movement in available for sale reserves: – – – – (3,754) – – – – (3,754) – (3,754)
– Arising in current period – – – – (3,754) – – – – (3,754) – (3,754)
TOTAL COMPREHENSIVE INCOME – 9,485 – 869 (3,754) 551 – – 55,953 63,104 (7,489) 55,615
Movement in general credit risk reserve – – 5,186 – – – – (5,186) – – –
Movement in statutory reserves – – 3,319 – – (33,065) – – 29,746 – – –
Total transfers within equity – – 8,505 – – (33,065) – – 24,560 – – –
Dividends paid – – – – – – – – (35,964) (35,964) – (35,964)
Total transactions with owners – – – – – – – – (35,964) (35,964) – (35,964)
Balance as at 1 January 2014 781,025 (143,899) 22,396 162,083 (548) 58,265 – – 570,235 1,449,557 (1,892) 1,447,665
Profit for the period – – – – – – – – 62,791 62,791 (2,992) 59,799
Other comprehensive income: – (60,194) 153,245 – – – – – (153,245) (60,194) 118 (60,076)
Foreign currency translation differences – (58,804) – – – – – – – (58,804) 118 (58,686)
Net loss on hedge of net investment in
foreign operations – (1,390) – – – – – – – (1,390) – (1,390)
Movement in general credit risk reserve – 153,245 – – – – – (153,245) – – –
Total comprehensive income – (60,194) 153,245 – – – – – (90,454) 2,597 (2,874) (277)
Movement in general credit risk reserve – – 153,245 – – – – – (153,245) – – –
Total transfers within equity – – 153,245 – – – – – (153,245) – – –
Dividends paid – – – – – – – – (11,560) (11,560) – (11,560)
Total transactions with owners – – – – – – – – (11,560) (11,560) – (11,560)
Balance as at 30 June 2014 781,025 (204,093) 328,886 162,083 (548) 58,265 – – 314,976 1,440,594 (4,766) 1,435,828
Segmental Analysis
BWP’000s
Total
income
Contribution
to banking
operations
Attributable
profit
Contribution
to banking
operations Total assets
Contribution
to banking
operations
BancABC Botswana 197,822 27% 59,484 40% 5,229,774 33%
BancABC Mozambique 88,717 12% 605 1% 2,315,597 15%
BancABC Tanzania 42,970 6% (17,144) (12%) 1,099,577 7%
BancABC Zambia 135,944 18% 35,378 24% 2,455,890 16%
BancABC Zimbabwe 272,349 37% 68,685 47% 4,599,015 29%
Banking operations 737,802 100% 147,008 100% 15,699,853 100%
Head office and other non-banking operations* (54,132) (84,217) 636,317
Total 683,670 62,791 16,336,170
for the six months ended 30 June 2013:
BWP’000s
BancABC Mozambique 80,064 12% 9,444 6% 1,507,902 12%
BancABC Tanzania 58,581 8% 555 0% 926,168 7%
BancABC Zambia 122,099 17% 32,892 19% 1,583,826 12%
Banking operations 700,717 100% 172,348 100% 12,828,742 100%
Head office and other non-banking operations* 609 (29,470) 909,249
Total 701,326 142,878 13,737,991
for the 12 months ended 31 December 2013:
BancABC Mozambique 160,302 11% 9,040 3% 2,288,680 15%
BancABC Tanzania 98,075 7% (19,581) (6%) 1,064,608 7%
BancABC Zambia 231,866 16% 49,889 16% 2,105,691 14%
Banking operations 1,441,645 100% 310,010 100% 14,925,589 100%
Head office and other non-banking operations* (67,194) (111,556) 858,066
Total 1,374,451 198,454 15,783,655
* Reflects non-banking operations in various geograhical sectors
Directors: Howard Buttery (Chairman) (South African),
Douglas T Munatsi (Chief Executive Officer) (Zimbabwean),
Francis M Dzanya (COO) (Zimbabwean), Bekithemba Moyo (CFO)
(Zimbabwean,) Ngoni Kudenga (Zimbabwean),
Doreen Khama (Motswana), Mark M Schneiders (Dutch),
Dirk Harbecke (German), Ruth Credo (British)
ABC Holdings Limited (Incorporated in the Republic of Botswana)
(Registration number 99/4865)
Ordinary share code: ABCH ISIN: BW0000000017

Abc holdings results 2014

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