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Capricorn Group Annual Results 2021

Capricorn Group Limited, a proudly Namibian financial services group listed on the Namibian Stock Exchange,​ with diversified operations and business interests in Namibia and Botswana, released its annual financial results for the year ended 30 June 2021 today.Despite the business being exposed to the direct and indirect impact of the Covid-19 pandemic on various levels, Capricorn Group showed tremendous resilience and performed much better than anticipated 12 months ago, with profit after tax increasing by 14.8% to N$983.0 million.  The agility and quick decision-making within the Group allowed it to swiftly sense and respond to ever-changing challenges.  During this period, the Group managed to provide financial relief to clients and job security to employees while executing its strategy to ensure the continued growth and sustainability of the Capricorn Group.

Since the start of the Covid-19 pandemic in March 2020, the Group has provided payment holidays on loans freeing up N$343 million in cash flow to its clients as well as committed and spent N$17.1 million in cash towards Covid-19 and other social relief measures.  This social spending included assistance to the most vulnerable communities by providing food parcels and educational material as well as access to water and sanitation.  The Group also procured Covid testing kits and contributed over N$1 million to the private sector oxygen initiative when the country desperately needed oxygen during the third wave in June and July 2021.  Capricorn Group also took special care of its employees by, amongst others, providing masks, hand sanitisers and immune boosters and enabling work from home.  Wellness support to Covid-19 positive employees and those who lost loved ones was ramped up by increasing psychological and spiritual counselling access.

“I am pleased with the commendable performance of the Group against all the odds.  I wish to thank each employee in Namibia, Botswana and South Africa and celebrate the way that they have persevered and adapted to new and uncertain conditions whilst maintaining customer service levels and delivering on our strategic choices.  All our subsidiaries performed above expectations and have managed to grow or maintain market share during the financial year, giving the Group a strong foundation to continue growing and expanding its leadership in the various markets.  We have a dynamic business model to create and preserve value while remaining true to our Group's purpose.  The Group has a real competitive strength in local decision-making, especially in the way it affects customers.  This is our main driver for growing market share", said Thinus Prinsloo, Group CEO.   

“The financial results of Capricorn Group in the current economic environment are a remarkable achievement and evidence of the dedication, personal commitment and resilience of our employees.  Our results demonstrate how Capricorn Group used our advantage of being local, nimble, and responsive.  We were able to preserve and grow value for our stakeholders even though Namibia's economy was in a recession before the Covid-19 pandemic and had to deal with the economic and social shock brought about by Covid-19.  During the year, we also disposed of our loss-making Zambian operations." said Jaco Esterhuyse, Group Financial Director.

Group financial performance highlights

  • Adjusting to new levels of net interest income

    Net interest income and interest margins were under pressure following unprecedented interest rate cuts of 250 basis points in Namibia and 100 basis points in Botswana between March 2020 and September 2020.  Notwithstanding this, the Group's net interest income before impairment charges increased by 3.3% to N$2.26 billion.

  • ​Resilient fee income

    Non-interest income of the Group increased by 3.6% to N$1.48 billion (2020: N$1.42 billion), significantly supported by diversified income streams from asset management and life assurance businesses.  Bank Windhoek and Bank Gaborone increased non-interest income by 4.3% and 28.8% respectively, mainly from increased transaction volumes.

  • Contribution from associates increased by 62.6%

    The diversification strategy of the Group continues to deliver good results with a significant increase of 62.6% in income from associates compared to the prior year.  This growth was mainly due to a N$29.7 million increase in the contribution from Paratus Group.  The contribution from associates to the Group profit after tax increased from 6.3% in the prior year to 10.1%.

  • Focus on essential spending

    The Group focused on incurring only essential spending to ensure it remains competitive and sustainable for the future.  Operating expenses increased by 5.1% compared to the prior year's 3.4% increase.  Technology costs increased by 12.6% (2020: 36.6%) largely due to weaker Namibian and Botswana currencies.  The investment in growing the Group's digital offerings also contributed to the increased IT cost.

  • ​Discontinued operations

    ​Losses from discontinued operations decreased by N$114.4 million (73.5%) after the disposal of Cavmont Bank Ltd on 4 January 2021. 

  • Credit quality

    Asset quality continues to be a key focus of the Group whilst supporting our customers through very difficult times brought on by the pandemic.  Bank Windhoek grew loans and advances by 4.0%, well above the Private Sector Credit Extension of 2.7%, as it continues to be the market leader in Namibia.  Bank Gaborone increased loans and advances by 4.8%, also continuing its trajectory to grow market share.  The growth in loans and advances of the two banks was attributable to mortgage loans, term loans and overdrafts.  The pandemic's impact on sectors such as travel, tourism, hospitality and construction resulted in deferments of instalments and increased non-performing loans (NPL's).  Capricorn Group's total NPL's increased from N$1.92 billion to N$2.46 billion (28.1%), resulting in an increase in the NPL ratio from 4.7% to 5.2%.

  • Liquidity position

    Liquidity is a key priority for Capricorn Group.  Maintaining appropriate levels of liquidity always takes preference over profit optimization.  Liquid assets remained well above regulatory requirements.  As of 30 June 2021, Bank Windhoek's liquid assets showed a surplus of N$3.1 billion over the Bank of Namibia minimum liquid asset requirements, while Bank Gaborone had a surplus of BWP681.4 million above Bank of Botswana requirements.  Liquidity levels remain healthy and within acceptable internal thresholds.  Bank Windhoek increased funding by 2.8% to N$38.1 billion, while Bank Gaborone increased funding by 11% to BWP5.8 billion. 

  • Capital depth

    The Group remains well capitalised with a total risk-based capital adequacy ratio of 15.0% (2020:14.7%), well above the minimum regulatory capital requirement of 10%.  Although the Group continues to preserve capital and maintain its large capital base, it managed to increase its return on equity to 13.5% (2020:12.6%) mainly due to:

  • ​​Realising the benefits of diversification as Entrepo, Capricorn Asset Management and associates performed well above expectations.

  • Positive contribution to the bottom line arising from the sale of Cavmont Bank.

Dividends

The Group declared a final dividend of 38 cents per ordinary share.  Considering the interim dividend of 22 cents per ordinary share, this represents a total dividend of 60 cents per ordinary share (2020: 50 cents per ordinary share).  The Group believes that the total dividend balances prudency in preserving the Group's capital and liquid asset position.

“We believe Botswana offers good growth opportunities, with real GDP growth of 8.8% projected for 2021.  Economists are still expecting interest rates to remain flat in the short term.  We can expect external factors to continue muting customer and business confidence.  As a Group, we remain committed to developing our new business pipeline and revenue streams to grow, even under these challenging circumstances", said Jaco Esterhuyse.

“I also wish to thank our loyal clients and suppliers.  Combined with our employees, we would not have been able to report such positive results without these key stakeholders.  We remain concerned about the impact of the general constrained economy, which will, unfortunately, continue to impact our business in the foreseeable future. We remain committed to growing a stable and sustainable business to the benefit of all our stakeholders with our strong capital and liquidity position, diversified operations, deep local knowledge and strong relationships", concluded Thinus Prinsloo.


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