Despite difficult economic conditions in its trading environments of Namibia and neighbouring Zambia, the Capricorn Group still started the 2020 financial year with confidence and even delivered positive half-year results. However, these results were short-lived as the Namibian financial services group’s full-year operating profits were significantly impacted by the Covid-19 pandemic, specifically during the last quarter of the financial year. This resulted in full-year profit after tax contracting by 15.6% to N$856.4 million while the group’s profit after tax from continuing operations, excluding its Zambian banking operation, amounted to N$1.01 billion, which is 2.2% lower than the prior year.
Capricorn Group Limited, which has diversified operations and business interests in Namibia, Botswana and Zambia and is listed on the Namibian Stock Exchange, last week released its annual financial results for the period ending 30 June 2020.
Explaining the exclusion of Cavmont Bank from its continuing operations, Jaco Esterhuyse, Financial Director of the group said: “Following three years of losses reported by the Bank in deteriorating market conditions in Zambia, Capricorn Group accepted the offer by Access Bank Zambia to acquire Cavmont Bank. Agreements for the sale and subsequent merger of the two banks have been concluded subject to the requisite regulatory approvals”.
Said Thinus Prinsloo, Group CEO: “Overall, Capricorn Group’s response to a challenging year showed resilience and sustainability in our operations and people. We are proud of the performance delivered by our business units and associates. By ensuring the well being of the business, our employees and clients as a priority during the pandemic, Capricorn Group endured and performed well under extremely challenging conditions. Bank Windhoek, our flagship brand, delivered strong results. Profitability was under pressure in the last three months of the financial year. The significant reduction in Namibia’s repo rate by 225 basis points impacted Bank Windhoek’s profits directly, declining by 9.8% compared to last year.”
Financial performance highlights (based on continuing operations)
Net interest income and interest margins came under significant pressure during the last quarter of the financial year with aggressive interest rate cuts of 225bps and 50bps by the central banks of Namibia and Botswana respectively. Interest rates on loans and advances reduced immediately while there was a lag in repricing liabilities. It was also not possible to further reduce rates on a substantial part of the two banks’ deposit books. Consequently, the net interest margin of Bank Windhoek decreased by 0.3%. The margin squeeze was contained to some extent by active and very effective management of the cost of funding. Notwithstanding the aforementioned and thanks to growth in the banks’ interest earning assets, the Group’s net interest income before impairment increased by 2.3% year-on-year to N$2.08 billion.
Balance sheet position
The group maintained its prudent approach to liquidity management with liquidity continuing to take preference over maximising profits. Following the declaration of the global pandemic, liquidity received increased focus and Capricorn Group’s liquidity position remained healthy throughout the year as reflected by the 16.2% increase in the group’s liquid assets.
Dividends
The group declared a final dividend of 20 cents per ordinary share. Considering the interim dividend of 30 cents per ordinary share, this represents a total dividend of 50 cents per ordinary share (2019: 66 cents per ordinary share). The total dividend per share for the year under review is 24.2% lower than the total dividend per share declared for the previous financial year.
“The global economic outlook is bleak with most economies projecting significant contraction. Namibia and Botswana have revised their forecasted contraction in GDP for the current fiscal year to 8.5% and 8.9% respectively. Unemployment rates are reaching new highs and business closures continue unabatedly, increasing the financial distress of individuals and businesses alike. As a result, we expect an increase in customer defaults with impairment charges remaining high. Net interest revenue, especially in the case of Bank Windhoek will be significantly lower in the next year following the aggressive cuts in interest rates. Bank Gaborone is expected to be less impacted and the expected appreciation of the Pula against the Namibia dollar will also contribute positively to earnings. Non-banking subsidiaries are not expected to be negatively impacted and should cushion the overall negative impact on the group’s results,” said Esterhuyse on the outlook for the Group.
“I want to extend my sincere thanks to our passionate and hardworking employees who remained resilient and focused in very difficult circumstances, embracing changes brought on by the pandemic. By adapting to new ways of working, our employees continued to service and support our clients. I also wish to thank our loyal clients, partners and suppliers. It is in unprecedented times like these that the value of relationships, collaboration and partnerships comes through. As a group we remain committed to improving lives through leadership in financial services by being connectors of positive change,” Prinsloo concluded.