Recession doesn’t derail Capricorn

Jo-Maré Duddy – Impairments charges which nearly doubled year-on-year shaved about N$55.6 million off Capricorn’s net interest income of more than N$1.13 billion for the six months ended 31 December 2019.

Capricorn Investment Group’s impairment charges in its latest half-year jumped by nearly N$17.5 million or 48.5% compared to the same six months in 2018.

The big increase didn’t catch analysts off guard.

Commenting on Capricorn’s latest set of financials, which was released on Thursday, IJG Securities said it “was to be expected, given the current recessionary economy”.

In its results, published on the Namibian Stock Exchange (NSX), Capricorn said the increased charges represent a 0.29% loan loss rate, which is “still well within acceptable norms given the current economic conditions”.

IJG said at a credit loss ratio of 0.29%, “the impairment charges are still remarkably low”.

The non-performing loans (NPLs) ratio also only ticked up slightly from 4.2% to 4.3% of total advances, indicating a “very resilient advances book”, the analysts say.

Capricorn said its NPLs for the half-year under review increased from N$1.6 billion to N$1.75 billion.

No surprises

Capricorn, the third biggest company on the Local Index of the NSX in terms of total market capitalisation, reported a profit of about N$557.2 million of its first six months of its 2020 financial year. Compared to the same half-year in 2019, it is an increase of around N$40.7 million or 7.9%.

An interim dividend of 30c per share was declared.

IJG, Simonis Storm and PSG Namibia all said the results were “in line” with their expectations.

The group itself described its results as “satisfactory”.

“This solid performance is mainly as a result of subsidiaries delivering on their strategies, despite difficult operating environments,” said the chief executive officer of Capricorn, Thinus Prinsloo.

“Bank Windhoek, Bank Gaborone, Entrepo and Capricorn Asset Management delivered above expectations during this period,” he said.

Capricorn’s banking operations in Namibia contributed the bulk – nearly 80% or N$443.5 million, up about 5% year-on-year - of the group’s profit during the past half-year.

Entrepo, Capricorn’s microlending activities in Namibia, was the second biggest contributor with profit of around N$96.5 million. This is nearly 21% more than the corresponding half-year in 2019.

Bank Gaborone in Botswana showed a profit of approximately N$32.6 million, about 8% higher on an annual basis.

Capricorn had a tough year in Zambia, marked by higher cost of funding as a result of significant market liquidity pressures. Included in Capricorn’s operating expenses of N$1.08 billion for the lastest half-year is an amount of N$30million relating to restructuring costs incurred in Zambia as part of a turnaround plan.

Capricorn reported a loss of N$15.4 million in its segmental breakdown under “other”. In the same six months in 2019, Capricorn reported a loss of about N$15.9 million in this segment.

Loan-book

Capricorn said its gross loans and advances increased by 5.5% (N$2.13 billion) from in the six months ended December 2018 to N$40.50 billion a year later.

“Growth was mainly attributable to commercial term loans at Bank Windhoek increasing by N$1.4 billion (16.6%) year-on-year. Overdrafts and the mortgage book increased by N$263 million (1.5%) and N$231 million (4.1%) respectively. Article finance reflected a decrease of N$89 million (2.7%) year-on-year due to a reduction in new and used vehicle sales in Namibia,” the group said.

During the period under review Capricorn maintained adequate funding and liquidity levels, financial director Jaco Esterhuyse said.

“Total funding increased year on year by 9.3%, while gross loans and advances increased by 5.5%. This translates to an improved loan to funding ratio of 89%.

“The group remains well capitalised with a total risk-based capital adequacy ratio of 14.6% which is well above the minimum regulatory capital requirement of 10%,” Esterhuyse said.

Outlook

“The group is confident that through its committed and capable Capricorn citizens, continuous focus to improve processes and invest in technology it will be able to weather the economic storms and continue to perform well,” Prinsloo said.

“Beyond this financial year, we remain positive that the group will continue its resilience, deliver positive results, create value for all our stakeholders and be a connector of positive change in the jurisdictions where we operate,” he said.

Capricorn closed at N$15.25 per share on Friday, up 0.7% from the previous week.