Another lean year for Capricorn

Jo-Maré DuddyThe Capricorn Group ended its latest financial year with only about N$16.8 million more profit in its pocket than the previous one, results released yesterday show.For the year ended June 2018, Capricorn recorded a profit of about N$934.4 million compared with some N$917.6 million for the same 12 months in 2017.This is the second consecutive year that Capricorn's profit growth trickled down to single digit figures. Year-on-year growth for its latest book-year came in at 1.83%, slightly up from the 1.39% for its 2017 financial year, but drastically short of the average of 20% plus for 2014 to 2016. For instance, profit for its 2017 year was about N$12.6 million higher than that of 2015. In 2015, however, profit growth exceeded N$152 million.The recession in Namibia, as well as “disappointing” results from Capricorn's Cavmont Bank in Zambia contributed to the still bleak profit figures.Operating profitOverall, the group's operating profit dropped by around N$26.6 million or 2.2% to nearly N$1.17 billion. In the previous book-year, annual operating profit growth was still positive at about 2%.Operating profit in the latest book-year was hurt by a nearly 29% increase year on year in operating expenses. Capricorn points out that, on a normalised basis, operating expenses rose by 14.7%. This “above-inflation” increase the group contributes to the opening of three new branches in Namibia, capacity building within it digital channels, marketing and strategic customer capabilities, as well as technology costs which jumped 28.6% as a result of continued investment in IT infrastructure.Basic headline earnings per share (HEPS), the most widely watched profit gauge which strips out certain one-off items, fell by 13% to 157.9c in the year ended June 2018. In the 2017 results, HEPS was up 0.2% on an annual basis.Normalised figuresTotal comprehensive income for 2018 stood at about N$986.2 million, nearly N$55.2 million or 6% higher than in 2017. However, normalised total comprehensive income decreased by 5.5% compared to the 2017 year.For normalised figures, Capricorn took the effect of significant once-off transactions and acquisitions into account. These include adjusted financial results of prior years to include the results, assets and liabilities of the Botswana and Zambia subsidiaries as if they were acquired at the beginning of the prior reporting period. Capital profit on the partial sale of the Visa Inc. shareholding, in line with the group strategy to realise non-core investments, has been excluded from the current financial year's results.In addition, results were adjusted to exclude any gain realised in the acquisition of a controlling interest in Entrepo Holdings (Pty) Ltd in the current financial year, and to exclude the assets and liabilities of Entrepo at 30 June 2018. Capricorn says the decrease in normalised total comprehensive income is “to some extent reflective of the challenging economic conditions, but was largely caused by the disappointing result of the Zambian operations”.Other normalised figures include the growth in net interest income (1.1%), non-interest income (4%), as well as loans and advances (5.8%).NPLsCapricorn says its non-performing loans (NPLs) as a percentage of gross advances weakened from 2.2% to 3.3%, mainly as a result of a substantial increase in the value of NPLs at Bank Windhoek.“This increase was mainly due to four large, but well secured, loans classified as non-performing during the year under review. Due to the substantial value and quality of the collateral held as security against these large exposures, potential losses are limited. For this reason, the bad and doubtful debt provisions did not increase in line with the increase in non-performing loans,” the group says.According to Capricorn, impairment charges for bad and doubtful debt increased by 39.4% or N$22.8 million to N$80.8 million. This was mainly as a result of including the Botswana and Zambian subsidiaries for a full year, the group says.However, on a normalised basis, impairment charges increased by only 2.7%, Capricorn says. “The impairment charges of Bank Windhoek and Cavmont Bank increased by N$11.5 million (24.7%) and N$14.3 million ( >100%) respectively, which is largely offset by a decrease in Bank Gaborone of N$21.4 million (46.1%) as a result of large specific impairments in the prior year relating to failures within the Botswana mining sector.”In its outlook, Capricorn says it “remains positive that, notwithstanding the subdued economic and business outlook in the region, it will continue to deliver solid results and value to all stakeholders”. “This requires us to be innovative and to continuously explore new investments, technologies and product and service offerings,” the group says.Capricorn Investment Group Ltd is listed on the Local Index of the Namibian Stock Exchange (NSX). With a total market capitalisation of nearly N$8.8 billion, it is the third biggest company on the Local Index.Capricorn closed at N$16.94 per share on Wednesday. Its share price has shed nearly 6% since the beginning of the year.

Another lean year for Capricorn

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Another lean year for Capricorn

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