File picture: Philimon Bulawayo
File picture: Philimon Bulawayo

Finbond drops more than 8% after flagging earnings decline

By Sandile Mchunu Time of article published May 29, 2019

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DURBAN – Finbond Group share price declined by more than 8 percent on the JSE yesterday after the financial services group flagged a decline of between 44.5 percent and 54.6 percent in its earnings for the year to end February – a greater decline than it forecast earlier in the year.

Finbond shares declined by 3.85 percent on the JSE yesterday to close at R3.75. The group said its headline earnings per share (Heps) would decrease to between 15.3 cents a share and 18.7c, down from 33.7c compared to last year.

The group attributed the expected decline in Heps to a number of factors, including the non-recurrence of an exceptional profit of R22.6 million following a mandatory offer last year, as well as the increase in the weighted average number of shares by 19.7 percent and, lastly, on South African business volumes coming under pressure due to a large portion of Finbond’s SA Social Security Agency (Sassa) client base transitioning to the new Sassa card, resulting in a significant reduction in Finbond’s Sassa customer base.

“This new card was launched by the SA Post Office and Sassa on May 3 last year, but is unable to load electronic funds transfer (EFT) debit or stop orders, which limited Finbond’s ability to extend credit to this segment of the market and led to significantly increased Sassa write-offs and impairments,” the group said.

The group released a trading update in February, saying it expected its Heps to decline by more than 35 percent.

The group also expects its earnings per share (EPS) to decline to between 4c and 7.2c, representing a decline of between 76.9 percent and 87.2 percent compared to last year's EPS of 31.3c.

The group said the expected decline in EPS was caused by the factors that affected its Heps as well as an abnormal downward fair value adjustment of R129.3m relating to Finbond’s properties in Mpumalanga and Gauteng.

Despite the expected decline in earnings, the group said its total assets increased by 8.8 percent to R3.42 billion during the year, up from R3.15bn, while interest revenue increased by 17.4 percent to R1.81bn, up from R1.54bn compared to last year.

Finbond expects to release its results on Friday.


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