Capricorn Group releases interim financial results for the six months ended 31 December 2023

Capricorn Group, a proud Namibian financial services group listed on the Namibian Stock Exchange with diversified operations and business interests in Namibia and Botswana, released its interim financial results for the six months ended 31 December 2023 today.

Capricorn Group achieved solid results with profit after tax for the six months ended 31 December 2023, increasing by 18.5% to N$827.6 million, compared to a profit after tax of N$698.2m that was reported in the comparative period in the prior year.  This represents an increase of 19.4% in earnings per share to 152.4 cents.  Annualised return on equity at half year increased from 16.6% to 16.8% year-on-year.

“The Group’s strong performance is attributable to loan book growth and increased transaction volumes, offset to some extent by escalated credit impairment charges.  Furthermore, the group’s profitability benefitted from implementing IFRS 17 – “Insurance Contracts”.  This improvement primarily stems from reduced discretionary policyholder reserves following the application of IFRS 17. Excluding the positive impact of IFRS 17 on the Group’s capital reserves, return on equity would have been 17.3% for the 6 months ended 31 December 2023,” said Thinus Prinsloo, Group CEO.

IFRS 17 requires full retrospective application for disclosure purposes.  Consequently, the comparative figures for the six-month period ended on 31 December 2022 were restated.  Following this restatement of the comparative period figures, the Group’s profit after tax for the six months ended 31 December 2023 represents a year-on-year increase of 7.5%.  Similarly, both headline earnings and earnings per share for the same period experienced a year-on-year growth of 7.2%.  All comparisons to figures from the prior period further in this announcement are based on the restated amounts unless explicitly stated otherwise.

According to Prinsloo, the central banks of both Namibia and Botswana have adopted prudent monetary policy measures to counteract inflationary pressures and to protect local currencies in volatile global market conditions brought about by spreading geopolitical tensions.  The current outlook is that inflation will stay within the target range of both central banks in the short to medium term, with the possibility of interest rates decreasing in the coming 12 months.

“The Bank of Namibia’s Economic Outlook for December 2023 predicts a deceleration in economic growth, primarily attributed to weakened global demand and an expected contraction in the agriculture sector.  The projections indicate real GDP growth rates of 3.9%, 3.4%, and 3.1% for the years 2023, 2024, and 2025 respectively.  Despite these challenges, the overarching commitment of Capricorn Group remains focused on sustained growth for the benefit of all stakeholders,” concluded Prinsloo.

Our positive financial performance enabled us to create value for all stakeholders, contributing to the socio-economic development of Namibia and Botswana and positively impacting many lives including our employees, suppliers, shareholders, communities and government.  The Group created value of N$2.42 billion during the six months ended 31 December 2023, which was shared by its main stakeholders as follows:

• Employees – N$563 million
• Government through taxes– N$574 million
• Ordinary Shareholders – N$314 million
• Suppliers – N$515 million
• Communities – N$19.8 million
• Value retained for future expansion – N$438 million.

Group financial performance highlights

• Capricorn Group experienced a noteworthy 12.0% year-on-year increase in net interest income, driven by higher interest rates, an 8.5% year-on-year growth in the loan book and prudent management of cost of funding.  The lending businesses managed their cost of funding very effectively, leading to a 23 basis point enhancement of the net interest margin to 5.1% for Bank Windhoek, while the net interest margin at Bank Gaborone commendably increased from 3.1% to 4.1%.

• Impairment charges increased by N$98.0 million to N$252.8 million year-on-year. The ongoing economic impact of increased inflation rates caused by geopolitical instability combined with higher interest rates continued to pressure key credit risk indicators, with non-performing loans increasing from N$2.46 billion in June 2023 to N$2.66 billion in December 2023.  The Group continues to hold prudent provisions for expected credit losses.
• Non-interest income for the half year increased by N$177.5 million (19.0%), mainly attributable to an increase in fee and commission income of N$67.0 million (10.1%) and net trading income of N$57.1 million (62.4%).  Asset management fees from Capricorn Asset Management increased by 13.4% due to strong growth in unit trusts, exceptional growth and satisfactory growth in Capricorn Private Wealth (a joint venture between Capricorn Asset Management and Bank Windhoek) and satisfactory growth in pension fund assets.
• Operating expenses registered an 11.5% year-on-year increase, totaling N$137.1 million. This rise can be attributed to an increase of N$48.8 million (42.7%) in variable operational banking expenses, directly linked to increased transaction and trading volumes.  Excluding these operational banking expenses, the growth in overall expenses was contained at 8.1% (N$88.3 million).  The majority of this growth is associated with an increase in staff costs amounting to N$61.2 million (9.4% increase year-on-year), primarily driven by annual increases and the filling of key vacancies, particularly in respect of IT resources.
• Before the IFRS 17 restatement of the preceding period, the Group recorded a substantial 95.3% year-on-year increase in income from associates, amounting to N$46.7 million. This growth is attributed to both organic expansion and the impact of IFRS 17 in the current year. However, the recognition of substantial previously unrecognised IFRS 17 profits in the restated prior period resulted in a 24.4% decline in income from associates of N$30.9 million being reported.
• Capricorn Group retained a healthy liquidity position as at 31 December 2023 as the Group’s liquid assets increased by 10.9% (N$1.56 billion) year-on-year. Liquid assets exceeded minimum regulatory requirements in Namibia and Botswana by 135% and 114%, respectively, as at 31 December 2023.
• Gross loans and advances increased by N$3.9 billion year-on-year, mainly driven by growth in term loans of N$2.4 billion (16.3%), instalment finance of N$750 million (18.9%) and overdrafts of N$423 million (6.8%).

Asset quality remained a key focus area for the Group.  Despite the challenging economic environment, the Group’s total non-performing loans (NPLs) were contained to N$2.66 billion (June 2023: N$2.46 billion) as the Group continues to manage credit risk on a pro-active basis.  This increased the NPL ratio from 5.2% to 5.4% over the six months ending 31 December 2023.  The NPL ratio remains below the industry average.

• The Group enhanced its already robust capital position with a total risk-based capital adequacy ratio of 17.6% as at 31 December 2023 (June 2023: 16.9%).

The Group declared an interim dividend of 48 cents per ordinary share.  The interim dividend per share for the period under review is 23.1% higher than the interim dividend per share of 39 cents declared in the comparative period.  The Group considered its capital and liquidity position when declaring an interim dividend that balances prudency and future growth capacity with a fair dividend yield for investors.

• Last day to trade cum dividend: 14 March 2024
• First day to trade ex-dividend: 15 March 2024
• Record date: 22 March 2024
• Payment date: 5 April 2024