COVID-19 knocks Capricorn’s operating profits to N$856.4 million
Listed financial services company, Capricorn Group’s operating profits were significantly impacted by the COVID-19 pandemic during the last quarter of the financial year, with full-year profit after tax contracting by 15.6% to N$856.4 million.
Capricorn has diversified operations and business interests in Namibia, Botswana and Zambia. The company’s annual financial results for the period ending 30 June 2020 shows that profit after tax from continuing operations, excluding its Zambian banking operation, amounts to N$1,01 billion, which is 2.2% lower than the prior year.
Loans and advances of the company increased by 5.6% to N$41.1 billion during the period under review. Bank Windhoek’s gross advances increased by 4.9% to N$33.4 billion, well above the growth in private sector credit extension of 2.8%. This growth was mainly in commercial loans. Bank Gaborone increased gross advances by 11.5% to P4.7 billion as the bank continued to grow its market share, mainly in commercial and mortgage loans.
The Group’s impairment charges increased by 146.1% to N$304.3 million for the year under review. Almost half of the increased charges is a direct result of stressed and prudent economic overlays, reflective of a severely depressed economic outlook, applied to the expected credit loss models. The balance of the increase is mainly due to the prudent approach applied by the group in determining expected credit losses given the current economic circumstances where many customers are experiencing financial distress.
CEO Thinus Prinsloo said the they are proud of the performance delivered by their business units and associates, adding that their response to a challenging year showed resilience and sustainability in operations.
“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,” Prinsloo said.
Prinsloo admits profitability was under pressure in the last three months of the financial year, explaining that 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.
Explaining the exclusion of Cavmont Bank from its continuing operations, Jaco Esterhuyse, Financial Director of the Group said after 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 has been concluded subject to the requisite regulatory approvals,” Esterhuyse said.
On the outlook going ahead, Esterhuyse said they expect an increase in customer defaults with impairment charges remaining high. He explains that 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 and that 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,” Esterhuyse said.