Financial Results
Finbond Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: "FGL"
ISIN: ZAE00013895
("Finbond" or "the Company" or "the Group"
Earnings enhancing growth;
Significant growth and consolidation opportunity in the North American short term, lending industry;
Anorganic growth in Finbond's core "30-day" competency;
Diversification of Country and Political Risk;
Effective ZAR hedge;
Teaming up with existing owners/managers with 10 - 30 years' experience in operating short term lending businesses in North America; and
Opportunity to operate and earn revenue in the $46 billion a year USA pay day lending market.
Finbond North American sales are well diversified across the various US states in which Finbond operates.

Serious Investment in Distribution and People

During the past financial year Finbond increased its overall branch network by 206 to 550 branches.

In South Africa Finbond increased its branch network by 35 branches to 379 branches of which 140 are located in Gauteng, North West, Limpopo and Mpumalanga, 62 in Kwazulu Natal, 68 in the Western Cape, 51 in the Eastern Cape and 58 in the Free State and Northern Cape. As part of our client-centric focus we ensured that our distribution channels reflect the demographics of our clients.

In the United States of America and Canada Finbond increased its branch network from 91 branches to 171 branches of which 35 are located in California, 42 are located in Louisiana, 40 are located in Illinois, 5 are located in Indiana, 2 are located in Florida, 1 is located in Ohio, 14 are located in Missouri, 6 are located in Ontario, 1 is located in Michigan, 2 are located in Mississippi, 8 are located in Alabama, 7 are located in Wisconsin and 8 are located in South Carolina.

We intend to open a further 40 branches in South Africa in the year ahead and to expand our branch network in the United States of America with an additional 80 branches.

Extension of Shareholders Loans

On 20 October 2016, shareholders were advised that as part of the Company's earnings enhancing growth strategy in terms of which Finbond expanded its short-term lending business into the North American market, Finbond entered into an agreement to acquire 50% of Americash Holding LLC and Creditbox.com LLC with an option to acquire the remaining 50% by 1 October 2017.

Finbond intended to raise the requisite capital to fund this acquisition from its shareholders by means of a Rights Offer.

In order to fund the purchase consideration in respect of the acquisition, that was due and payable in the course of October 2016, Finbond's three major shareholders (Riskowitz Value Fund LP, Net1 Finance Holdings (Pty) Ltd and Finbond Chief Executive Officer, Dr Willie van Aardt through Kings Reign Investments (Pty) Ltd) ("the Lenders") extended unsecured shareholder loans to Finbond to the value of US$37.5 million (R525 million).

On 28 February 2017 the Board of Directors agreed with the Lenders to extend the Repayment Date of the shareholder loans and provide for certain additional rights exercisable by each individual Lender in terms of the Amendment Agreement to the Rights Offer Shareholders' Loan Agreement ("the Amendment Agreement").

Subject to the terms and conditions set out in the Amendment Agreement, the Lenders made available to Finbond the shareholders' loans on the following terms and conditions:
The Amended Commencement Date: 28 February 2017
Loan Amount: $37,5 million (R525 million)
Repayment Date: on/or before 31 August 2017 or such later date as may be mutually agreed upon by the Parties in writing.
Security: Unsecured.
Interest Rate: LIBOR plus 12% (LIBOR meaning the three month US Dollar London interbank offered rate administered by ICE Benchmark Administration Limited).
The Conversion Rate: the rate of exchange against which the Shareholders' Loans shall be converted from US Dollars into South African Rand at such time as which the Rights Option shall be exercised and which shall, notwithstanding the prevailing rate of exchange at such time, be the greater of (a) R14.54 to $1 or, (b) the average mid-point rate for the 30 day period immediately preceding close of business on the business day prior to the Repayment Date.
Rights Option: the Lenders' respective entitlement to: (a) elect to convert their shareholders loans into shares in FGL at a price of R 2.68 by way of a Rights Offer in the future; or (b) continue earning interest at the applicable interest rate until such a time as the loans are repaid in full.
In determining the number of shares which a Lender is entitled to, a Lender should be in the same position the Lender would have been had it elected to convert its new loan to Finbond shares on 28 February 2017 on the basis that Finbond had 762,210,879 shares in issue on a fully diluted basis.
Interest shall be paid in US dollars on a quarterly basis within five business days of the last day forming part of the relevant interest measurement period.
The terms and conditions of the original Shareholders' Loan Agreement remain unaltered save to the extent contemplated in the Amendment Agreement.
Black Economic Empowerment

South Africa's policy of Black Economic Empowerment (BEE) is not simply a moral initiative to redress the wrongs of the past. It is a pragmatic growth strategy that aims to realise the country's full economic potential while helping to bring the black majority into the economic mainstream.

As a responsible corporate citizen Finbond is committed to contribute to the improvement and development of the quality of life of the communities in which it operates, and to support sustainable community development initiatives. We believe that BBBEE is a fundamental driver of economic and social transformation in South Africa and therefore an integral component of our business.

We are committed to align our business in the workplace and in society, with the national transformation agenda. We are further dedicated to the creation and development of an enabling environment, for effective BBBEE within our organisation.

Finbond also apportions resources, within reasonable means, to the pursuit and accomplishment of the aims and goals of BBBEE, in line with our vision, mission and strategic objectives, and in doing so, ensuring that Finbond retains its character, business focus, values and high performance standards.

Finbond has been rated as a level 4 contributor to BBBEE and it is our aim to achieve level 3 status by 2018.

Responsible Lending Practices and Inclusive Banking and Financial Services

There is a need among Finbond's current customer base and target market for a mutual and savings bank that specifically caters for their needs with regards to inter alia the following banking products and needs:
Branch network in rural areas;
Low monthly bank charges and no cash deposit or cash handling fees;
Innovative and modern cash deposits, transfers and drawings;
Unsecured loans with credit guarantee insurance;
Basic financial education;
Savings accounts that earn higher interest on small amounts, that actively encourage saving; and
No minimum operating balance.
Finbond is well positioned and able to provide much needed inclusive banking services and products to the vulnerable, unbanked, under banked and previously disadvantaged in step with the principles set out in Treasury's National Policy Document "a safer financial sector to serve South Africa better" with regards to financial inclusion and promoting access to financial services.

Looking Ahead

The challenging and difficult macro-economic environment as well as the adverse market conditions in the markets within which Finbond operates are not expected to abate in the short and medium term.

However, we remain confident that we have the required resources and depth in management to overcome these challenges and remain optimistic about our prospects for the future due to Finbond's: Improvement achieved in earnings and profitability despite difficult market conditions; Improvement achieved in cash generated from operating activities; Management expertise; Strong Cash Flow; Strong Liquidity and surplus cash position; Uniquely positioned 379 branch network in South Africa and 171 branches in North America; Superior Asset Quality; Access to funding; Conservative Risk Management and growth potential in the Micro Finance and Banking markets in the lower end of the market both in South Africa and North America.

We believe that the evolution from a short term Micro Finance Institution to a Bank in South Africa and our continued expansion into the North American Short Term Lending market in the implementation of our strategic action plan will ensure that we achieve good results in the medium and long term.

as at
for the period ended

Notes to the summarised consolidated financial statements

Finbond Group Limited is a company domiciled in South Africa. The summarised consolidated financial statements of the Company as at and for the 12 months ended 28 February 2017 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities.

Basis of preparation

The summarised consolidated financial statements have been prepared in accordance with the requirements of the JSE Limited Listings Requirements and the requirements of the Companies Act of South Africa. The summarised consolidated financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and financial pronouncements as issued by the Financial Reporting Standards Council IAS 34 Interim Financial Reporting, the Companies Act and the JSE Listings Requirements. It does not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated annual financial statements of the Group as at and for the year ended 28 February 2017.

The accounting policies applied by the Group in these summarised consolidated financial statements are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.

The summarised consolidated financial statements were prepared under the supervision of Mr C Eksteen CA(SA), in his capacity as chief financial officer.

These summarised consolidated financial statements are extracted from the Group's audited financial statements and are not itself audited. The directors take full responsibility for the preparation of these summarised consolidated financial statements and the financial information has been correctly extracted from the Group's audited financial statements.


The preparation of annual financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these summarised consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated annual financial statements as at and for the year ended 29 February 2016.

Fair value measurement

Fair value hierarchy of instruments measured at fair value

The fair value hierarchy reflects the significance of the inputs used in making fair value measurements. The level within which the fair value measurement is categorised in its entirety, is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The different levels have been defined as follows:

Level 1: Fair value is based on quoted unadjusted prices in active markets for identical assets or liabilities that the group can access at measurement date.

Level 2: Fair value is determined through valuation techniques based on observable inputs, either directly, such as quoted prices, or indirectly, such as derived from quoted prices. This category includes instruments valued using quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques where all significant inputs are directly observable from market data.

Level 3: Fair value is determined through valuation techniques using significant unobservable inputs. This category includes all assets and liabilities where the valuation technique includes inputs not based on observable data, and the unobservable inputs, have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required, to reflect differences between the instruments.
Valuation techniques used to derive level 2 and 3 fair values

Level 2 fair values of other financial assets have been derived by using the rate as available in active markets. The IBNR provision is managed from industry data accumulated on the Alexander Forbes Risk and Insurance Services claim system, and is classified as a Level 3.

Level 3 fair values of investment properties have been generally derived using the market value, the comparable sales method of valuation, and the residual land valuation method, as applicable to each property.

The fair value is determined by external, independent property valuers, having appropriate, recognised professional qualifications and recent experience in the location and category of the properties being valued. The valuation company provides the fair value of the Group's investment portfolio every twelve months.

Reconciliation of assets and liabilities measured at level 3
No transfers of assets and liabilities within levels of fair value hierarchy occurred during the current financial year.

Cash and cash equivalents are not fair valued and the carrying amount is presumed to equal fair value.

Short-term receivables and short-term payables are measured at amortised cost and approximate fair value, due to the short-term nature of these instruments. These instruments are not included in the fair value hierarchy.

Business Combination

During the reporting period the group acquired a number of branches in South Africa, USA and Canada as a going concern through business combinations, summarised below:
Events after the reporting period

There have been no subsequent events that require reporting.

Independent auditor's opinion

The Group's consolidated annual financial statements have been audited by the Company's auditors, KPMG Inc., who have expressed an unmodified opinion which is available for inspection at the Company's registered office.


The board has approved the declaration of a dividend from retained earnings of 7.28 cents per share ("Cash Dividend"). Shareholders will, however, be entitled to elect to receive a capitalisation share issue alternative ("the Capitalisation Issue Alternative"). If no election is made, the Cash Dividend will be paid.

The circular related to the Cash Dividend and Capitalisation Issue Alternative will be distributed to shareholders in due course.

The Cash Dividend will be payable in the currency of South Africa. The Cash Dividend is subject to a local dividend tax rate of 20%, resulting in a net Cash Dividend of 5.824 cents per share, unless the relevant shareholder is exempt from dividend tax or is entitled to a reduced rate in terms of the applicable double tax agreement. The company's income tax reference number is 9194313145. At the date of this announcement the company has 762 210 879 ordinary shares in issue.

If approved, the Capitalisation Issue Alternative will not be subject to dividend tax. However, there are possible tax implications of electing to receive shares under the Capitalisation Issue Alternative and shareholders are advised to obtain their own professional advice in this regard.

References to future financial performance included anywhere in this announcement have not been reviewed or reported on by the Group's external auditors.

For and on behalf of the Board
Dr. Malesela Motlatla                                                        Dr. Willie van Aardt
29 May 2017


Chairman: Dr MDC Motlatla* (BA, DCom (Unisa)); Chief Executive Officer: Dr W van Aardt (BProc (Cum Laude), LLM (UP), LLD (PU CHE) Admitted Attorney of The High Court of South Africa, QLTT (England and Wales), Solicitor of the Supreme Court of England and Wales); HJ Wilken-Jonker* (BComHons (Unisa); Chief Financial Officer: GT Sayers (CA (SA), BCom (Hons) (UNP), BCompt (Hons) (Unisa)); Adv J Noeth* (B Iuris LLB); Adv. N Melville* (B Law, LLB(Natal) LLM(Cum Laude)(Natal)SEP(Harvard); RN Xaba* (CA)(SA) BCompt, BCompt (Hons) (Unisa);R Emslie* (B Com (Law), Hons (Acc), (CA)(SA)); DJ Brits* (B Com, MBA) (NW); Chief Operating Officer: C van Heerden (MBA). Secretary: Ben Bredenkamp (B Com Accounting LLB UP)

Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)

Sponsor: Grindrod Bank Limited