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Ellerines
 

The Ellerines results presented here are for the nine months from the effective acquisition date in January 2008 to 30 September 2008. Substantial changes relating to accounting policies, recognition of income, definitions of advances, asset quality and atacquisition adjustments have been implemented since the acquisition. These changes mainly affected the financial services business and the more significant of these were:

  • advances no longer include capitalised insurance and origination fees;
  • the total income yield is now based on the accrual of interest, fees and insurance on a constant yield to maturity over the term of the loans, previously fees and insurance were effectively recognised upfront on origination;
  • non-performing loans are disclosed according to the African Bank definitions (being the total capital at risk for loans which are more than three instalments in arrears) and have replaced the previously published arrears (being the value of missed instalments only);
  • provisions are based on a higher discount rate applied to future expected cash flows. Forecasted cashflows in turn are based on African Bank’s IAS 39 model, which recognises impairment provisions earlier.

Various at-acquisition and fair value adjustments have been made to the take on balances at 7 January 2008. For details, please refer to the SENS announcement released on 7 May 2008.

The number of shares used for earnings per share ratios are the ABIL shares issued to acquire Ellerines, being 294,7 million shares weighted for the nine month period equalling 220,7 million ABIL ordinary shares, and the 11,6 million ABIL ordinary shares issued on 30 September 2008 in terms of the Ellerines BEE programme Masonge, which when weighted for the one day, has an immaterial effect on the total weighting of 220,7 million.

Given these changes which, combined with the fact that this reporting period excludes the peak retail trading quarter of October to December, together with the difficulties in restating historical data, the focus has rather been on providing a base from which new trend data can be built, with historical data provided only where relevant and comparable.

For the purposes of analysis, the results have also as far as possible been split between the two parts of the Ellerines business, being retail and financial services, in order to provide an overview of each operating unit on a stand-alone basis. As these businesses still operate as a single entity, certain assumptions have had to be made in order to achieve the split of the operating units, in particular the cost allocation. For the purposes of the split, retail has been defined as all activities, income and expense items which relate to the furniture retail business, excluding the provision of credit and insurance. All income and expense activities relating to the provision of credit, including short term insurance and credit life assurance, have been classified as financial services.

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