Still questions over bank's gamble on Ellerines

Loan applications approved for the retailer's “low price” brands' customers dived from 76% to just over 50%, subsequently easing off to allow the application approval rate to rise to around 57%.

Abil chief executive Leon Kirkinis said at the results presentation on Monday: “In retrospect, we may have pulled the handbrake too hard.”

Ellerines salesmen apparently went on a reckless binge before the takeover, leading to a R450 million bad debt hangover for the new owner.

It was too early to see from the September year-end results if a bank marrying a furniture retailer was a good idea, as they did not include Ellerines' peak December trading period.

The results saw the enlarged Abil posting lower earnings and dividends than last year due to the dilution from its all-share takeover. The exchange of 255 Abil shares for 100 Ellerines shares along with a black empowerment deal saw the number of Abil shares in issue at the September year end jump 62% to nearly R804 million.

Ellerines hopes to gain a competitive advantage over rival furniture credit retailers JD Group and Lewis by sourcing money to lend more cheaply from its owner bank. Abil, in turn, hopes to turn Ellerines customers into account holders.

Source: Daily Dispatch

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