High energy reaping rewardsOperational update – quarter one of 2011

Momentum in last 6 months of 2010 accelerated into 2011

External environment

• Moderately improving economic conditions

• Stronger retail sales over the festive period

• Unemployment claims have stabilised but remain high

• Intensely competitive trading conditions

• Low inflation, low interest rates and above inflation salary increases improving consumer affordability

• Debt mediation rules finalised – deployment expected by February 2011

Introduction

Substantial reinvigoration of business and focus on people bearing fruit

• Strong quarter for both businesses

• New products for the ‘festive’ and ‘back-to-school’ seasons well received

• EHL brands experienced some impact of change over to African Bank systems in September 2010

• Substantial growth in the number of new clients

• High growth in credit card continued

• African Bank footprint expanding rapidly through a presence in EHL stores

• Ezi*cash (top-up credit products) and Ezi*Loans (credit only initiatives) in EHL stores proving successful

• New retail categories and private label expansion in EHL

• Group operating cost slightly ahead of budget given higher sales

• Asset quality continued to improve

• Yields relatively stable

ABIL initiatives

Credit sales of R5,5 billion (up 59% y-on-y)

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200

400

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1 000

1 200

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Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

R m

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African Bank credit sales up 63%

2011 2009 2010

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09

Oct

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Nov

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Jan

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Feb

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Aug

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Card sales grew 87%

New card sales (LHS) Limit increases on existing cards (RHS)

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5 000

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45 000

2009

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2010

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African Bank

New client base up 41%

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Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

R m

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EHL credit sales up 29%

2011 2009 2010

Risk mix positive

• Loan offer rates have remained steady

• The move in the mix to low risk was largely a function of the ‘Payment break’ campaign

• Low/Med customers have increased from 69% of portfolio to 74%

100 000

150 000

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250 000

300 000

0%

10%

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80%

Oct

09

Nov

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Dec

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Jan

10

Feb

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Mar

10

Apr

10

May

10

Jun

10

Jul 1

0

Aug

10

Sep

10

Oct

10

Nov

10

Dec

10

Loan applications – African Bank

No of applications Offer Rate %

41.6%

18.2%

14.3%

14.0%

1.8%2.7%

7.4% Sales risk mix Dec 2010

1Low

2LowMed

3Med

4MedHigh

5High

6Thin

7Other

37.6%

18.5%

13.3%

14.2%

2.3%2.6%

11.6% Sales risk mix Dec 2009

1Low

2LowMed

3Med

4MedHigh

5High

6Thin

7Other

Product innovation paying off

• Insights gained from staff and customer roadshows and the retail business, are driving product development

• PAYMENT BREAK

Offered from October to December 2010 – R1 billion in sales (19% of credit sales)

Aimed at lower risk and new clients – sales volumes skewed towards lower risk as a result

1st instalments due in January 2011

Similar product in EHL and an African Bank April/May 2010 promotion have performed satisfactorily

• INTEREST BUSTER

Designed to capitalise on short term lending opportunities and attract new and long-dormant clients

Product available for limited time and specific book size – currently +/- 15% of sales by number of loans, 9% by value

0% interest, no service fees, R10 000 maximum loan size, 12-month product

Standard initiation fee and compulsory credit life

R2 500 potential saving for customers

• MOBILE SERVICE (balance enquiries, airtime, lost cards) - 50 000 active users

Product innovation paying off

• EZI*CASH (top-up credit) and EZI*LOANS (credit only) in EHL proving successful – R112 million for the quarter

• Category expansion in EHL through new imported furniture ranges and computers

• TEK private label – further development into appliances as well

• Club membership reached 570 000 members – new club magazines & benefits positively received

• Credit facilities pilot launched in Wetherlys in December 2010

Distribution network expanding rapidly

• 32 new African Bank branches opened to date

in 2011, including 10 sales centres

• 30 new EHL stores opened for the quarter and 41 more secured for 2011, with a strong focus on improving trading densities

• 121 (55 in Qtr1 2011) African Bank kiosks opened in EHL stores - R90 million of additional sales for the quarter

• 10 African Bank ‘carve-out’ branches in EHL –R73 million of sales

• 5 African Bank promotional vehicles deployed

• Expectation for 100 more kiosks and 100 ‘carve-out’ branches this year

Advances growth tracking sales

• African Bank traditional advances increased by 10% for the quarter to R26,8 billion

• Furniture credit advances increased by 17% to R5,9 billion

• First quarter is traditionally the highest growth quarter

• Advances growth on track to reach the 2011 objective

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R b

illion

Monthly advances growth

Furniture African Bank traditional

EHL – retail performance

• Merchandise sales up 8% to R1,5 billion, 12% on a like-for-like m²

• Focus on trading densities paying off - m² down but number of stores up

• Ellerines (48% of EHL sales) performed well

• Fire at Furniture City’s biggest store

• Wetherlys continued to battle with legacy location strategy and slow recovery in upper LSMs

• Gross margins increased relative to same period in 2010 and stock turn improved

• Merchandise sales credit mix increased from 60% (Sep 10) to 66% (Dec 10)

• Productivity ratios continued to improve further

18%

12%

-1%

9%

-4%

3%

12%

-10%

-5%

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15%

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Comparable sales growth - m²

African Bank vintages continue to fall from peaks of 2008

0%

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25%

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

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Month on Book

VINTAGE GRAPH - African Bank More than three missed instalments

Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09

May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10

Furniture credit vintages at the lower end of target range

0%

5%

10%

15%

20%

25%

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NPL

90 %

Months on book

VINTAGE GRAPH - EHLMore than three missed instalments

200808 200809 200810 200811 200812 200901 200902 200903 200904

200905 200906 200907 200908 200909 200910 200911 200912 201001

201002 201003 201004 201005 201006 201007 201008

Looking ahead

The main strategic initiatives for ABIL in 2011 remain as follows:• Integrate and optimise the African Bank operations

• Transform the value proposition and delivery model of the Bank to service a broader market

• Grow the client base of the Bank and convert EHL customers into African Bank customers as well

• Build EHL into a premier cash retailer

• Expand ABIL’s presence in the retail footprint in South Africa.

ABIL

group objectivesActual 2010

Target

2011

Medium term target (rolling 4

years)

Advances growth 20% > 25% > 15% CAGR

Merchandise sales R4,5 bn > 8,5% R8 bn – R9 bn p.a.

Return on equity 15,6% > 18% > 30%

Our people journey has only just started!Our people journey has only just started!