|
AFB
AFB
AFB - Alexander Forbes Limited - Audited results: year ended 31 March 2007
ALEXANDER FORBES LIMITED
Registration number: 1958/001974/06.
Share code: AFB.
ISIN code: ZAE000018230
ALEXANDER FORBES LIMITED
Audited results for the year ended 31 March 2007
For more information and full details of the SENS announcement, please visit our
website: www.alexanderforbes.co.za
- Trading results +13%
- Core EPS +14%
- Basic and headline EPS >100%
- Global assets under management >R150 billion
REVIEW OF OPERATIONS
OVERVIEW
The year to 31 March 2007 has been characterised by:
Strong organic growth across most major businesses with trading results of
continuing operation increasing by 13% to R877 million.
SA Financial Services recorded a slight decline in profits, however this was a
most commendable performance given the issues impacting this business in the
early part of the year. Significant progress has been made with the bulking
settlement process with two thirds of current retirement fund clients having now
accepted settlement offers.
Continued strong growth in the assets of Investment Solutions with global assets
under management increasing by 23% to exceed R150 billion at the financial year
end.
Strategy: The strategic decision to sell the International Risk Services (IRS)
business was successfully implemented in November 2006. The historical results
and profit realised on disposal of this business are shown separately from the
results of continuing operations in accordance with International Financial
Reporting Standard 5 (IFRS 5). We will continue to work closely with our
international network in servicing African clients with international
operations.
TRADING RESULTS
No material acquisitions have been concluded in the current or previous
financial years. Thus, the group achieved strong organic growth as evidenced by
the 16% growth in income from continuing operations, which totalled R4,465
million for the year, and the 13% growth in trading results from continuing
operations, which totalled R877 million for the year.
- SA Risk & Insurance Services
Income from operations increased by 10% to R898 million driven by strong new
business gains in the Risk Services` corporate broking division, continued
strong growth in Guardrisk`s cell captive insurance operations and significant
growth in the Compensation Technologies` medical claims facilitation business.
During the year, we secured appointments to a number of new major corporate
clients and in particular have been appointed to several large construction
projects both in South Africa and across the continent.
Disciplined expense management contributed to the 11% growth in trading results,
which totalled R207 million for the year.
- SA Financial Services
Income from operations increased by 3% to exceed R1 billion for the first time.
This is a most commendable performance given the issues impacting this business
in the early part of the year. The core Consultants & Actuaries division was
the most impacted by these issues, recording a 16% reduction in revenue mainly
as a result of lower ad hoc consulting income for the year. The improved 4th
quarter performance recorded by this division is encouraging going forward into
the new financial year. The reduced revenues from the Consultants & Actuaries
division were more than offset by strong growth recorded by HomePlan`s pension-
backed lending operations and by the Financial Planning Consultants division,
driven by good sales and the strong equity market conditions, as well as growth
recorded across the remainder of the business.
The reduction in ad hoc consulting income and some pressure on costs impacted on
the trading results, which were 9% down and totalled R169 million for the year.
- International Financial Services
Income from operations increased by 7% to GBP96.3 million (R1,304 million)
driven by strong 4th quarter sales recorded by Alexander Forbes Financial
Services` pensions IFA business, partly offset by reduced growth recorded by
Lane Clark & Peacock`s actuarial consulting operations, which came off a high
base in the previous year. Lane Clark & Peacock have been recognised by FT
Business and, for the 3rd consecutive year, in the UK Pensions Awards as the
Actuarial Consultancy and Investment Consultancy of the Year.
Trading results totalled GBP9.6 million (R129 million) up 9% on the previous
year. This result was stated after incurring trading losses of GBP1.8 million
(2006: GBP1.6 million) in the DC Link administration business. DC Link recorded
good new business gains but has not yet achieved the scale required to operate
profitably. The group is reviewing the strategic options available to this
business.
- Africa Investment Solutions
Income from operations increased by 20% to R912 million on the back of continued
strong equity market conditions during the year. Assets under management in SA
totalled R134 billion at 31 March 2007. Including the international operations,
global assets under management exceeded R150 billion, which is a remarkable
achievement given that Investment Solutions commenced operations less than ten
years ago.
Trading results increased by 21% to R346 million, reflecting the benefits of
operational gearing inherent to the business.
- International Investment Solutions
Income from operations increased by 27% to GBP7.1 million (R96 million) driven
by both market growth and new business gains. Assets under management broke
through the important GBP1 billion mark on 26 October 2006 and totalled GBP1,115
million at the financial year end. This represented growth of GBP226 million
for the year.
The trading loss recorded for the year amounted to GBP0.8 million, reflecting
the continued investment in growing this strategically important area of
operations.
- Afrinet (Africa ex-South Africa)
Alexander Forbes` African network extends to 12 countries in sub-Saharan Africa.
This strategically important part of the business has been separated from the
Risk Services and Financial Services businesses to provide a dedicated focus and
renewed impetus for growth.
Income from operations increased by 24% to R239 million. Trading results
increased even faster, growing by 28% to R37 million.
CORE EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Consistent with previous years, an adjusted measure of headline earnings per
share, namely core earnings per share, has been presented in order to facilitate
a more meaningful assessment of the group`s performance for the year. This
adjusted measure excludes:
- the financial effects caused by the mismatch resulting from accounting for
certain policyholder investments as treasury shares under IFRS (refer SENS
announcement to shareholders of 3 April 2006 and note 7 to this
announcement);
- the trail commission profit of the UK Direct Marketing entity in run-off;
- exceptional gains and losses; and
- the historical results and profit realised on disposal of the IRS business
(these are shown separately as a discontinued operation in accordance with
IFRS 5).
(Details of the calculation of core earnings are provided in the segmental
profit analysis contained in this announcement.)
Core earnings per share totalled 130 cents for the year, representing a 14%
increase compared to the previous year. This is in line with the underlying
growth in trading results of continuing operations.
DISTRIBUTION TO SHAREHOLDERS
No distribution is proposed to be made to shareholders pending the outcome of
the private equity bid for the group. This position will be reviewed by the
board in the event that the proposed scheme of arrangement does not become
operative.
CHANGES IN DIRECTORATE
As advised to shareholders on 23 April 2007, Mike Ilsley has resigned from the
position of Group Finance Director and has been succeeded by Deon Viljoen. The
board is pleased to advise that Mike has agreed to continue as a senior
executive of the group until 31 March 2008 which will ensure a smooth handover
of his responsibilities to Deon.
DEVELOPMENTS AND PROSPECTS
Circulars were posted to shareholders and option holders on 31 May 2007
regarding the proposed acquisition of the share capital of Alexander Forbes by a
consortium of private equity investors, acting through Cleansheet Investments
(Proprietary) Limited, by way of a scheme of arrangement in terms of section
311 of the Companies Act. The updated offer price is R17.26 per Alexander Forbes
share, which will accrue interest at a rate of 6% per annum from 3 July 2007.
In addition, shareholders were sent a pre-listing statement issued by Alexander
Forbes Preference Share Investments Limited setting out details of the terms of
a re-investment election available to qualifying Alexander Forbes` shareholders.
The proposed transaction is subject to a number of conditions precedent as set
out in the circulars, including approval by 75% of shareholders and option
holders present and voting at the separate meetings to be held on Monday, 18
June 2007.
The results for the past year were assisted by the favourable economic
environment that prevailed and, in particular, by the continued strong equity
market conditions. Barring any significant changes in market conditions and any
major unforeseen events, we believe that the existing strategies in place and
diversified earnings streams from the core underlying businesses will ensure
that the group is well positioned to capitalise on opportunities and deliver
further growth in earnings.
P L Heinamann M P Moyo
Chairman Group chief executive
1 June 2007
ABRIDGED INCOME STATEMENT
for the year ended 31 March 2007
Restated
2007 2006
Notes Rm Var. Rm
Income from continuing 3 4,465 16% 3,840
operations
Other income 52 71
Operating expenses (3,708) (3,593)
Operating profit from 809 318
continuing operations
Analysed as follows:
Trading results of operations 877 13% 775
Profit from direct marketing 31 41
entity in run-off
Consolidation of group`s own (17) (1)
errors & omissions insurance
cell
Exceptional gains and losses 4 (49) (480)
Impairment charges and other 5 (33) (17)
capital gains and losses
Operating profit from 809 >100% 318
continuing operations
Net interest costs 6 (17) (2)
Net fair value gain (offset by 12 18
taxation expense attributable
to policyholders)
Effect of accounting for 7 (43) (81)
policyholder investments as
treasury shares under IFRS
Share of net profit of 10 12
associates
Profit before taxation from 771 >100% 265
continuing operations
Taxation of continuing
operations
Taxation expense (208) (209)
Taxation attributable to (12) (18)
policyholders (offset by net
fair value gain above)
Profit for the year from 551 >100% 38
continuing operations
Profit for the year from 91 19
discontinued operation
Net profit of IRS business up 8.1 7 19
to effective date of disposal
Capital profit on sale and 8.2 84 -
other discontinuance effects
Total profit for the year 642 >100% 57
Attributable to:
Ordinary shareholders 589 >100% 12
Minority interests in 53 45
continuing operations
642 >100% 57
Core earnings per share from continuing 130 14% 115
operations
Headline earnings per share from 120 >100% (1)
continuing operations
Basic earnings per share
Continuing operations 112 >100% (2)
Discontinued operation 21 425% 4
Total 133 >100% 2
Diluted basic earnings per share
Continuing operations 111 >100% (2)
Discontinued operation 20 400% 4
Total 131 >100% 2
Weighted ave. no. of shares for basic 443 - 443
and headline earnings per share
(millions)
Adjusted for policyholder investments 18 19
accounted for as treasury shares under
IFRS and deducted from equity
(millions)
Weighted ave. no. of shares for core 461 - 462
earnings per share (millions)
Weighted ave. no. of shares for basic 443 - 443
earnings per share (millions)
Adjusted for potential dilutory effect 7 4
of employee share options over unissued
shares (millions)
Weighted ave. no of shares for diluted 450 1% 447
basic earnings per share (millions)
SEGMENTAL PROFIT ANALYSIS
for the year ended 31 March 2007
Income from Trading results of
continuing operations operations
2007 Var. 2006 2007 Var. 2006
Africa (Rm)
Risk & Insurance 898 10% 815 207 11% 186
Services
Financial Services 1,016 3% 990 169 (9%) 186
Investment 912 20% 763 346 21% 285
Solutions
Afrinet (Africa ex- 239 24% 192 37 28% 29
South Africa)
Total Africa (Rm) 3,065 11% 2,760 759 11% 686
International
(GBPm)
Financial Services 96.3 7% 89.8 9.6 9% 8.8
Investment 7.1 27% 5.6 (0.8) - (0.8)
Solutions
Total International 103.4 8% 95.4 8.8 10% 8.0
(GBPm)
Total International 1,400 30% 1,080 118 33% 89
(Rm)
Total Group (Rm) 4,465 16% 3,840 877 13% 775
Africa International Total
2007 2006 2007 2006 2007 2006
Rm Rm Rm Rm Rm Rm
Trading results of 759 686 118 89 877 775
continuing operations
Consolidation of (17) (1) - - (17) (1)
group`s own insurance
cell
Core operating profit 742 685 118 89 860 774
Net interest costs (24) (1) 7 (1) (17) (2)
Policyholders` net 12 18 - - 12 18
fair value gain
Share of headline 10 (7) - 5 10 (2)
profits of associates
Core profit before 740 695 125 93 865 788
tax
Taxation on core
profit
Taxation expense (194) (197) (5) 1 (199) (196)
Policyholders` (12) (18) - - (12) (18)
taxation expense
Core profit after tax 534 480 120 94 654 574
Minority (16) (12) (37) (33) (53) (45)
shareholders`
interests
Attributable core 518 468 83 61 601 529
earnings
ABRIDGED BALANCE SHEET
at 31 March 2007
2007 2006
Notes Rm Rm
Assets
Financial assets held under multi- 145,540
manager investment contracts 118,373
Financial assets of cell captive 5,615 4,729
insurance facilities
Housing loans secured by retirement 750 750
fund assets
Property and equipment 188 222
Purchased and developed computer 30 29
software
Goodwill 1,774 2,091
Other intangible assets 38 48
Investments in associates 9 4 68
Deferred tax assets 122 257
Financial assets 269 367
Insurance related receivables 150 169
Trade and other receivables 1,191 1,204
Cash and cash equivalents 2,383 2,803
Total assets 158,054 131,110
Equity and liabilities
Ordinary shareholders` funds 2,218 1,531
Minority shareholders` interests 129 82
Total equity 2,347 1,613
Financial liabilties held under multi- 145,812 118,619
manager investment contracts
Liabilities of cell captive insurance 5,615 4,729
facilities
Securitisation funding for housing 750 750
loans
Borrowings 187 678
Deferred consideration for 52 191
acquisitions
Retirement benefit obligations 82 236
Deferred tax liabilities 148 95
Provisions 596 680
Deferred income 301 482
Insurance related payables 564 1,560
Trade and other payables 1,600 1,477
Total liabilities 155,707 129,497
Total equity and liabilities 158,054 131,110
Total equity per above 2,347 1,613
Adjusted for policyholder investments 191 184
accounted for as treasury shares and
deducted from equity under IFRS
Adjusted total equity (a) 2,538 1,797
Number of share in issue, net of 442 442
treasury shares (millions)
Adjusted for policyholder investments 18 19
accounted for as treasury shares and
deducted from equity under IFRS
(millions)
Adjusted number of shares (millions) 460 461
(b)
Net asset value per share (cents) 531 365
Adjusted for policyholder investments 21 25
accounted for as treasury shares and
deducted from equity under IFRS
(cents)
Adjusted net asset value per share 552 390
(cents) (a)/(b)
ABRIDGED CASH FLOW STATEMENT
for the year ended 31 March 2007
Restated
2007 2006
Rm Rm
Cash generated from trading results of 946 811
continuing operations
Movement in working capital and insurance 89 137
balances
Cash generated from direct marketing entity 31 41
in run-off
Taxation and distributions paid (484) (438)
Cash inflow from operating activities 582 551
Subsidiaries and businesses aquired - (53)
Disposal of subsidiaries, businesses and 851 1
associates
Housing loans provided to clients secured by - (750)
retirement fund assets
Capital expenditure for the year (96) (71)
Other net movements 32 (22)
Cash outflow from investing activities 787 (895)
Treasury shares purchased, net of proceeds of (17) (48)
share issues
Policyholder investments accounted for as (6) (23)
treasury shares under IFRS
Net borrowings repaid (558) (81)
Securitisation funding raised for housing - 750
loans
Funding of premium finance receivables 53 (24)
Cash settlement of retirement benefit (7) (5)
obligations
Cash settlement of provisions (150) -
Distributions to minority shareholders (46) (50)
Cash inflow from financing activities (731) 519
Net cash inflows from continuing operations 638 175
Cash flows from discontinued operation up to (136) 140
effective date of disposal (mainly reduction
of insurance balances)
Cash balances of subsidiaries and businesses (1,415) -
sold
Foreign subsidiaries translation adjustment 494 (140)
Net movement in cash balances (419) 175
ABRIDGED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2007
Treasury
Share share
capital and Ordinary Minority
and share share- share-
share option Other holders` holders Total
premium reserve reserves equity interests equity
Rm Rm Rm Rm Rm Rm
At 1 April 1,270 (28) 753 1,995 102 2,097
2005
Share issues 1 1 - 1
Movement in 76 (91) 23 8 - 8
share option
reserve
Treasury (49) (49) - (49)
shares
purchased
Movement in (23) (23) - (23)
policyholder
investments
accounted
for as
treasury
shares under
IFRS
Foreign (115) (115) (6) (121)
currency
translation
and other
movements
Profit for 12 12 45 57
the year
Distribution (298) (298) (52) (350)
to
shareholders
Movement in - (7) (7)
minority
interests
At 31 March 1,049 (191) 673 1,531 82 1,613
2006
Share issues - - - -
Movement in 37 (42) 8 3 - 3
share option
reserve
Treasury (17) (17) - (17)
shares
purchased
Movement in (6) (6) - (6)
policyholder
investments
accounted
for as
treasury
shares under
IFRS
Release of (108) (108) - (108)
foreign
currency
translation
reserve on
disposal of
IRS
Foreign 485 485 18 503
currency
translation
and other
movements
Profit for 589 589 53 642
the year
Distribution (259) (259) (62) (321)
to
shareholders
Movement in - 38 38
minority
interests
At 31 March 827 (256) 1,647 2,218 129 2,347
2007
NOTES
BASIS OF PREPARATION
This abridged financial information has been prepared in accordance with, and
complies with, International Financial Reporting Standards ("IFRS") and the
South African Companies Act of 1973, as amended.
The accounting policies are consistent with those applied for the year ended 31
March 2006. Standards and interpretations effective subsequent to this date will
not have a material effect on the reported results.
It should be noted that the IRS business sold during the year has been
classified and accounted for as a discontinued operation in accordance with IFRS
5. As such, the reported profit up to the effective date of disposal, costs
resulting from the discontinuance of the IRS business and the capital profit
realised on the sale have been reported in a separate component of the income
statement. The cash flow effects of the IRS business up to the effective date
of disposal have also been separately reported in the cash flow statement.
Comparative figures have been restated accordingly.
It should further be noted that changes have been made to management accounting
entries affecting income recognition between divisional entities. Changes have
also been made to the allocation of corporate costs to divisional entities, in
particular to international entities, following the sale of IRS. Comparative
segmental results have been restated in order to ensure comparability of
segmental results to the previous year. These changes affect only allocations
between segments and do not affect the total trading result as previously
reported (except that the IRS trading result is now separately shown as a
discontinued operation).
Details of the restated segmental profit analysis for the interim periods ended
30 September 2005 and 2006 are published on the group`s investor relations
website.
31 March 31 March
2007 2006
2. Exchange rates
The income statements and balance sheets of
material foreign subsidiaries have been
translated to Rands as follows:
Weighted average R:GBP rate 13.5 11.3
Closing R:GBP rate 14.2 10.8
2007 2006
Rm Rm
3. Income from continuing operations
Fee and commission income 4,165 3,592
Operational interest income from insurance 41 18
broking operations
Interest and other income from financing 152 111
operations
Less: Directly related interest expense (62) (33)
Net premium and investment income from 523 622
insurance operations
Less: Net claims and transfers to (354) (470)
policyholders` funds
4,465 3,840
4. Exceptional gains and losses
Provision for client settlements in respect (20) (480)
of bulking and other historical business
practices
Legal and accounting fees incurred in respect (11) -
of the Deneys Reitz/Ernst & Young independent
review of business practices across the South
African group
Corporate advisory and legal fees incurred in (18) -
respect of the private equity bid.
(49) (480)
5. Impairment charges and other capital gains
and losses
Goodwill impairment charges (44) (14)
Profit on sale of associate investment in 14 -
Medscheme
Other capital items (3) (3)
(33) (17)
6. Net interest costs
Interest income 55 70
Dividend income from preference share 18 17
investments
Total interest and investment income 73 87
Finance costs - provision for client (29) -
settlements
Finance costs - bank borrowings and other (61) (89)
finance costs
(17) (2)
7. Effect of accounting for policyholder
investments as treasury shares under IFRS
Increase in value of shares held on behalf of (32) (69)
policyholders
Dividends received on shares held on behalf (11) (12)
of policyholders
Total reported loss (43) (81)
As previously advised to shareholders, the IFRS requirement to account for
Alexander Forbes shares held on behalf of policyholders as treasury shares
results in a mismatch in accounting for the asset and liability movement, which
does not reflect the economic substance of the transactions.
As shown above, this mismatch has resulted in the reporting of a R43 million
loss in the current year (2006: R81 million loss), whereas no actual economic
loss will ever be realised by the group.
Adjusted measures of headline earnings per share (referred to as core earnings
per share) and net asset value per share (referred to as adjusted net asset
value per share), which exclude the effects of accounting for policyholder
investments as treasury shares, have been presented in order to accurately
reflect the underlying economic substance of the transactions and provide
meaningful reporting to shareholders.
2007 2006
Rm Rm
8. Profit for the year from discontined
operation
The group sold the IRS business effective
9 November 2006. The historical financial
results of this business were as follows:
8.1 Net profit of IRS business up to
effective date of disposal
Income from operations 972 1,495
Operating expenses (950) (1,470)
Operating profit 22 25
Analysed as follows:
Trading results of operations 4 13
Capital gains and impairment charges - (2)
Exceptional gains and losses 18 14
Operating profit 22 25
Net interest costs (11) -
Share of net profit of associates 2 5
Profit before taxation 13 30
Taxation expense (6) (11)
Profit before minority interests 7 19
Minority interests (rounded to nil) - -
Net profit up to effective date of 7 19
disposal
8.2 Capital profit on sale and other
discontinuance effects
Employee settlements and other costs (38) -
resulting from the discontinuance of the
IRS business
Less: Taxation effects thereon 11 -
Potential de-grouping tax charge (48) -
Net discontinuance effects (75) -
Release of foreign currency translation 108 -
reserve on disposal of IRS
Capital profit on sale 51 -
84 -
9. Investments in associates
Carrying value in balance sheet 4 68
Directors` valuation of associates 9 99
10. Capital expenditure and commitments from
continuing operations
Depreciation and amortisation for the year 84 71
Capital expenditure for the year 96 71
Operating lease commitments
Due within one year 157 130
Thereafter 696 765
853 895
Capital expenditure and commitments will be funded from internal cash resources.
AUDITORS REPORT
The results for the year have been audited by PricewaterhouseCoopers Inc and
their unqualified audit report on the company and group financial statements for
the year ended 31 March 2007 is available upon request at the company`s
registered office.
DIRECTORS
P L Heinamann (Chairman), J V H Robins (Deputy chairman) (British), M P Moyo
(Group chief executive), J H Vickers (Group development director), D M Viljoen
(Group finance director), M G Ilsley (Outgoing Group finance director), T R T
Bohlmann, J J Durand, W E Lucas-Bull, M P Nicholls (British), M C Ramaphosa, G
J Roberts-Baxter (Alternate), A F van Biljon, P J J van der Walt.
COMPANY SECRETARY:
J E Salvado
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited.
Ground Floor, 70 Marshall Street, Johannesburg. PO Box 61051, Marshalltown,
2107.
INVESTOR RELATIONS
D Kotzen
Telephone +27 (0) 11 269-0024
E-mail: kotzend@aforbes.co.za
REGISTERED OFFICE
Alexander Forbes Place, 61 Katherine Street, Sandown
Telephone +27 (0) 11 269-0000
Fax +27 (0) 11 269-1111
E-mail: info@aforbes.co.za
Website: www.alexanderforbes.co.za
SPONSORS
JP Morgan Equities Limited.
1 Fricker Road, Illovo Boulevard, Johannesburg.
Date: 01/06/2007 15:03:01 Produced by the JSE SENS Department.
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
