| Fri 14 Dec 2007, 15:24 | | AFP - Alexander Forbes Preference Share Investments - Unaudited Interim Results |
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AFP
AFP
AFP - Alexander Forbes Preference Share Investments - Unaudited Interim Results
For The Period Ended 30 September 2007
Alexander Forbes Preference Share Investments Limited
(Formerly Micawber 515 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/031561/06)
Share code: AFP & ISIN number: ZAE000098067
ALEXANDER FORBES EQUITY HOLDINGS (PROPRIETARY) LIMITED -
UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Review of Activities
Alexander Forbes Equity Holdings (Proprietary) Limited ("AFEH") is the ultimate
holding company of the Alexander Forbes group of companies ("the group"). AFEH
acquired the entire issued share capital of Alexander Forbes Limited effective
26 July 2007 ("the effective date") following the implementation of a scheme of
arrangement in terms of Section 311 of the Companies Act No 61 of 1973, as
amended ("the scheme of arrangement"). Prior to the implementation of the
scheme of arrangement, Alexander Forbes Limited was listed on the JSE Limited.
The historical interim and annual financial statements of this company are
published on the group`s website, www.alexanderforbes.com.
Details of the scheme of arrangement are provided in the circular to
shareholders issued by Alexander Forbes Limited on 30 May 2007 and in the pre-
listing statement issued by Alexander Forbes Preference Share Investments
Limited on 10 July 2007.
AFEH changed its financial year end to 31 March to coincide with the financial
year end of the acquired Alexander Forbes group (namely Alexander Forbes Limited
and its subsidiaries). AFEH`s interim results are therefore presented for the
seven months ended 30 September 2007, but include only two months of trading
results covering the period from the effective date of acquisition of Alexander
Forbes Limited on 26 July 2007 up to the half year end. The full segmental
trading results of the acquired Alexander Forbes group for the six months ended
30 September 2007 is provided in note 5 to these interim results in order to
provide more comprehensive information concerning the recent trading performance
of the acquired group. This includes commentary on the trading performance for
the six months.
It should be noted that the group`s trading results are cyclical within each
financial year and that therefore the two-months of trading results included in
these interim results may not be representative of the annualised trading
performance of the group.
The implementation of the equity and debt funding structure at the time of
acquisition of Alexander Forbes Limited has exposed the group to financial risk
in relation to increases in variable interest rates and depreciation of the Rand
against foreign currencies. This risk has been mitigated by implementing
interest rate and currency hedges which have a medium term duration.
Distribution to shareholders
As detailed in the pre-listing statement issued by Alexander Forbes Preference
Share Investments Limited on 10 July 2007, AFEH does not intend to declare any
dividends for the foreseeable future.
Changes in directorate
The board of directors of AFEH at the date of implementation of the scheme of
arrangement, comprising Natalie Kolbe and Garth Jarvis, resigned on 3 September
2007 and were replaced by a full new board on that same date. The following
directors were appointed: Bruce Campbell, Andrew Claerhout, Thomas Espiard,
Peter Moyo (resigned on 9 November 2007), Gideon Nkadimeng, Cyril Ramaphosa,
Andre Roux, Peter Schmid, John van Wyk and Deon Viljoen. The following
alternate directors were appointed: Lori Hall (alternate to Andrew Claerhout),
Natalie Kolbe (alternate to John van Wyk), Kojo Mills (alternate to Gideon
Nkadimeng) and Richard Pender (alternate to Andre Roux).
Sello Moloko was appointed chairman of the board on 1 December 2007.
B Campbell DM Viljoen
Group chief executive Group finance director
14 December 2007
Abridged consolidated income statement
for the seven months ended 30 September 2007 (including two months
of consolidated trading results from the effective date)
30 Sept
2007
Notes Rm
Income from operations
858
Operating expenses
(728)
Operating profit
130
Interest and investment income
21
Finance costs
(130)
Profit before taxation
21
Taxation expense
(15)
Profit for the period
6
Attributable to:
Ordinary shareholders
-
Minority interests
6
6
Headline earnings per ordinary share (cents) 2
2
Basic earnings per ordinary share (cents) 2
-
Number of ordinary shares (millions)
Issued 377
Weighted average (from effective date) 377
Abridged consolidated balance sheet
at 30 September 2007
30 Sept 28 Feb
2007 2007
Notes Rm Rm *
ASSETS
Financial assets held under multi-
manager investment contracts 150,616 -
Financial assets of cell captive
insurance facilities 5,962 -
Housing loans secured by retirement
fund assets 750 -
Property and equipment 197 -
Purchased and developed computer
software 30 -
Goodwill and other intangible assets 7,869 -
Investments in associates 3 10 -
Deferred tax assets 137 -
Financial assets 284 -
Insurance related receivables 323 -
Trade and other receivables 1,204 -
Cash and cash equivalents 1,929 -
Total assets 169,311 -
EQUITY AND LIABILITIES
Ordinary shareholders` funds 3,245 -
Minority shareholders` interests 133 -
Total equity 3,378 -
Financial liabilities held under multi-
manager investment contracts 150,572 -
Liabilities of cell captive insurance
facilities 5,962 -
Securitisation funding for housing
loans 750 -
Borrowings 4,932 -
Deferred consideration for acquisitions 11 -
Retirement benefit obligations 84 -
Deferred tax liabilities 438 -
Provisions 501 -
Deferred income 303 -
Insurance related payables 733 -
Trade and other payables 1,647 -
Total liabilities 165,933 -
Total equity and liabilities 169,311 -
Total equity per above 3,378 -
Number of ordinary shares in issue
(millions) 377 -
Net asset value per ordinary share
(cents) 896 -
*The balance sheet at 28 February 2007 reflects assets and equity
with a value of R100 each.
Abridged consolidated cash flow statement
for the seven months ended 30 September 2007 (including two months
of consolidated trading results from the effective date)
30 Sept
2007
Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 178
Net interest costs (109)
Movement in working capital 241
Movement in insurance balances (323)
Taxation paid (129)
Net cash outflow from operating activities (142)
CASH FLOWS FROM INVESTING ACTIVITIES
Subsidiaries and businesses acquired (8,453)
Proceeds on disposal of property and equipment 3
Capital expenditure for the period (14)
Net cash outflow from investing activities (8,464)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of share issues 3,323
Borrowings received 4,931
Payments to minority shareholders (2)
Net cash inflow from financing activities 8,252
Net movement in cash and cash equivalents (354)
Cash balances of subsidiaries and businesses
acquired 2,313
Foreign subsidiaries translation adjustment (30)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,929
Abridged consolidated statement of changes in equity
for the seven months ended 30 September 2007 (including two months of
consolidated trading results from the effective date)
Share Non- Retained Ordinary Minority Total
capital distri- income share- share- equity
and butable holders` holders`
premium reserves equity interests
Rm Rm Rm Rm Rm Rm
At 28
February - - - - - -
2007*
Shares issued
on the 3,323 - - 3,323 - 3,323
effective
date, 26 July
2007
Minority
shareholders` - - - - 131 131
interests of
acquired
Alexander
Forbes group
Foreign
currency - (78) - (78) (2) (80)
translation
and other
movements
Profit for
the period - - - - 6 6
Movement in
minority - - - - (2) (2)
interests
At 30
September 3,323 (78) - 3,245 133 3,378
2007
*The issued share capital of the company at 28 February 2007 was
R100.
NOTES
Basis of preparation
The interim results have been prepared in accordance with, and comply with,
International Financial Reporting Standards ("IFRS"), including IAS 34 Interim
Financial Reporting, and the South African Companies Act No 61 of 1973, as
amended.
The accounting policies applied in the preparation of these interim results are
consistent with those detailed in the circular to shareholders issued by
Alexander Forbes Limited on 30 May 2007. There have been no new standards or
interpretations, which have had a material effect on the results.
In accordance with IFRS 3 Business Combinations, the excess of the purchase
consideration over the tangible net asset value of the acquired Alexander Forbes
group has been split between goodwill and other intangible assets. The
allocation between goodwill and other intangible assets is the same provisional
percentage split applied in the pre-listing statement issued by Alexander Forbes
Preference Share Investments Limited on 10 July 2007, being 80% allocated to
goodwill and the remaining 20% allocated to other intangible assets. It should
be noted that the other intangible assets are to be valued as part of a
comprehensive purchase price allocation exercise to be completed before the
financial year end and that the final fair values of the other intangible assets
could be materially different to the amount resulting from the provisional
percentage split (with a corresponding adjustment to the value of goodwill).
Any material adjustment to the fair value of other intangible assets will result
in a change to the related amortisation charge reported in the income statement.
This will have no affect on cash flows as previously reported.
The AFEH group commenced trading following the acquisition of Alexander Forbes
Limited on 26 July 2007. Thus, there are no income statement and cash flow
comparative figures for the prior reporting period.
30 Sept
2007
Rm
2. Reconciliation of headline earnings
Earnings attributable to ordinary -
shareholders (IAS 33 earnings)
Plus remeasurement of discontinued 7
operation on disposal (IFRS 5)
Tax effect of above adjustment -
Headline earnings 7
30 Sept 28 Feb
2007 2007
Rm Rm
3. Investments in associates
Carrying value in balance sheet 10 -
Directors` valuation of associates 21 -
4. Capital expenditure and commitments
Amortisation of other intangible assets for 20
the period
Depreciation of property and equipment and 14
amortisation of computer software for the
period
Capital expenditure for the period 14
Operating lease commitments
Due within one year 175
Thereafter 688
863
Historical segmental trading results of the acquired Alexander Forbes group
The segmental trading results of the acquired Alexander Forbes group for the six
months ended 30 September 2007, including comparative figures, are shown in the
table below. It should be noted that these include trading results for the
period prior to being acquired by AFEH.
Segmental analysis of Alexander Forbes Limited
for the six months ended 30 September 2007
Income from operations Trading results of
operations
30 Sept 30 Sept 30 Sept 30 Sept
2007 Var. 2006 2007 Var. 2006
Africa (Rm)
SA Risk & 11% 138 24% 111
Insurance 480 432
Services
SA Financial 17% 165 13% 146
Services 665 569
Investment 16% 123 27% 97
Solutions 400 344
Afrinet (Africa 10% 20 18% 17
ex-South 106 96
Africa)
Total Africa 15% 446 20% 371
(Rm) 1,651 1,441
International(GBPm
)
Financial 5% 2.2 -44% 3.9
Services 45.3 43.2
Investment 25% -20%
Solutions 4.0 3.2 (0.6) (0.5)
Total 6% 1.6 -53% 3.4
International 49.3 46.4
(GBPm)
Total 18% 22 -44% 39
International 705 599
(Rm)
Total Group (Rm) 2,356 15% 468 14% 410
2,040
The prior period comparatives ended 30 September 2006 have been
restated for the removal of discontinued operations and the change
in classification of a subsidiary to an associate. A reconciliation
of the restated income from operations and trading results of
operations is provided below.
Income Trading
from results of
operations operations
Rm Rm
Total previously reported 2,914
409
Less operations not part of continuing
operations and accounted for as
discontinued operations in accordance
with IFRS 5
International Risk Services (843)
(11)
DC Link administration business (17)
15
Less Reclassification of Kenyan Risk (14)
Services subsidiary to an associate (3)
Restated total for the group
2,040 410
It should be noted that comparative segmental results have been restated in
order to ensure comparability to the current period. These changes result from
intragroup restructuring; thus, the changes affect only allocations between
segments and do not affect the total trading results as previously reported.
Operational review of Alexander Forbes Limited
The group achieved good growth in profits on the back of strong organic revenue
growth for the six months ended 30 September 2007, with trading results from
operations increasing by 14% to R468 million.
*SA Risk & Insurance Services
Income from operations increased by 11% to R480 million driven by strong growth
in Risk Services (the core corporate broking division), which benefited from a
generally positive business environment and record new business gains.
Alexander Forbes Insurance (personal lines car and household insurance) recorded
continued good growth on the back of a significant increase in new business and
continued margin improvement. Guardrisk`s cell captive insurance operations
once again reported strong growth and significant gains were achieved in the
affinity partnership segment of the market.
Continuing disciplined expense management contributed to the 24% growth in
trading results from operations, which totalled R138 million.
*SA Financial Services
Income from operations increased by 17% to R665 million. The core Retirement
Funds division (actuarial consulting and retirement fund administration
services) delivered a pleasing result and made significant progress in dealing
with the historical disclosure issues. More than 80% of current retirement fund
administration clients have now accepted settlement offers in respect of
undisclosed income received from bulking of current bank accounts. Alexander
Forbes Health and Alexander Forbes Life contributed to the good growth in
profits.
The restructuring and vertical integration of the retail investment offering to
individual clients has been successfully implemented and is expected to deliver
further growth in this strategically important sector of the market.
Overall, trading results from operations increased by 13% to R165 million.
*Africa Investment Solutions
Income from operations increased by 16% to R400 million on the back of continued
favorable equity market conditions. Assets under management in South Africa
increased to R139 billion at 30 September 2007. Including the international
operations, global assets under management exceeded R155 billion at 30 September
2007.
Trading results from operations increased by 27% to R123 million, reflecting the
benefits of operational gearing inherent to the business.
*Afrinet (Africa ex-South Africa)
The increased focus on expansion into African territories outside of South
Africa continues to identify exciting opportunities. Our presence in Nigeria is
now well established and there are a number of opportunities arising from
regulatory and economic change in this territory. The group now has operations
in 12 countries in southern, central, eastern and western Africa.
Income from operations increased by 10% to R106 million and trading results grew
by 18% to R20 million.
*International Financial Services
Income from operations increased by 5% to GBP45.3 million. Whilst the business
delivered reasonable revenue growth, the trading profit was down due to the
continued investment in additional sales resources and the effects of
diseconomies of scale post the disposal of the International Risk Services
business. The combined effect of these factors resulted in a reduction in
trading results to a profit of GBP2.2 million for the six months.
The UK based DC Link administration business, which as previously advised was
subject to a strategic review, was sold in the period under review. The group
recorded a GBP0.5 million loss on disposal.
*International Investment Solutions
Income from operations increased by 25% to GBP4.0 million, with assets under
management growing to GBP1,166 million at 30 September 2007. New business gains
remain the key driver to successfully growing assets under management to
profitable critical mass.
The trading loss recorded for the six months amounted to GBP0.6 million,
reflecting the continued investment in growing this operation.
Directors:
Non-executive directors:
M S Moloko (Chairman), A J Claerhout, T Espiard, L Hall (Alternate),
N C Kolbe (Alternate), K A Mills (Alternate), P G Nkadimeng,
R H Pender (Alternate), M C Ramaphosa, A Roux, P Schmid, J A van Wyk
Executive directors:
B Campbell (Group chief executive), D M Viljoen (Group finance director)
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
Registered office:
Alexander Forbes Place, 61 Katherine Street, Sandown, 2196
Sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Alexander Forbes Equity Holdings (Proprietary) Limited
Registration number: 2006/025226/07
Date: 14/12/2007 15:24:05 Produced by the JSE SENS Department.
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