| Mon 19 May 2008, 12:07 | | CLI - Clientele Limited - Abridged pre-listing sta |
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CLI - Clientele Limited - Abridged pre-listing statement of Clientele
Clientele Limited
(Formerly, Newshelf 901 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2007/023806/06)
Share code: CLI
ISIN code: ZAE000117438
("Clientele" or "the Company" or "the group")
ABRIDGED PRE-LISTING STATEMENT OF CLIENTELE
The purpose of this abridged Pre-listing Statement is to provide relevant
information to shareholders of Clientele Life Assurance Company Limited
("Clientele Life") in compliance with the Listings Requirements of the JSE
Limited ("JSE") in connection with the listing of the shares of Clientele on
the JSE.
This abridged Pre-listing Statement is not an invitation to the public to
subscribe for shares nor an announcement directly soliciting subscription for
or inviting purchases of Clientele shares by the public.
The document which includes the full Pre-listing Statement is available only
in English and copies thereof may be obtained on request at the relevant
addresses indicated in paragraph 8 below.
1. INTRODUCTION AND PURPOSE OF THIS ABRIDGED PRE-LISTING STATEMENT
Further to the initial announcement of 17 March 2008 regarding the
restructuring of Clientele Life ("the restructuring") and subsequent updating
announcements, the scheme of arrangement in terms of section 311 of the
Companies Act, 1973 (Act 61 of 1973), as amended, proposed by Clientele
between Clientele Life and its shareholders ("the scheme"), has now been
implemented. Accordingly, Clientele is the new holding company of Clientele
Life.
The purpose of this abridged Pre-listing Statement is to provide relevant
information to shareholders of Clientele Life and to the general public in
compliance with the Listings Requirements of the JSE in connection with the
listing of the shares of Clientele on the JSE under the Code "CLI" and ISIN:
ZAE000117438 with effect from the commencement of trading on the JSE on
Monday, 19 May 2008.
This abridged Pre-listing Statement is not an invitation to the public to
subscribe for shares nor an announcement directly soliciting subscription for
or inviting purchases of Clientele shares by the public.
The document which includes the full Pre-listing Statement of Clientele is
available only in English and copies thereof may be obtained on request at the
relevant addresses indicated in paragraph 8 below.
2. IMPLICATIONS OF THE RESTRUCTURING
Clientele Life, presently the major part of the Clientele group, is a company
that conducts long-term insurance business. Being a long-term insurance
business and, as such, operating within clearly defined and regulated
parameters, it does not have sufficient flexibility to pursue opportunities,
other than those that fall strictly within the field of long-term insurance,
particularly in the financial services arena. The restructuring now affords
the Clientele group with the aforementioned opportunities and the ability to
lever off two highly regarded brands namely, "Clientele" and "IFA" and thus
the ability to offer alternative but complementary products. Furthermore,
combining the efficiencies and distribution know-how to new businesses should
add value to the group and its stakeholders.
In summary, the restructuring:
- provides the Clientele group with flexibility to pursue opportunities that
are not strictly related to long-term insurance and thus should not or cannot
be pursued in a life insurance company;
- enhances the ability to facilitate the establishment of a short-term
insurance business on a selective basis, an objective that the board of
Clientele wishes to pursue. Due to regulatory and other constraints, a
subsidiary of Clientele Life cannot hold a licence to conduct short-term
insurance business;
- mitigates the limited ability that long-term insurance companies have to
secure debt funding. Additionally, raising capital within Clientele Life has
an impact on capital adequacy requirements and thus the ability of that
company to pay dividends. The restructuring will assist in alleviating these
constraints should the new initiatives require additional capital in due
course;
- reduces the constraint factor that a long-term insurance company such as
Clientele Life has in regard to certain asset spreading requirements that
limit its ability to fully reflect the value of its subsidiaries;
- mitigates the potential risks that may accompany new business initiatives
outside the long-term insurance sector which can now be ring-fenced so as not
to affect Clientele Life and its policyholders.
3. HISTORY AND BUSINESS
Clientele was incorporated in Pretoria, South Africa under the name Newshelf
901 (Proprietary) Limited on 23 August 2007 with registration number
2007/023806/07. With effect from 25 January 2008, the name of the company
changed to Clientele Limited and the company converted to a public limited
liability company. Clientele is the holding company of Clientele Life and the
Clientele group of companies.
Clientele Life, presently the major part of the Clientele group, is a company
that conducts long-term insurance business. It has developed a comprehensive
understanding of the wide ranging needs for financial protection of lower to
middle income earning South Africans. Simplicity, efficiency and convenience
extend to the Clientele Life range of products and services. These include the
Lasting Dignity Life Cash Back Plan, which is Clientele Life`s flagship
product offering affordable, easy-to-access cover to provide for final
expenses on the death of a policyholder or family member and the Saver and
Protector Plan, designed to provide efficient long-term savings and
protection.
Clientele Life has grown to become a relatively low cost, high-tech life
assurance company distributing its products via the medium of television and
print advertising, referral marketing and other direct selling methods,
thereby eliminating most intermediary commissions and costly infrastructure.
Its market includes a wide spectrum of South Africans seeking the convenience
and quick response to a broad range of easy to understand cost-effective
financial protection products.
The user-friendly client-centred products and service of Clientele Life are
well-known to policyholders, many of whom feel more comfortable dealing
directly with Clientele Life as a result of application procedures which are
both brief and courteous due to well-trained and closely monitored systems and
procedures.
Clientele Life is a direct marketer and direct seller of long-term insurance
products. Its products are distributed through four distribution channels, one
of which is a network of Independent Field Advertisers ("IFAs") who refer
people to and invite people to attend IFA presentations presented by duly
registered presenters. By referring people to presentations, IFAs become
eligible, based on certain criteria, to earn referral fees from policies taken
out by such persons. The products marketed under the IFA brand include the IFA
Life Cash Back Plan and the IFA Saver and Protector Plan.
4. RECENT RESULTS AND PROSPECTS FOR THE GROUP
The group`s main operating subsidiary, Clientele Life, presently accounts for
the entire profit of the group. Accordingly, in the shorter to medium term and
until such time as the group`s initiatives in complementary financial services
businesses come to fruition and become profitable, the prospects of the group
will be driven by Clientele Life.
The most recent reported results of Clientele Life for the six months of
Clientele Life to 31 December 2007 was influenced by the introduction of the
National Credit Act ("NCA"), changes in banking system collection mechanisms
and a weakening of investment markets in November and December 2007. These
changes affected net production, persistency and investment returns for the
six-month period.
This had an effect on Clientele Life`s results which nevertheless reflected a
healthy increase in headline earnings. Net recurring premium income for the
period of R379 million (2006: R285 million) increased by 33%. The group earned
R61 million (2006: R38 million) of other income which represented an increase
of 58% and was comprised mainly of recurring income, prior to the allocation
of related expenses, from its IFA distribution channel. Fair value gains on
financial assets for the six months were significantly lower than that of the
corresponding period in 2006 and at R35 million was R45 million short of the
comparative gains of R80 million. Within these fair value gains, R9 million
was attributable to shareholders which was R19 million lower than previous
year. This was as a result of the weaker financial markets in November and
December 2006. Policyholders` benefits of R80 million (2006: R53 million)
increased by 52%. Administration expenses per policy continued to be well-
controlled and the relatively low average annual administration cost per
policy was in line with actuarial assumptions. Together, acquisition costs and
administration expenses for the period increased by 29% in comparison to the
33% increase in net recurring premium income. The transfer to policyholder
liabilities under insurance contracts decreased significantly for the period
mainly due to policyholder investment performance which had been affected by
lower market returns. The effective tax rate for the period increased in
comparison to the comparative period due to the change in mix of income with
significantly less investment income this period. Headline earnings per share
increased by 27% from 156,89 cents to 199,45 cents for the period under
review. The results translated into an annualised after-tax return on average
shareholders` interests of 85%.
Value of New Business for the six months amounted to R159 million (2006: R169
million) and had been affected by the introduction of the NCA and changes in
banking collection mechanisms. These changes had the most impact in the first
quarter of the financial year and good progress has been made in responding to
these changes. Embedded Value increased from R876 million after adjusting for
dividends and related Secondary Taxation of Companies at 30 June 2007 to
R1 billion at 31 December 2007. This translated into an annualised return on
Embedded Value of 40% which, although lower than the same period last year,
was still pleasing off a significantly higher base.
Recent initiatives
Whilst at this stage not financially material to the group, the following
represent some potentially exciting new ventures:
Clientele Legal
On 1 November 2007, Clientele Life through its newly formed wholly-owned
subsidiary, Clientele Short Term (Proprietary) Limited, launched a personal
legal expense insurance product by means of a cell captive arrangement. The
same distribution methods and know-how that are currently utilised in
Clientele Life and IFA division will be adopted to market the product. The
operations are conducted in a division of Clientele Short Term (Proprietary)
Limited, named Clientele Legal.
Clientele Loans Direct
On 19 December 2007, an agreement was signed with Direct Axis (SA)
Proprietrary Limited to establish a direct personal loans business for the
benefit of Clientele Life customers. Clientele will own 70% of Clientele Loans
Direct and it is expected that the business will be launched during July 2008.
5. FINANCIAL INFORMATION
Being recently incorporated, Clientele has no trading history. Historical
financial information of Clientele and the report thereon of
PricewaterhouseCoopers Inc, the auditors and reporting accountants, are
contained, respectively, in Appendix 2 and Appendix 3 to the full Pre-listing
Statement of Clientele referred to in paragraph 8 below.
As Clientele Life is the main operating subsidiary of the Clientele group
accounting for the major part of group profit, the following unaudited pro
forma financial effects, which have been prepared by and are the
responsibility of the directors of Clientele, are presented for illustrative
purposes only to show the effects of the restructuring and, because of their
nature, may not give a fair reflection of the Company`s financial position or
the effect of future earnings.
The report of PricewaterhouseCoopers Inc, the reporting accountants, on the
unaudited pro forma financial effects is provided in Appendix 5 to the full
Pre-listing Statement of Clientele referred to in paragraph 8 below.
Before After
(before (after
restructuring restructuring
and de facto and de facto Percentage
sub division)(5) sub division)(5) change
Market value per share (cents) 7 500(2) 750(3) N/A
Embedded value per share (cents) 3 262,20(1) 324,67(4) (0,5)
Headline earnings per share (cents) 199,45(1) 18,40(4) (7,7)
Earnings per share (cents) 199,45(1) 18,40(4) (7,7)
Net asset value per share (cents) 430,81(1) 41,54(4) (3,6)
Net tangible asset value per
share (cents) 430,81(1) 41,54(4) (3,6)
Notes:
1. Extracted from the published summarised unaudited group results of
Clientele Life for the six months ended 31 December 2007.
2. The price of the shares of Clientele Life on the JSE at the close of
trading on the JSE on the last practicable date prior to the finalisation of
this abridged Pre-listing Statement, namely, 14 May 2008.
3. Taking account of the de facto sub division referred to in note 5 below and
the price of Clientele Life shares at the close of trading on the JSE on the
last practicable date prior to the finalisation of this abridged Pre-listing
Statement, namely, 14 May 2008, the illustrative share price (all other things
being equal) at which the shares of Clientele could be expected to commence
trading on the JSE assuming that the listing of the shares of Clientele was
also to take place on 14 May 2008.
4. Following the illustrative de facto sub division of Clientele Life shares
referred to in note 5 below and expensing of estimated restructuring costs.
5. In terms of the restructuring, shareholders of Clientele Life have
effectively `exchanged` their shares in Clientele Life for new shares in
Clientele in the ratio of ten new Clientele shares for every one Clientele
Life share previously held. Thus, their shares in Clientele Life will have
been subjected to a de facto sub division. Clientele Life shareholders thus
retain proportionately the same percentage interest in Clientele as they did
in Clientele Life.
6. DIRECTORS
The names, ages, nationalities, business addresses and capacities of the
directors of Clientele are as follows:
Name, age and
nationality Business
address Capacity
Gavin Quentin Routledge Heroncrest Chairman of the board and independent
(52) South African Winery Road non-executive member of group audit
Firgrove, and investment committees and
7130 chairman of the group remuneration
committee
Gavin John Soll Clientele Executive, member of risk and
(45) South African House compliance, investment, product and
Morningview actuarial committees
Office Park
Corner Rivonia
and Alon Roads
Morningside, 2196
Patrick Jocelyn Anthony 14 Fife Avenue Non-executive, independent, chairman
Cunningham Clynton of group audit committee, member of
(71) South African Sandton, 2196 group remuneration and risk and
compliance committees
Adrian Dominic `T hooft Hollard Non-executive
Enthoven Office Park
(38) South African 22 Oxford Road
Parktown Ridge
Parktown, 2193
Brenda-Lee Frodsham Clientele House Executive, member of the group
(35) South African Morningview actuarial and product committees
Office Park
Corner Rivonia
and Alon Roads
Morningside, 2196
Iain Bruce Hume Clientele House Executive, chairman of the investment
(41) South African Morningview committee, member of group actuarial
Office Park and risk compliance committees
Corner Rivonia
and Alon Roads
Morningside, 2196
Basil William Reekie Clientele House Executive, chairman of the group
(35) British Morningview product and actuarial committees,
Office Park member of risk and compliance
Corner Rivonia and investment committees
and Alon Roads
Morningside, 2196
Further details pertaining to the directors and senior management of
Clientele, are set out in the full Pre-listing Statement which is available
as detailed in paragraph 8 below.
7. SHARE CAPITAL
The authorised share capital of Clientele is R15 million, comprising
750 000 000 ordinary shares of a nominal value of 2 cents each.
Pursuant to the restructuring, the JSE has granted a listing under the Code
"CLI" and the ISIN: ZAE000117438 by way of an introduction of 323 500 000
ordinary shares of a nominal value of 2 cents each in Clientele in the "Life
Insurance" sector of the JSE lists under the abbreviated name "Clientele",
with effect from the commencement of trading on the JSE on Monday,
19 May 2008.
Clientele does not have any share premium on its books and there are
presently no treasury shares.
The shares of Clientele will only be traded on the JSE as dematerialised
shares.
8. Availability of full Pre-listing Statement
The document which includes the full Pre-listing Statement is available
only in English and copies thereof may be obtained at the respective
addresses of the following entities during normal business hours on business
days from:
- the registered office of Clientele
Clientele House
Morningview Office Park
Corner Rivonia and Alon Roads
Morningside, 2196;
- PricewaterhouseCoopers Corporate Finance (Pty) Limited
3rd Floor, East Wing
2 Eglin Road
Sunninghill, 2157; and
- Computershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001.
Johannesburg
15 May 2008
Corporate adviser and sponsor
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
(Registration number 1970/003711/07)
Attorneys
Edward Nathan Sonnenbergs Inc.
Registration number 2006/018200/21
Auditors and reporting accountants
PricewaterhouseCoopers
Chartered Accountants (SA)
Registered Accountants and Auditors
(Registration number 1998/012055/21)
Date: 15/05/2008 15:25:10 Produced by the JSE SENS Department.
