| Mon 2 Jun 2008, 7:06 | | AFP - Alexander Forbes Equity Holdings (Proprietary) Limited - Reviewed results |
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AFP
AFP
AFP - Alexander Forbes Equity Holdings (Proprietary) Limited - Reviewed results
for the period ended 31 March 2008
ALEXANDER FORBES EQUITY HOLDINGS (PROPRIETARY) LIMITED
(Formerly Micawber 515 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/031561/06)
Share code: AFP & ISIN number: ZAE000098067
REVIEWED RESULTS FOR THE PERIOD ENDED 31 MARCH 2008
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 financial information of this company is published on the group`s
website, www.alexanderforbes.com.
Details of the scheme of arrangement were 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 results are therefore presented for the thirteen
months ended 31 March 2008, but include only eight months of trading results
covering the period from the effective date of acquisition of Alexander Forbes
Limited on 26 July 2007 up to the financial year end. The full segmental trading
results of the acquired Alexander Forbes group for the year ended 31 March 2008,
as well as commentary thereon, is provided in note 9 to these results in order
to provide more comprehensive information concerning the recent trading
performance of the acquired 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 are of a medium term duration.
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
Further to the changes in directorate advised in the interim results
announcement, the board is pleased to announce the appointment of Dr Len Konar
as an independent non-executive director with effect from 1 February 2008. Mr
Richard Pender resigned and was replaced by Mr Anthonie De Beer as Mr Andre
Roux`s alternate director with effect from 29 February 2008.
S Moloko B Campbell
Chairman Group chief executive
30 May 2008
ABRIDGED CONSOLIDATED INCOME STATEMENT
for the thirteen months ended 31 March 2008 (including eight months of
consolidated trading results for the acquired Alexander Forbes group)
31 March
2008
Notes Rm
Income from continuing operations 3 3,465
Operating expenses and other costs detailed below (2,959)
Operating profit 506
Analysed as follows:
Trading result from continuing operations 719
Consolidation of group cell captive insurance (41)
arrangement
Operational profits available to service net 678
finance costs
Non-cash amortisation of intangible assets (124)
arising from business combinations
One-off costs resulting from acquisition of (87)
Alexander Forbes group
Capital gains net of impairment charges 39
Operating profit as defined under IFRS 506
Net finance costs 5 (515)
Share of associates profits 3
Loss before taxation (6)
Taxation (109)
Loss from continuing operations (115)
Loss from discontinued operations (16)
Attributable loss for the period (131)
Attributable to:
Ordinary shareholders (165)
Minority interests 34
(131)
Headline earnings per ordinary share (cents) 6 (50)
Basic earnings per ordinary share (cents) (44)
Number of ordinary shares (millions)
Issued 377
Weighted average (from effective date) 377
ABRIDGED CONSOLIDATED BALANCE SHEET
at 31 March 2008
31 March 28 Feb
2008 2007
Notes Rm Rm *
ASSETS
Financial assets held under multi- 143,501 -
manager investment contracts
Financial assets of cell captive 6,795 -
insurance facilities
Housing loans secured by 750 -
retirement fund assets
Property and equipment 215 -
Purchased and developed computer 259 -
software
Goodwill assets 5,420 -
Other intangible assets 2,645 -
Investments in associates 7 13 -
Deferred tax assets 124 -
Financial assets 356 -
Insurance related receivables 324 -
Trade and other receivables 1,964 -
Cash and cash equivalents 3,322 -
Total assets 165,688 -
EQUITY AND LIABILITIES
Shareholders` funds 3,787 -
Minority shareholders` interests 252 -
Total equity 4,039 -
Financial liabilities held under 143,473 -
multi-manager investment
contracts
Liabilities of cell captive 6,795 -
insurance facilities
Securitisation funding for 750 -
housing loans
Borrowings 5,142 -
Deferred consideration for 6 -
acquisitions
Retirement benefit obligations 85 -
Deferred tax liabilities 930 -
Provisions 789 -
Deferred income 267 -
Insurance related payables 2,043 -
Trade and other payables 1,369 -
Total liabilities 161,649 -
Total equity and liabilities 165,688 -
Total equity per above 4,039 -
Number of ordinary share in issue 377 -
(millions)
Net asset value per ordinary 1,071 -
share (cents)
* The balance sheet at 28 February 2007 reflects assets and equity with a value
of R100 each.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
for the thirteen months ended 31 March 2008 (including eight months of
consolidated trading results for the acquired Alexander Forbes group)
31 March
2008
Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 727
Net finance costs requiring servicing (425)
Movement in working capital (3)
Movement in insurance balances 962
Taxation paid (238)
Net cash inflow from operating activities 1,023
CASH FLOWS FROM INVESTING ACTIVITIES
Subsidiaries and businesses acquired net of disposals (8,305)
Investment in financial assets (70)
Proceeds on disposal of property and equipment 1
Capital expenditure for the period (60)
Net cash outflow from investing activities (8,434)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of share issues 3,261
Borrowings received 5,119
Cash settlement of cash management and retirement (91)
benefit commitments
Payments to minority shareholders (8)
Net cash inflow from financing activities 8,281
Net cash outflow from discontinued operations (67)
Net movement in cash and cash equivalents 803
Cash balances of subsidiaries and businesses acquired 2,467
Foreign subsidiaries translation adjustment 52
CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,322
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the thirteen months ended 31 March 2008 (including eight months of
consolidated trading results for the acquired Alexander Forbes group)
Share Non- Accumulated
capital and distributable loss
premium reserves
Rm Rm Rm
At 28 February 2007 * - - -
Shares issued on 26 July 3,323 - -
2007
Equity raising fees (62) - -
deducted from share
premium
Minority shareholders - - -
interests of the acquired
Alexander Forbes group
Cash flow hedge - 652 -
implemented during the
period
Foreign currency - 39 -
translation and other
movements
Loss for the period - - (165)
Other movements in - - -
minority interests
At 31 March 2008 3,261 691 (165)
Ordinary Minority Total
share- share- equity
holders` holders`
equity interests
Rm Rm Rm
At 28 February 2007 * - - -
Shares issued on 26 July 3,323 - 3,323
2007
Equity raising fees (62) - (62)
deducted from share
premium
Minority shareholders - 210 210
interests of the acquired
Alexander Forbes group
Cash flow hedge 652 - 652
implemented during the
period
Foreign currency 39 9 48
translation and other
movements
Loss for the period (165) 34 (131)
Other movements in - (1) (1)
minority interests
At 31 March 2008 3,787 252 4,039
* The issued share capital of the company at 28 February 2007 was R100.
NOTES
1. 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 No 61 of 1973, as amended.
The accounting policies applied in the preparation of these 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.
The AFEH group did not trade prior to 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.
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 is allocated among goodwill, computer software and other intangible
assets. A comprehensive purchase price allocation exercise is in the process of
being completed. The indicative result of this exercise has been accounted for
in these results and differs to the provisional percentage split applied in the
group`s interim results published on 14 December 2007. The entire exercise is
on track to be completed within the required twelve months of date of
acquisition. It should be noted that any accounting adjustments made on
completion of the exercise will have no effect on cash flows as previously
reported.
31 March
2008
Rm
2. Exchange rates
The income statements and balance sheets of
significant foreign subsidiaries have been translated
to Rands as follows:
Weighted average R :GBP rate 15.1
Closing R :GBP rate 16.0
3. Income from continuing operations
Fee and commission income 3,131
Operational interest income 29
Interest and other finance income from finance 120
operations
less: directly related interest expense (55)
Net premium and investment income from insurance 644
operations
less: net claims and transfers to policyholder funds (404)
Total income from continuing operations 3,465
5. Net finance costs
Interest income 52
Finance costs requiring servicing (477)
Net finance costs requiring servicing (425)
Accrued interest on Pay-in-Kind note (90)
Total net finance costs (515)
6. Calculation of headline earnings per share
Loss attributable to ordinary shareholders (IAS 33 (165)
earnings)
Adjusting items
- Capital gains net of impairment charges (39)
- Discontinued operation on disposal (IFRS 5) 21
- Tax effect on above adjustment (5)
Headline attributable loss for the period (188)
Weighted average number of shares (from effective 377
date)
Headline earnings per share (cents) (50)
7. Investments in associates
Carrying value in balance sheet 13
Directors` valuation of associates 21
8. Capital expenditure and commitments
Depreciation of property and equipment and 59
amortisation of computer software for the period
Capital expenditure for the period 60
Operating lease commitments
Due within one year 132
Thereafter 492
624
Capital expenditure and commitments will be funded from internal cash
resources.
9. Historical segmental trading results of the acquired Alexander
Forbes group
The segmental trading results of the acquired Alexander Forbes group
for the year ended 31 March 2008, 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 RESULTS OF ALEXANDER FORBES LIMITED
for the year ended 31 March 2008
Income from operations* Trading results of
operations*
31 March 31 31 March 31
March March
2008 Var. 2007 2008 Var. 2007
% %
Africa (Rm)
SA Risk & 989 11% 888 257 25% 206
Insurance
Services
SA Financial 1,352 12% 1,205 313 14% 274
Services
Investment 809 10% 735 252 5% 241
Solutions
Afrinet (Africa 226 (5%) 237 48 30% 37
excl-South
Africa)
Total Africa 3,376 10% 3,065 870 15% 758
(Rm)
International
(GBPm)
Financial 101.1 8% 93.4 10.2 (8%) 11.1
Services
Investment 8.4 18% 7.1 (0.5) 38% (0.8)
Solutions
Total 109.5 9% 100.5 9.7 (6%) 10.3
International
(GBPm)
Total 1,575 16% 1,355 144 3% 140
International
(Rm)
Total Group 4,951 12% 4,420 1,014 13% 898
(Rm)
*The above segmental results reflect 12 months of trading of the
Alexander Forbes Limited group
COMMENTARY ON SEGMENTAL RESULTS
The Alexander Forbes Limited group achieved strong organic growth as evidenced
by the 12% growth in income from operations, which totalled
R4 951 million for the year. Trading results of operations grew by 13% to R1
014 million for the year, exceeding the R1 billion mark for the first time.
A brief commentary on the operating results of each of the main businesses is
detailed below.
- SA Risk & Insurance Services
Income from operations increased by 11% to R989 million for the year driven by
strong new business gains in Risk Services (the core corporate broking
division). Benefits were also derived from higher interest rates. Alexander
Forbes Insurance, the personal lines insurance business recorded continued good
growth, having successfully implemented its move to a full service insurer model
at the beginning of the financial year. Alexander Forbes Compensation
Technologies reported pleasing results and Guardrisk once again delivered strong
growth in revenues and profits. Our Cre8 business, which has experienced
difficulties, has been restructured.
Continuing disciplined expense management contributed to the 25% growth in
trading results, which totalled R257 million for the year.
- SA Financial Services
Income from operations increased by 12% to R1 352 million for the year. All
businesses had excellent client retention in the year.
There has been an ongoing effort to restructure the business in aligning it to
meet the stated objective of providing holistic financial wellness to
individuals who are members of retirement funds. The newly formed Retail
Cluster (comprising Financial Planning Consultants, Individual Client
Administration and Fiduciary Services) showed stellar performance despite
challenging market conditions. Within the Institutional Cluster, there was
exceptional performance from the Administration business and FIHRST on the back
of new business and growth opportunities. The Consultants and Actuaries division
had a challenging year. The Healthcare Cluster showed strong performance over
the year. Areas of the business that experienced difficulties in the year were
our Homeplan division which was negatively impacted by the National Credit Act
and our Healthcare Management Solutions division which showed poor performance
and has subsequently been restructured.
Trading results increased by 14% to R313 million for the year.
- Africa Investment Solutions
Income from operations increased by 10% to R809 million for the year.
Notwithstanding the volatile market conditions, the business succeeded in
growing assets under management by R5 billion to R139 billion. Including the
international operations, global assets under management totalled R159 billion
at 31 March 2008. The integration of the retail business under the SA Financial
Services business was a success.
Trading results increased by 5% to R252 million for the year.
- Afrinet (Africa excl-South Africa)
Income from operations decreased by 5% to R226 million for the year due to the
deconsolidation of the Kenya Risk Services operations. During the year under
review, the group continued its coordinated focus on expansion into other
African territories. The group`s presence in Nigeria is now well established
and with operations in 11 other African countries outside of South Africa, the
group is able to capitalise on the opportunities brought about by growing demand
for our services in this region. There was strong organic growth in Namibia and
Botswana and solid growth in Kenya despite political unrest.
- International Financial Services
Income from operations increased by 8% to GBP101.1 million for the year
continued strong performances being delivered especially in core businesses in
the UK and Switzerland. The actuarial consulting business, Lane Clark &
Peacock, reported revenue growth of 9% and continues to expand its operations
having expanded into the Netherlands and Ireland. The UK based employee
benefits IFA (Independent Financial Advisory) and Healthcare businesses recorded
revenue growth, although profits were down as the business continues to invest
in operating and management infrastructure.
The combined effect of the continued investment in, particularly, the IFA
business, and an increased premises cost base, supporting growth, has resulted
in an 8% reduction in trading results to GBP10.2 million for the year.
The loss-making DC Link administration business was disposed during the second
half of the financial year.
The business received four corporate advisor awards and accreditation for
"Investors in Customers" in the UK.
- International Investment Solutions
Income from operations for the year increased by 18% to GBP8.4 million. Assets
under management totalled GBP1.3 billion at 31 March 2008, reflecting growth
over the GBP1.1 billion at the previous year end. New business gains remain the
key driver to successfully growing assets under management to profitable
critical mass.
The trading loss recorded for the year amounted to GBP0.5 million, reflecting
the continued investment in growing this strategically important area of
operations.
REVIEW OPINION
Our auditors, PricewaterhouseCoopers Inc, have reviewed the abridged financial
information in this report for the period ended 31 March 2008. A copy of their
unqualified review report is available upon request.
Directors:
Independent directors:
L Konar
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, AC De Beer (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
Investor relations:
D Kotzen
Registered office:
Alexander Forbes Place, 61 Katherine Street, Sandown
Transfer secretaries:
Computershare Investor Services (Pty) Limited.
Ground Floor, 70 Marshall Street, Johannesburg. PO Box 61051, Marshalltown, 2107
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: 02/06/2008 07:06:01 Produced by the JSE SENS Department.
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