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AFP - Alexander Forbes Equity Holdings (Proprietary) Limited - Unaudited
Interim Results For The Six Months Ended 30 September 2009
ALEXANDER FORBES EQUITY HOLDINGS (PROPRIETARY) LIMITED
Registration number: 2006/025226/07
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009
- Results show resilience in current challenging markets
- Income from operations down 4%
- Trading results up 5%
- High Yield Term Loan successfully restructured
REVIEW OF ACTIVITIES
Alexander Forbes Equity Holdings (Proprietary) Limited ("AFEH") is the
ultimate holding company of the Alexander Forbes group of companies ("the
group") and its financial statements are made publically available solely for
purposes of further informing the users of the financial statements of
Alexander Forbes Preference Share Investments Limited.
Income from operations decreased by 4% compared to the first six months of
the previous financial year. However, the group`s trading result increased
by 5% which is pleasing, given the challenging current trading environment
and can be attributed largely to specific cost containment programs
implemented during the latter half of the previous financial year and
improved market conditions for our SA Financial Services and Investment
Solutions divisions.
A brief commentary on the operating results of each of the main businesses
appears below.
- SA Risk & Insurance Services
Income from operations was negatively impacted by the lower interest
rate environment, affecting operational interest income, and in response
to our clients needs to contain expenditure during the current economic
downturn. Despite this pressure on organic growth, income from
operations increased by 4% to R569 million for the 6 month period.
Pleasing new business growth was achieved across all operating divisions
during this period. The Guardrisk and Compensation Technology
businesses were the main contributors to the increase in revenue.
Disciplined expense control continued across all operating divisions;
the benefit of this is however offset by continued investment in a more
substantial sales force as well as technical industry specific insurance
skills. These investments remain focus areas for this business and have
impacted expenses for the period under review.
Trading results remained consistent with the prior year at R166 million.
- SA Financial Services
Although assisted by improved market conditions a challenging six months
for all areas of the SA Financial Services divisions resulted in income
from operations decreasing by 3% from the prior year to R652 million for
the six months.
The strategic focus on the retirement administration and consulting
division is to provide our clients with comprehensive advice and
effective solutions in order for their members to achieve financial
security in retirement. The Retirement Funds division delivered a
satisfactory result. The retail cluster has benefited from the
improved market conditions and continued strong new business cash flows
in the current period. The Healthcare division`s income from
operations declined during the current period with the Health Management
Solutions division completing its restructure. Given the difficult
trading conditions, a continued strong focus on expense control was
achieved.
Trading results decreased by 3% to R110 million for the half year.
- Africa Investment Solutions
Income from operations increased for the period by 3% to R401 million.
Overall investment performance continues to be pleasing with over 75% of
portfolios performing above the median over a 3 year period. High
client retention rates and improved equity markets assisted a 12%
increase in closing assets under management to R140 billion at 30
September 2009. However, a noticeable decline in new business flows and
an increase in benefit withdrawals were experienced as a result of a
contracting economy. Including the international operations, global
assets under management totalled R150 billion at 30 September 2009.
The above, combined with disciplined cost management in the 6 month
period, gave rise to an increase in trading results of 18% to R138
million.
- Afrinet (Africa excluding South Africa)
Income from operations grew by 8% to R143 million. There was strong
organic growth achieved, particularly in our Risk Services businesses in
Tanzania, Uganda and Nigeria, while the Financial Services activities in
Botswana continue to deliver strong performance. The pre-eminent African
network extending over 12 countries, and a further 18 countries with
correspondent relationships, is being further developed as part of the
group`s strategic efforts to expand into other African territories.
Trading result increased by 15% to R30 million for the 6 month period.
- International Financial Services
Income from operations improved marginally from prior year to GBP52.3
million for the half-year. The actuarial consulting business, Lane Clark
& Peacock, reported pleasing year-on-year growth in income from
operations of 6.5%. This was largely offset by an 11% decline from the
UK based employee benefits Independent Financial Advisory (IFA)
business, principally as a result of the continuing decline in the UK
economy and more specifically the increasing levels of unemployment
amongst small and medium size enterprises, which are its primary target
market. The difficult trading conditions in the UK are expected to
continue for the foreseeable future.
As a result of restructuring of the IFA business over the past 12 months
and certain cost reduction programs, the trading profit for the half
year of GBP2.8 million was 12% ahead of the comparable period of the
prior year.
- International Investment Solutions
Income from operations for the half-year of GBP3.4 million decreased
marginally from prior year. Assets under management increased by GBP0.2
billion over the period assisted mainly due to the improved equity
markets, ending on GBP1.2 billion as at 30 September 2009
The trading loss for the half-year of GBP0.6 million is a marginal
improvement over prior year.
Prospects
The directors are satisfied with the resilient performance of the group in
the current challenging environment which can partly be ascribed to the
group`s diversified revenue streams and disciplined expense control. Our
core focus on delivering innovative products to our client base, and
investing in top quality staff continues and will ensure that we are well
positioned to take advantage of opportunities in a recovering economy.
High yield term loan restructure
On the 2nd of June 2009, the company along with its private equity consortium
shareholders successfully concluded the purchase of the Euro159 million High
Yield Term Loan from an international consortium of funders at a discount to
par value. A portion of the funding of the transaction was from the inherent
value of the cross currency hedge in place at the time of the transaction. As
part of the debt buy back changes were negotiated to certain conditions of
the loan to better suit the financial needs of the company. These changes
include changing the denomination of the loan from Euro to Rand thereby
eliminating currency risk. More significantly, the terms of the loan were
changed such that the semi-annual cash interest service is no longer
compulsory but dependent upon the financial position and strategic financial
needs of the group. This will give the group the financial flexibility to
continue its strategic development even in current difficult market
conditions.
Contingent liabilities
Reference is made to disclosure regarding contingent liabilities contained in
note 44 to the annual financial statements for the year ended 31 March 2009
and in particular the matter referred to as the Lifecare matter. While the
board continues to work towards finding a resolution to this matter, in the
opinion of the directors, the assessment of the financial liability remains
unchanged at the present time.
Change in directorate
We are pleased to announce that Edward Kieswetter has been appointed CEO of
the Alexander Forbes Group with effect from January 2010. Mr Kieswetter is
currently SARS Deputy Commissioner and is highly experienced in strategic
leadership. In line with the group`s stated commitment to transformation,
our present CEO Bruce Campbell will be stepping down at the end of this year.
The board expresses its appreciation for the valuable contribution and
commitment to the group by Mr Campbell since stepping in as CEO two years
ago. Andrew Claerhout resigned as a director and was replaced by his
alternate Lori Hall-Kimm with effect from 8 September 2009. Jean-Charles
Douin was appointed as Ms Hall-Kimm`s alternate director from the same date.
M S Moloko B Campbell
Chairman Group chief executive
27 November 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2009
12
months
30 Sep 30 Sep 31 Mar
2009 2008 2009
Notes Rm Rm Rm
Continued operations
Income 3 2 472 2 585 5 361
Operating expenses (2 000) (2 137) (4 385)
Trading results from continuing operations 472 448 976
Professional indemnity insurance cell 4 6 (11)
Amortisation of intangible assets arising (95) (95) (190)
from business combination
Non-recurring items (22) (17) 48
Impairment losses and other capital items 4 36 (354) (347)
Operating profit / (loss) 395 (12) 476
Finance income 49 40 132
Finance costs 5 (412) (403) (874)
Share of net (loss)/profit of associates (1) 1 1
(net of income tax)
Profit/(Loss) before taxation 31 (374) (265)
Income tax expense (113) (71) (156)
Loss for the period from continuing (82) (445) (421)
operations
Discontinued operations
(Loss)/Profit of discontinued operations 6 (5) 6 8
(net of income tax)
Accumulated loss for the period (87) (439) (413)
Loss attributable to:
Equity holders (109) (463) (464)
Non-controlling interests 22 24 51
Loss for the period (87) (439) (413)
Headline loss per ordinary share (cents) 7 (38) (29) (31)
Basic loss per ordinary share (cents) 7 (29) (123) (123)
Number of ordinary shares (million)
Issued 377 377 377
Weighted average (from 377 377 377
effective date)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2009
12
months
30 Sep 30 Sep 31 Mar
2009 2008 2009
Notes Rm Rm Rm
Loss for the period (87) (439) (413)
Foreign currency translation (112) (66) (108)
differences of foreign
operations
Changes in fair value of cash (90) (17) (94)
flow hedges
Portion of fair value hedge (24) - (47)
recycled to profit or loss
Other comprehensive loss for the period (226) (83) (249)
(net of income tax)
Total comprehensive loss for the period (313) (522) (662)
Total comprehensive loss attributable to:
Equity holders (319) (540) (713)
Non-controlling interests 6 18 51
Total comprehensive loss for the period (313) (522) (662)
(net of income tax)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2009
30 Sep 30 Sep 31 Mar
2009 2008 2009
Notes Rm Rm Rm
ASSETS
Financial assets held under 150 518 135 495 134 718
multi-manager investment
contracts
Financial assets of cell 7 530 7 169 7 498
captive insurance facilities
Housing loans secured by 750 750 750
retirement fund assets
Property and equipment 201 212 208
Purchased and developed 198 222 210
computer software
Goodwill 8 5 335 5 512 5 335
Intangible assets 2 005 2 178 2 091
Investments in associates 9 5 12 7
Deferred tax assets 146 140 148
Financial assets 401 365 365
Insurance receivables 422 290 330
Trade and other receivables 988 1 764 1 778
Cash and cash equivalents 2 344 2 408 2 495
Total assets 170 843 156 517 155 933
EQUITY AND LIABILITIES
Equity holders` funds 2 259 2 751 2 578
Non-controlling interest 178 224 205
Total equity 2 437 2 975 2 783
Financial liabilities held 150 474 135 465 134 686
under multi-manager
investment contracts
Liabilities of cell captive 7 530 7 169 7 498
insurance facilities
Securitisation funding for 750 750 750
housing loans
Borrowings 5 414 5 933 5 857
Deferred consideration for 7 5 8
acquisitions
Retirement benefit 160 90 155
obligations
Deferred tax liabilities 703 810 719
Provisions 565 692 608
Deferred income 246 283 263
Insurance payables 1 458 1 366 1 379
Trade and other payables 1 099 979 1 227
Total liabilities 168 406 153 542 153 150
Total equity and liabilities 170 843 156 517 155 933
Total equity per above 2 437 2 975 2 783
Number of ordinary share in 377 377 377
issue (millions)
Net asset value per ordinary 646 789 738
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2009
12 months
30 Sep 30 Sep 31 Mar
2009 2008 2009
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 426 482 1 132
Net finance costs requiring servicing (107) (235) (502)
Cash settlement of cash management and (19) (52) (91)
retirement benefit commitments
Taxation paid (130) (123) (281)
Operating cash flows 170 72 258
Movement in working capital (53) (263) (56)
Movement in insurance balances (15) (642) (669)
Net cash inflow/(outflow) from 102 (833) (467)
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net movement in subsidiaries and 34 (13) (18)
businesses disposed/(acquired)
Net movement in financial assets (26) (13) (63)
Proceeds from close out of foreign 374 - -
exchange hedge
Proceeds from sale of other financial 1 - 58
assets
Proceeds on disposal of property and - - 10
equipment
Capital expenditure for the period (45) (51) (102)
Net cash inflow /(outflow) from 338 (77) (115)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repaid)/advanced (449) 20 (64)
Payments to non-controlling interest (22) (26) (84)
Net cash outflow from financing (471) (6) (148)
activities
Net cash (outflow)/inflow from (4) 10 16
discontinued operations
Net movement in cash and cash (35) (906) (714)
equivalents
Cash and cash equivalents at beginning 2 495 3 322 3 322
of period
Cash balances of subsidiaries and (6) (1) (1)
businesses disposed/acquired
Foreign subsidiaries translation (110) (7) (112)
adjustment
CASH AND CASH EQUIVALENTS AT END OF 2 344 2 408 2 495
PERIOD
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2009
Share capital Non- Accumu- Ordinary Non- Total
and premium distribu lated share- controll equity
table loss holders` ing
reserve equity interest
Rm Rm Rm Rm Rm Rm
At 31 March 3 261 200 (170) 3 291 238 3 529
2008
Loss for the - - (463) (463) 24 (439)
period
Other - (77) - (77) (6) (83)
comprehensiv
e loss
Total - (77) (463) (540) 18 (522)
comprehensiv
e loss
Other - - - - (32) (32)
movements in
non-
controlling
interest
At 30 3 261 123 (633) 2 751 224 2 975
September
2008
Loss for the - - (1) (1) 27 26
period
Other - (172) - (172) 6 (166)
comprehensiv
e loss
Total - (172) (1) (173) 33 (140)
comprehensiv
e loss
Movement in - 2 (2) - - -
contingency
reserve for
short-term
insurance
company
Other - - - - (52) (52)
movements in
non-
controlling
interest
At 31 March 3 261 (47) (636) 2 578 205 2 783
2009
Loss for the - - (109) (109) 22 (87)
period
Other - (210) - (210) (16) (226)
comprehensiv
e loss
Total - (210) (109) (319) 6 (313)
comprehensiv
e loss
Movement in - 3 (3) - - -
contingency
reserve for
short-term
insurance
company
Other - - - - (33) (33)
movements in
non-
controlling
interest
At 30 3 261 (254) (748) 2 259 178 2 437
September
2009
SEGMENTAL RESULTS
for the six months ended 30 September 2009
Income from operations Trading results of
operations
30 Sep Var. 30 Sep 30 Sep Var. 30 Sep
2009 % 2008 2009 % 2008
Africa (Rm)
SA Risk & Insurance 569 4% 546 166 - 166
Services
SA Financial Services 652 (3%) 674 110 (3%) 113
Investment Solutions 401 3% 391 138 18% 117
Afrinet (Africa excluding- 143 8% 133 30 15% 26
South Africa)
Total Africa (Rm) 1 765 1% 1 744 444 5% 422
International (GBPm)
Financial Services 52.3 - 52.1 2.8 12% 2.5
Investment Solutions 3.4 (8%) 3.7 (0.6) 14% (0.7)
Total International (GBPm) 55.7 - 55.8 2.2 22% 1.8
Total International (Rm) 707 (16%) 841 28 8% 26
Total Group (Rm) 2 472 (4%) 2 585 472 5% 448
Depreciation & Assets
Amortisation
30 Sep Var. 30 Sep 30 Sep Var. 30 Sep
2009 % 2008 2009 % 2008
Africa (Rm)
SA Risk & Insurance 8 33% 6 9 738 3% 9 442
Services
SA Financial Services 8 (11%) 9 19 730 22% 16 222
Investment Solutions 1 - 1 139 218 15% 121 325
Afrinet (Africa 3 - 3 1 546 16% 1 330
excluding-South
Africa)
Total Africa (Rm) 20 5% 19 170 232 15% 148 319
International (GBPm)
Financial Services 0.8 11% 0.9 95.2 (4%) 99.4
Investment Solutions - - - 969.2 8% 901.1
Total International 0.8 11% 0.9 1 064.4 6% 1 000.5
(GBPm)
Total International (Rm) 10 (29%) 14 12 511 (16%) 14 938
Unallocated:
Corporate Services 15 (7%) 16 584 9% 536
Goodwill 5 335 (3%) 5 512
Consolidation (17 819) 39% (12 788)
elimination
Total Group (Rm) 45 (8%) 49 170 843 9% 156 517
NOTES
for the six months ended 30 September 2009
1. Basis of preparation
These 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 financial statements
issued by Alexander Forbes Equity Holdings (Proprietary) Limited for the
year ended 31 March 2009, except for the changes required by IAS 1
(Presentation of Financial Statements), IFRS 8 (Operating Segments) and
Circular 3/2009 (Headline Earnings).
30 Sep 30 Sep 31 Mar
2009 2008 2009
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 12.7 15.1 14.3
Closing R:GBP rate 11.8 14.9 13.8
30 Sep 30 Sep 12
months
31 Mar
2009 2008 2009
Rm Rm Rm
3. Income
Fee and commission income 2 221 2 288 4 858
Operational interest income 20 26 50
Interest and other finance income from finance 51 74 142
operations
less: directly related interest expense (33) (45) (91)
Net premium and investment income from insurance 533 556 1 059
operations
less: net claims and transfers to policyholder (320) (314) (657)
funds
Total income 2 472 2 585 5 361
4. Impairment losses and other capital items
Impairment of goodwill arising on acquisition of - (353) (354)
the Alexander Forbes group (see note 7)
Profit on sale of business 34 - -
Other 2 (1) 7
Total impairment losses and other capital items 36 (354) (347)
30 Sep 30 Sep 12
months
31 Mar
2009 2008 2009
Rm Rm Rm
5. Finance costs
Finance costs requiring servicing (156) (275) (634)
Accrued interest not requiring servicing (256) (128) (240)
(412) (403) (874)
6. Discontinued operation
In May 2009 the group sold Chambers Townsend Consultancy (CTC), a
business based in the UK. The CTC business unit was not disclosed as a
discontinued operation or classified as held for sale as at 30
September 2008 and 31 March 2009. The comparative income statement has
been re-presented to show the discontinued operation separately from
continuing operations.
7. Calculation of headline loss per share
7.1 Basic loss per preference share
Basic loss per share is calculated by dividing the loss for the year
attributable to equity holders by the weighted average number of
preference shares in issue during the period.
7.2 Headline loss per preference share
Headline loss per share is calculated by excluding all impairment
charges and capital gains and losses from the loss attributable to
shareholders and dividing the resultant headline earnings by the
weighted average number of preference shares in issue during the
period. Headline earnings are defined in Circular 3/2009 issued by the
South African Institute of Chartered Accountants.
7.3 Calculation of headline loss per share
Loss attributable to ordinary (109) (463) (464)
shareholders (IAS 33 earnings)
Adjusting items
- Impairment losses and other capital (36) 354 347
items
- Tax effect on above adjustment - - -
Headline attributable loss for the (145) (109) (117)
period
Weighted average number of shares (from 377 377 377
effective date)
Basic losses per share (cents) (29) (123) (123)
Headline losses per share (cents) (38) (29) (31)
8. Goodwill
The goodwill balance arises primarily from the acquisition of the
Alexander Forbes group effective 26 July 2007. In line with the
relevant accounting policy of the group, goodwill is assessed
annually for impairment in March of each year. An early
impairment review is performed during the year only in the event
that there is a significant indication of impairment in the value
of a specific cash generating unit within the group. There has
been no indication of impairment in the goodwill balances for the
six months ended 30 September 2009.
9. Investments in associates
Carrying value in balance sheet 5 12 7
Directors` valuation of associates 17 18 17
10. Capital expenditure and commitments
Depreciation of property and equipment and 45 49 91
amortisation of computer software for the
period
Capital expenditure for the period 45 51 102
Operating lease commitments
Due within one year 127 164 148
Thereafter 412 486 357
539 650 505
Capital expenditure and commitments will be funded from internal
cash resources.
Directors:
Independent directors: D Konar, V R Ngalwana
Non-executive directors: A C De Beer (Alternate), J E Douin (Alternate)
L Hall-Kimm, N C Kolbe (Alternate), K A Mills (Alternate), P G Nkadimeng,
M C Ramaphosa, A Roux, P Schmid, J A van Wyk
Executive directors: M S Moloko (Chairman), B Campbell (Group chief
executive),
D M Viljoen (Group finance director)
Company secretary & Investor relations: J E Salvado
Registered office:
Alexander Forbes Place, 61 Katherine Street, Sandown, Sandton, 2196
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
Date: 02/12/2009 14:06:03 Produced by the JSE SENS Department.
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