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AFP
AFP
AFP - Alexander Forbes Preference Share Investments Limited - Audited results
for the year ended 31 March 2010
ALEXANDER FORBES PREFERENCE SHARE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2006/031561/06
ISIN code: ZAE000098067
Share code: AFP
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2010
REVIEW OF ACTIVITIES
Alexander Forbes Preference Share Investments Limited ("AF Pref" or "the
company") was incorporated on 10 October 2006. The sole purpose of the company
is to incorporate the special purpose vehicle through which existing
shareholders of Alexander Forbes Limited could remain invested following the
private equity buyout of the Alexander Forbes group.
AF Pref holds 26.5% of the ordinary shares in Alexander Forbes Equity Holdings
(Proprietary) Limited ("AFEH"). In addition AF Pref also holds 31,8% of the
preference shares in AFEH and 100% of the Pay-in-Kind ("PIK") debentures issued
by a subsidiary of AFEH, Alexander Forbes PIK Funding (Proprietary) Limited ("AF
PIK"), the latter investment forming part of the financing arrangement of the
private equity transaction.
During the current year the company was offered the opportunity to invest in
additional assets of the Alexander Forbes Group. These assets include a High
Yield Term Loan issued by Alexander Forbes Funding (Pty) Ltd ("AF Funding") and
which was acquired from the existing holders at a discount, a Put and Call
Option issued by AF PIK and Preference Shares issued by AF PIK, and newly issued
preference shares issued by AF PIK (collectively known as the "relevant
assets"). The details of this investment were given to shareholders in a rights
offer circular published on the 16th of September 2009. The rights offer made
to shareholders as a result of this investment was 99.9% subscribed and AF Pref
was able to invest in its full allocation of this investment.
In order to facilitate the above investment AF Pref made a capitalisation issue
of linked units in lieu of accrued interest on the debenture. The
capitalisation issue was made to ensure that, from the date of issue of the
rights offer, all debenture units would have an equal book value. The rights
offer was made at a discount to the market price at the time of the offer and at
a discount to the face value of the debenture. The discount in face value was
matched to a certain extent by the discount achieve in the purchase of the HY
Term Loan. In order to fully align the earnings from the underlying investments
with the interest accrued on the issued debentures the debenture deed was
amended to suspend interest accrual on the debenture for a period of 283 days.
The amendments to the debenture trust deed were approved at a general meeting of
debenture holders on the 8th of October 2009.
AF Pref has issued a linked unit made up of two instruments, namely redeemable
participating preference shares and unsecured fixed rate debentures, which
together constitute a linked unit listed on the JSE Limited. The preference
shares give the holder the see-through economic and voting rights in the pro
rata underlying investment in the equity of AFEH and the Preference Share
investment in AF PIK. The debentures give the holder the see-through economic
rights in the pro rata underlying PIK debentures investment in AF PIK, the
investment into the HY Term Loan in AF Funding and the Put and Call Option
agreement with AF PIK.
AF Pref made a distribution to preference shareholders on the 6th of November
2009 of 85 cents by way of a capital reduction. This payment resulted from the
repayment of the BEE underwrite proceeds on the original investment into AFEH.
AF Pref does not intend to declare any dividends for the foreseeable future.
Change in directorate
The board welcomes Mr Brendan Harmse who was appointed as alternate director to
the Chairman of the Board, Mr Sean Gaskell, with effect from 10 December 2009.
This results announcement should be read in conjunction with the results
announcement of AFEH which is made available to all AF Pref preference
shareholders.
S Gaskell T Fearnhead
Director Director
15 June 2010
INCOME STATEMENT
for the year ended 31 March 2010
31 Mar 31 Mar
2010 2009
Notes Rm Rm
Investment income 2 206 168
Operating expenses (2) (1)
Finance cost 3 (199) (151)
Share of net loss of associates (net of (34) (125)
income tax)
Loss before taxation (29) (109)
Income tax expense 4 (1) (3)
Loss for the year (30) (112)
Loss attributable to:
Equity holders 5 - -
Preference shareholders 5 (30) (112)
Loss for the year (30) (112)
Headline earnings/(loss)(cents)
- per ordinary share 6 - -
- per preference share 6 (10) (8)
- per linked unit 6 80 62
Basic earnings/ (loss)(cents)
- per ordinary share 6 - -
- per preference share 6 (13) (47)
- per linked unit 6 76 18
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2010
Loss for the year (30) (112)
share of other comprehensive loss of (74) (44)
associates
share of purchase price allocation adjustment - (1)
of associate
Other comprehensive loss for the year (net of (74) (45)
income tax)
Total comprehensive loss for the year (104) (157)
Total comprehensive loss attributable to:
Equity holders - -
Preference shareholders (104) (157)
Total comprehensive loss for the year (104) (157)
STATEMENT OF FINANCIAL POSITION
at 31 March 2010
31 Mar 31 Mar
2010 2009
Notes Rm Rm
ASSETS
Investment in associate 7 710 824
Financial assets 8 1 504 991
Other receivables 1 1
Cash and cash equivalents 16 96
Total assets 2 231 1 912
EQUITY AND LIABILITIES
Ordinary shareholders` equity - -
Preference shareholders` interest - component 1 037 1 122
of linked units
Non-distributable reserve (118) (44)
Accumulated loss (187) (157)
Total equity 732 921
Debentures - component of linked units 1 499 991
Total equity and liabilities 2 231 1 912
Total equity per above 732 921
Number of ordinary shares in issue (`000s) 1 1
Net asset value per ordinary share 732 921
CONDENSED STATEMENT OF CASH FLOWS
for the year ended 31 March 2010
31 Mar 31 Mar
2010 2009
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 3 15
Taxation paid (2) (3)
Net cash (outflow) / inflows from operating 1 12
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loan from associate 6 -
Investment in High Yield Term Loan and relevant (311) -
assets
Repayment/(advance) of BEE and management - 83
underwrite
Net cash (outflow) / inflow from investing (305) 83
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Preference shares issued* - -
Debentures issued 309 -
Capital distribution to preference shareholders (85) -
Net cash inflow from financing activities 224 -
Net movement in cash and cash equivalents (80) 95
Cash and cash equivalents at beginning of period 96 1
CASH AND CASH EQUIVALENTS AT END OF PERIOD 16 96
* 136.7 million preference shares were issued during the year at a par value of
R0.000001
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2010
Ordinary Preference Non- Accumu- Total
share- share- distribu lated equity
holders` holders` table loss
equity interest reserve
Rm Rm Rm Rm
At 31 March 2008 - 1 122 - (44) 1 078
Loss for the period - - - (112) (112)
Other comprehensive loss - - (44) (1) (45)
Total comprehensive loss - - (44) (113) (157)
At 31 March 2009 - 1 122 (44) (157) 921
Loss for the period - - - (30) (30)
Other comprehensive loss - - (74) - (74)
Total comprehensive loss - - (74) (30) (104)
Distribution to preference - (85) - - (85)
share holders
At 31 March 2010 - 1 037 (118) (187) 732
NOTES
1. Basis of preparation
These 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 results are
consistent with those detailed in the financial statements issued by AF
Pref for the year ended 31 March 2009, except for the changes required by
IAS 1 (Presentation of financial statements) and Circular 3/2009
(Headline earnings).
31 Mar 31 Mar
2010 2009
Rm Rm
2. Finance income
Income in respect of BEE underwrite - 8
Interest & investment income on
held-to-maturity financial assets:
PIK Debentures 171 151
High Yield term loan 26 -
Put & call option agreement 5 -
Interest on cash balances 4 9
206 168
3. Finance costs
Interest cost on financial (199) (151)
liability held at amortised cost
(debentures)
4. Taxation
South African income tax
Current tax (1) (3)
The standard South African income
tax rate for companies is
reconciled to the company`s actual
tax rate as follows:
Income tax rate for companies 28.0% 28.0%
Adjusted for the effect of:
Share of net loss of associate (net (33.4%) (30.8%)
of income tax)
Exempt income and disallowed 4.0% -
expenditure
Effective tax rate (1.4%) (2.8%)
5. Earnings attributable to equity holders and preference shareholders
The economic rights to return of capital and dividends for equity holders
and preference shareholders are detailed in section 5 of the pre-listing
statement issued by AF Pref on 10 July 2007 and in the published
financial statements.
6. Earnings per share
The preference shareholders have the economic rights to return of capital
and dividends and as such earnings and headline earnings per share are
all attributable to preference shareholders and are nil for ordinary
shareholders. Basic and headline earnings per share for ordinary
shareholders is therefore not provided.
6. Earnings per share (continued)
6.1 Basic loss per preference share
Basic loss per share is calculated by dividing the loss for the year
attributable to equity holders be the weighted average number of
preference shares in issue during the period.
6.2 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.
6.3 Calculation of earnings per share
31 Mar 31 Mar
2010 Var. 2009
Rm % Rm
Loss for the period (a) (30) (112)
Earnings attributable to debenture (b) 199 151
holders
Headline adjusting items:
Share of impairment charge and other (c) 7 92
capital items of associate
Weighted average number of preference (d) 237 237
shares in issue (millions)
Weighted average number of linked (e) 221 213
units in issue (millions)
Basic loss per preference share (a)/(d) (13) (47)
(cents)
Headline loss per preference share (a+c)/(d) (10) 50% (8)
(cents)
Basic earnings per linked unit (a+b)/(e) 76 18
Headline earnings per linked unit (a+b+c) 80 24% 62
/(e)
31 Mar 31 Mar
2010 2009
Rm Rm
7. Investment in associate
Cost 1 026 1 026
Subscription for shares in respect of management 12 12
underwrite
Share of cumulative post -acquisition movement (118) (44)
in equity
Share of cumulative post -acquisition losses (204) (170)
Loan from associate (6) -
Carrying value in balance sheet 710 824
Directors` valuation of associate 982 895
In terms of the South African Companies Act No. 61 of 1973 directors are
required to provide a valuation of the associate investment in Alexander
Forbes Equity Holdings (Proprietary) Limited. At 31 March 2010, the
directors are of the opinion that the value of the investment in AFEH is
R982 million.
Audit opinion
Our auditors, PricewaterhouseCoopers Inc, have issued their opinion on the
group`s financial statements for the year ended 31 March 2010. A copy of their
unmodified report is available upon request.
Independent directors: S Gaskell, T Fearnhead, J Doidge (Alternate), B Harmse
(Alternate)
Company secretary: J E Salvado
Transfer secretaries:
Computershare Investor Services (Pty) Limited.
Ground Floor, 70 Marshall Street, Johannesburg.
PO Box 61051, Marshalltown, 2107
Investor relations: N Sindelman
Registered office:
5th Floor, The Terraces, 25 Protea Road
Claremont, 7708
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Date: 17/06/2010 07:05:01 Produced by the JSE SENS Department.
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