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AFP
AFP
AFP - Alexander Forbes Preference Share Investments Limited - Unaudited
interim results for the six months ended 30 September 2010
Alexander Forbes Preference Share Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2006/031561/06)
Share code: AFP
ISIN code: ZAE 000098067
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
- Headline earnings per linked unit increases by 81% to 58 cents per linked
unit
- Headline loss per preference share reduces by 25% to 6 cents per preference
share
- Equity accounted loss from Alexander Forbes Equity Holdings reduces by 34%
from R29 million to R19 million
REVIEW OF ACTIVITIES
Alexander Forbes Preference Share Investments Limited ("AF Pref") was
incorporated on 10 October 2006. The sole purpose of the company is to
incorporate the special purpose vehicle through which certain existing
shareholders of Alexander Forbes Limited could remain invested following the
private equity buyout of the Alexander Forbes group with effect 26 July 2007.
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"), as well 26.5% of the High-yield term loan
issued by Alexander Forbes Funding (Proprietary) Limited ("AF Funding").
This announcement should be read in conjunction with the announcement made
available by AFEH which provides an overview of the results of the AFEH group
for the six month period ended 30 September 2010. In summary, AFEH`s
consolidated revenue, net of direct product cost, remained in line with the
comparable six month period of the previous financial year at R2.1 billion
while profit from continuing operations before non-trading items increased by
4% to R484 million. The loss attributable to AFEH equity holders (i.e. after
finance cost related to the funding structure and after tax) improved by 34%
to R72 million from a loss of R109 million for the first half of the previous
financial year. AF Pref`s share of this net loss amounts to R19 million
which is equity accounted in these financial statements and is the main
contributor to the loss reported by AF Pref for the six months ended 30
September 2010 of R14 million.
Change in directorate
With effect from 18 August 2010, Mr S Gaskell resigned as a director of the
company and was replaced by his alternate, Mr B Harmse. Mr Gaskell was
appointed Mr Harmse`s alternate director on the same date.
This results announcement should be read in conjunction with the results
announcement of AFEH which is made available to all AF Pref preference
shareholders.
B Harmse TJ Fearnhead
Director Director
29 November 2010
INCOME STATEMENT
for the six months ended 30 September 2010
30 Sep 30 Sep 12
months
31 Mar
2010 2009 2010
Notes Rm Rm Rm
Investment income 2 149 89 206
Operating expenses (2) (1) (2)
Finance costs 3 (142) (86) (199)
Share of net loss of associate (19) (29) (34)
(net of income tax)
Loss before taxation (14) (27) (29)
Income tax expense 4 - (1) (1)
Loss for the period (14) (28) (30)
Loss attributable to:
Equity holders 5 - - -
Preference shareholders 5 (14) (28) (30)
Loss for the period (14) (28) (30)
Headline earnings/(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (6) (8) (10)
- per linked unit 6 58 32 80
Basic earnings/(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (6) (12) (13)
- per linked unit 6 58 27 76
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2010
Loss for the period (14) (28) (30)
Share of other comprehensive (4) (55) (74)
loss of associate
Other comprehensive loss for the (4) (55) (74)
period (net of income tax)
Total comprehensive loss for the (18) (83) (104)
period
Total comprehensive loss
attributable to:
Equity holders - - -
Preference shareholders (18) (83) (104)
Total comprehensive loss for the (18) (83) (104)
period
STATEMENT OF FINANCIAL POSITION
at 30 September 2010
30 Sep 30 Sep 31 Mar
2010 2009 2010
Notes Rm Rm Rm
ASSETS
Investment in associate 7 692 740 710
Financial assets 8 1 653 1 077 1 504
Other receivables 1 - 1
Cash and cash equivalents 9 99 16
Total assets 2 355 1 916 2 231
EQUITY AND LIABILITIES
Ordinary shareholders` equity - - -
Preference shareholders` 1 037 1 122 1 037
interest - component of linked
units
Non-distributable reserve (122) (99) (118)
Accumulated loss (201) (185) (187)
Total equity 714 838 732
Debentures - component of linked 1 641 1 077 1 499
units
Taxation payable - 1 -
Total liabilities 1 641 1 078 1 499
Total equity and liabilities 2 355 1 916 2 231
Total equity attributable to ordinary 0 0 0
shareholders
Number of ordinary shares in 1 1 1
issue (`000s)
Net asset value per ordinary share 0 0 0
(cents per share)
Total equity attributable to 714 838 732
preference shareholders
Number of preference shares in 237 237 237
issue (million)
Net asset value per preference share 3.0 3.5 3.1
(cents per share)
Total equity attributable to 714 838 732
linked unit holders
Number of linked units in issue 221 213 221
(million)
Net asset value per linked units (cents 3.2 3.9 3.3
per unit)
STATEMENT OF CASH FLOWS
for the six months ended 30 September 2010
30 Sep 30 Sep 12
months
31 Mar
2010 2009 2010
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash (utilized)/generated from (2) 3 3
operations
Taxation paid - - (2)
Net cash (outflow)/inflow from (2) 3 1
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
(Decrease)/Increase in loan from (5) - 6
associate
Investment in High-yield term loan - - (311)
and relevant assets
Net cash outflow from investing (5) - (305)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Debentures issued - - 309
Capital distribution to preference - - (85)
shareholders
Net cash inflow from financing - - 224
activities
Net movement in cash and cash (7) 3 (80)
equivalents
Cash and cash equivalents at 16 96 96
beginning of period
CASH AND CASH EQUIVALENTS AT END OF 9 99 16
PERIOD
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2010
Ordina Prefere Non- Accumu- Total
ry nce distribut lated equity
share- share- able loss
holder holders reserve
s` `
equity interes
t
Rm Rm Rm Rm
At 31 March 2009 - 1 122 (44) (157) 921
Loss for the period - - - (28) (28)
Other comprehensive - - (55) - (55)
loss
Total comprehensive - - (55) (28) (83)
loss
At 30 September 2009 - 1 122 (99) (185) 838
Loss for the period - - - (2) (2)
Other comprehensive - - (19) - (19)
loss
Total comprehensive - - (19) (2) (21)
loss
Distribution to - (85) - - (85)
preference share
holders
At 31 March 2010 - 1 037 (118) (187) 732
Loss for the period - - - (14) (14)
Other comprehensive - - (4) - (4)
loss
Total comprehensive - - (4) (14) (18)
loss
At 30 September 2010 - 1 037 (122) (201) 714
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
2010.
30 Sep 30 Sep 12
months
31 Mar
2010 2009 2010
Rm Rm Rm
2. Investment income
Interest & investment income on
held-to-maturity financial assets:
PIK Debentures 99 86 171
High Yield term loan 43 - 26
Put & call option agreement 7 - 5
Interest on cash balances - 3 4
149 89 206
3. Finance costs
Interest cost on financial (142) (86) (199)
liability held at amortised cost
(debentures)
4. Income tax expense
South African income tax
Current tax - (1) (1)
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% 28.0%
Adjusted for the effect of:
Share of net loss of associate (35.4%) (30.2%) (33.4%)
(net of income tax)
Exempt income and disallowed 7.4% - 4.0%
expenditure
Effective tax rate 0% (2.2%) (1.4%)
5. Loss 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 annual 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.
6.1 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.
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
30 30 12
Sep Sep months
31 Mar
2010 2009 2010
Loss for the period (R (a) (14) (28) (30)
million)
Earnings attributable to (b) 142 86 199
debenture holders (R
million)
Headline adjusting items:
Share of impairment charge (c) - 10 7
and other capital items of
associate
Weighted average number of (d) 237 237 237
preference shares in issue
(millions)
Weighted average number of (e) 221 213 221
linked units in issue
(millions)
Basic loss per preference (a)/(d) (6) (12) (13)
share (cents)
Headline loss per preference (a+c) (6) (8) (10)
share (cents) /(d)
Basic earnings per linked (a+b) 58 27 76
unit (cents) /(e)
Headline earnings per linked (a+b+c) 58 32 80
unit (cents) /(e)
30 Sep 30 Sep 31 Mar
2010 2009 2010
Rm Rm Rm
7. Investment in associate
Cost 1 038 1 038 1 038
Share of cumulative post - (122) (99) (118)
acquisition movement in equity
Share of cumulative post - (223) (199) (204)
acquisition losses
Loan from associate (1) - (6)
Carrying value in balance sheet 692 740 710
Directors` valuation of associate 989 928 982
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 30 September 2010, the directors
are of the opinion that the value of the investment in AFEH
is R989 million.
8. Financial assets
Opening balance 1 504 991 991
High-yield term loan acquired - - 279
Put and call option asset acquired - - 31
Interest accrued 142 86 198
Fair value adjustment 7 - 5
Closing balance 1 653 1 077 1 504
Analysed as follows:
High-yield term loan receivable 348 - 305
Put and call option asset 43 - 36
Investment in PIK debentures 1 262 1 077 1 163
1 653 1 077 1 504
9. Debenture interest
Interest on debentures accrues on a daily basis and will,
subject to the terms in the debenture agreement, be
capitalised semi-annually on the last day of each interest
period.
In terms of the debenture agreement, AF Pref is entitled at
its election to either pay the accrued interest in respect
of each interest period or capitalise such interest not paid
in cash by adding it to the principal outstanding.
The terms of the PIK debentures held by the company
anticipate the roll-up of interest until exit date of the
private equity holding or refinance date while the High
Yield term loan held may either service interest in cash or
capitalise such interest from time to time.
The accrued interest on the debentures has been capitalised
and added to the principle outstanding on the basis that no
interest was received in cash for the period under review.
The introduction by the Financial Services Board of the new
capital adequacy requirements for long-term insurance
companies, with effect 30 June 2010, as well as registered
financial advisors and intermediaries (FAIS), with effect 31
December 2010, resulted in a significant increase in
regulatory capital to be held by various regulated entities
within the AFEH group amounting to approximately R316
million in the current financial year alone. In terms of
the asset spreading requirements prescribed in the capital
adequacy regulations, the additional capital is required to
be backed largely by assets in the form of cash or near cash
on the balance sheets of these subsidiaries. This
introduction of additional capital requirement has therefore
significantly impacted on the free cash resources available
for distribution by the AFEH group in the current year.
Although further impact is expected in future years it is
estimated to be far less onerous than the introductory phase
and normal service of the interest on the High Yield term
loan will in all probability resume in the next year.
Independent directors: TJ Fearnhead, B Harmse, JRP Doidge (Alternate), S
Gaskell (Alternate)
Company secretary and Investor relations: JE Salvado
Transfer secretaries: Computershare Investor Services (Pty) Limited. Ground
Floor, 70 Marshall Street, Johannesburg.
PO Box 61051, Marshalltown, 2107
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: 29/11/2010 16:27:01 Produced by the JSE SENS Department.
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