| Wed 13 Jun 2012, 8:46 | | AFP - Alexander Forbes Equity Holdings Proprietary Limited - Audited |
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AFP
AFP
AFP - Alexander Forbes Equity Holdings Proprietary Limited - Audited
results for the year ended 31 March 2012
Alexander Forbes Equity Holdings Proprietary Limited
Registration number: 2006/025226/07
(Incorporated in the Republic of South Africa)
("AFEH" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2012
- Income from continuing operations, net of direct product costs, increases
by 10% to R4.3 billion
- Profit from operations before non-trading items increases by 9% to R1.1
billion
- Operating loss after non-trading items, finance costs and taxation
increases by 86% to R52 million
- Sale of Risk Services businesses largely completed
- Investment in strategic growth areas, reorganisation of the group,
branding and marketing continues
- Strategic growth initiatives showing strong traction, particularly in the
individual client sectors with combined revenue growth of 12%
REVIEW OF ACTIVITIES
AFEH is the ultimate holding company of the Alexander Forbes group of
companies ("the group") and its financial results are made publicly
available solely for purposes of further informing the financial results of
the listed Alexander Forbes Preference Share Investments Limited, which
holds a 26.5% stake in the issued ordinary shares of AFEH and also holds
various other instruments issued by the company and its subsidiaries.
An announcement was made on 31 August 2011 regarding the proposed sale of
the Risk Services businesses. A subsequent announcement was made on 4
January 2012 informing investors that the conditions precedent to the
Threshold Transaction (being the disposal of our Risk Services business in
South Africa, Botswana and Namibia) have been met. These businesses have
now been sold and thus treated as discontinued operations for purposes of
our annual financial statements and this results announcement. Certain
conditions precedent to the sales of a number of smaller Risk Services
businesses in the rest of Africa, such as regulatory approvals, are still
being fulfilled and the sales of those businesses are expected to follow in
due course. Despite these outstanding matters, those transactions are also
at a stage where treatment as a discontinued operation from an accounting
perspective is applicable. As required by International Financial
Reporting Standards (IFRS), the results of all discontinued operations are
shown separately from continuing operations.
Overall the group`s results for the financial year ended 31 March 2012 have
been pleasing and in particular it has been encouraging to see the growth
in top line revenue for the period. As previously reported, the strategic
growth areas continue to show traction and delivered good growth. As
expected, the more mature parts of the business are still feeling the
effects of the global economic uncertainties and lower economic growth
rates in SA and in particular the UK. However, operational restructuring
in certain of the more mature parts of our group, efficiency improvement
and ongoing innovation in these businesses bode well for the future. The
group also continued its investment in branding and marketing.
Following the sale of the Risk Services businesses, the group`s gross
income from continuing operations now total R5 billion compared to the
previous financial year of R4.6 billion (rebased from R5.2 billion due to
the disposal of Risk Services). Operating income from continuing
operations, net of direct product costs, totalled R4.3 billion, an increase
of 9.6% from the previous financial year. Growth in income in all the
retail (individual client) market segments combined increased by 12% but
this was offset by somewhat lower growth in the larger but more mature
areas of our business.
Operating expenses of continuing operations (excluding non-trading items)
of R3.2 billion increased by 9.7% compared to the previous year. We
continue to balance disciplined cost management in the established business
areas with investment in the strategic growth areas, particularly to
support our expansion in the individual client market as well as branding
and marketing. In addition, it is anticipated that the disposal of the
Risk Services business will, in the short term, result in certain
previously allocated shared services cost which is reflected in the
restated continuing operations following the treatment of that operational
segment as a discontinued operation. These previously allocated costs will
over time be rebased or will provide additional capacity for future growth
particularly in areas such as information technology.
Profit from continuing operations, before non-trading items, increased by
9% to R1.1 billion compared to the R996 million of the previous financial
year. This growth in trading profit should be viewed in the context of the
largely flat results achieved by the UK and European operations as well as
the investments made in strategic growth areas, branding and marketing.
After non-trading items and finance charges, the group`s profit before
taxation from continuing operations of R302 million is significantly (142%)
up from the R125 million of the previous year. As there is no group
taxation relief in SA, the tax charges of certain subsidiaries still
exceeds our consolidated profits before tax resulting in an after tax loss
of R63 million compared to the R68 million loss in the previous year. This
loss should also be viewed in light of the ongoing accounting amortisation
of the intangible assets which arose from the business combination
(acquisition by the current shareholders in 2007) amounting to R174 million
for the year (refer note 5).
The net result of the sale of the Risk Services businesses is set out in
note 7. As communicated previously, the transaction agreement provides for
further proceeds to be received by the group based on the revenue growth
achieved by the merged entity of Marsh Africa incorporating Alexander
Forbes Risk Services over the next two years from 1 January 2012 (the
effective date of the Threshold Transaction) of up to R238 million (the
earn-out). As at 31 March 2012, given the limited performance history of
the combined entity, no earn-out proceeds have been recognised in the
financial statements as the quantum and probability of such earn-out, if
any, could not be reliably determined.
A brief commentary on the operating results for each of the main businesses
follows. As explained in the interim results announcement, the segmental
reporting has been expanded to now include the Guardrisk group and
Alexander Forbes Insurance operations as separate reportable segments in
line with the operational changes made following the implementation of the
sale of the Risk Services businesses. In addition, Alexander Forbes
Compensation Technologies (AFCT), will in future be included in the SA
Financial Services operational segment to be in line with its revised
operational management and control. In this transition year, AFCT is shown
separately to afford better comparison. These operations were previously
all included in the Risk & Insurance Services segment. In addition, to
provide proper comparison, the shared services costs that remain in the
group but that was previously allocated to the discontinued operations of
Risk Services have been treated as continuing costs and the comparative
results of all segments in the segmental results have been restated in
order to give recognition to the fact that certain central costs will not
be discontinued going forward.
- SA Financial Services
Income from operations, net of direct product cost, increased by 6% to R1.4
billion compared to the previous financial year and trading profit
increased by 13% to R336 million. Strong new business growth was achieved
in all the major divisions. A number of new client appointments were
gained in our core retirement funds division and healthcare broking
business during the year. Client retention has remained strong despite a
competitive operating environment.
Growth in members under administration in the retirement fund
administration business grew by 6% compared to the previous year. We
continue to invest in operational efficiencies in our administration areas
with a focus on improving the client experience and level of automation.
The umbrella retirement fund offering, The Alexander Forbes Retirement
Fund, is now one of the largest funds of its kind in the market and member
under administration grew by 13% compared to the previous year.
The retail investment platform enjoyed strong net new cash flows with
significant new business flows written in the year and assets under
management on the retail administration platform increased by 14% now
totaling R33 billion at 31 March 2012. In line with our focus on the
retail (individual client) segment of the market, we continued to increase
the size of our internal advisory force during the year.
The long term insurer, Alexander Forbes Life, significantly improved its
underwriting results in the year.
- AF Compensation Technologies
Income from operations increased by 5% to R77 million for the year and
trading profit decreased by 16% to R27 million. The decrease in trading
profits is mainly due to additional provisioning for doubtful debts as a
result of a deterioration in cash flows in respect of claims receivable
from statutory bodies.
- Investment Solutions South Africa
Closing assets under management and administration increased by 9% to R193
billion at 31 March 2012 of which R185 billion are assets under management.
Average assets under administration increased by 10% compared to the
previous financial year. Income from operations increased by 14% to R551
million for the year and trading profit increased by 12% to R299 million
driven largely by a recovery, albeit volatile, in equity markets.
New business flows have been encouraging during the year although the
ongoing benefit payments to fund members remain relatively high compared to
ongoing contributions into funds, reflecting the underlying pressure the
South African economy still continues to face. Most of our investment
portfolios are performing very well against peers and ahead of their
respective benchmarks over medium to long term measurement periods.
Focus on increasing the depth in expertise continues throughout the
business while the restructuring of the operations area and upgrading of
certain core systems have largely been completed.
- Guardrisk
Income from operations increased by 10% to R312 million for the year and
trading profit increased by 10% to R136 million. Strong new business
growth was achieved in the Life, Corporate Risk Services and Affinity
divisions as well as good organic growth in the Underwriting Managers
division. Selected specialised products in the Guardrisk Allied Products
and Services division performed well with others negatively impacted by
lower business volumes. Underwriting results were negatively impacted by
increased claims ratios and an increase in reinsurance costs.
Lost business and new business growth in the Guardrisk Allied Products and
Services division remains a challenge as a result of highly competitive
markets. Tight expense management continued in the business resulting in a
healthy and stable trading margin. Increased resource and cost
requirements to implement change as a result of the implementation of
various new regulatory initiatives continues to put profit margins under
pressure but will strengthen the business offering and further enhance our
technical capabilities.
- Alexander Forbes Insurance ("AF Insurance")
Gross written premiums increased by 15% to R926 million, driven by a
combination of strong new business flows and active up-selling. This
growth is particularly pleasing given new entrants in the market and the
continued competition in motor and household insurance. Net income from
operations increased by 12% to R289 million for the year and trading profit
increased by 16% to R89 million.
Investment in the sales capacity within the business continues, increasing
our sales team by 40% since March 2011 and as a result, new business
written during the financial year increased by a very pleasing 31%.
From an underwriting perspective, increased loss ratios due to a small
number of larger incidents, impacted negatively on results. Underwriting
remains an area of focus for management although the absolute level of risk
assumption in the business still remains relatively low.
- AfriNet (covering all operations in Africa outside of South Africa)
Income from operations increased by 11% to R181 million for the year and
trading profit increased by 19% to R31 million. The operating environment
in the rest of Africa remains challenging and highly competitive in certain
areas. The disposal of our Risk Services businesses in the rest of Africa
will have an impact on the scale of overall operations in most countries
but we are of the opinion that significant opportunities for growth exist.
We are currently in the process of bringing closer operational alignment
between these operations and our South African Financial Services business.
The larger operations of Namibia and Botswana continued to deliver solid
results.
The short term insurance broking operations previously included within the
AfriNet network are included in the sale transaction mentioned earlier and
consequently also included in discontinued operations.
- International Financial Services
Income from operations increased by 3% to GBP119 million for the year and
trading profit decreased by 10% to GBP14 million. The United Kingdom and
European operations continued to be affected by the uncertain economic
environment and high levels of unemployment Due to financial pressures on
employers, as well as other pending legislative changes, many employers are
adopting a wait and see approach to employee benefit related expenditure.
Despite this, we continued to win new clients and capitalise on the demand
for consulting and investment advice as well as de-risking solutions.
LCP continued to perform well in these markets. Alexander Forbes Financial
Services made good progress in improving its quality of earnings through a
mixture of new services, larger clients and recurring, as opposed to
historic upfront, commission, in anticipation of the implementation of the
Retail Distribution Review in 2013.
- International Investment Solutions
Income from operations increased by 32% to GBP4.5 million for the year and
trading profit increased to GBP0.6 million. The overall assets under
management of the Company increased by 10% to total GBP1.57 billion at 31
March 2012 with positive cash flows accounting for 7% and investment return
3%. The focus continues to be the growth of UK-sourced assets under
management through delivery of both DB and DC pension and other investment
solutions.
- Discontinued operations
The Threshold Transaction, being the disposal of our Risk Services business
in South Africa, Botswana and Namibia, was implemented with effect 1
January 2012. The results included within discontinued operations in the
segmental report and in note 7 therefore include results of these
operations for 9 months and for the remaining Risk Services businesses in
Africa for 12 months. The comparative numbers include trading for a full
12 months in respect of these businesses. As mentioned above, the results
of continuing operations have also been adjusted to take account of shared
services costs previously allocated to the discontinued operations but that
are expected to continue after the disposal. These costs have therefore
been reallocated to the continuing businesses and comparative results of
the prior year similarly restated. These expenses amounted to R42 million
in the current year and R37 million in the prior year. Discontinued
operations in the prior year, and to a lesser extent in the current year,
also include certain smaller disposals unrelated to the Risk Services
disposal.
Regulatory capital changes
As previously reported, the introduction of the new capital adequacy
requirements for long-term insurers by the Financial Services Board (FSB)
took effect in June 2010. This is an interim measure in advance of the
implementation of the Solvency Assessment and Management framework (SAM)
expected to be implemented in 2014. The new requirements have significant
impact on the level of capital required to be carried in particular by
Investment Solutions as the required capital is determined based on the
level of liabilities. This requirement is irrespective of whether those
liabilities are solely as a result of linked investment contracts (as in
the case of Investment Solutions where no underwriting risk is taken) or
long term insurance liabilities where actual underwriting risk is taken.
In October 2011, the FSB issued further interim measures in respect of the
also short term insurance entities which resulted in further capital to be
maintained by Alexander Forbes Insurance and largely backed by cash or cash
equivalents.
In addition, the new liquidity requirements for financial advisory and
intermediary (FAIS registered) businesses from the end of December 2010
continues to impact on the level of cash required to be retained in the
businesses to meet these requirements. These requirements are typically a
function of expense base of various entities operating under different
categories of FAIS licenses and a number of further developments and areas
of clarification by the FSB, resulted in significant additional cash
resources having to be retained by the group.
Almost all the entities in the group are affected by these developments in
one way or another - be they long term insurers, short term insurers or
FAIS registered entities. Most entities in the group are therefore
required to maintain additional regulatory capital and these are largely
required to be backed by cash or cash equivalent assets which are held on
the various individual balance sheets of these entities. This cash would
otherwise have been available to reduce outstanding debt.
The larger part of these capital requirements have now been made. However,
the FSB indicated that the implementation of consolidated or group
supervision, although postponed from the original implementation date, will
now likely take place in early 2013. As a consequence, the current capital
and debt structure of the group is being reviewed to ensure that it best
meets the long term regulatory and operational requirements of the group.
As noted in previous announcements, the group made full payment of the
interest on the High Yield Term Loan for the six months ended 18 December
2011 and also made two additional interest payments on the High Yield Term
Loan resulting from the proceeds of the sale of the Risk Services
businesses. However, as communicated in an announcement dated 1 June 2012,
the normal High Yield Term Loan interest due on 18 June 2012, will be
postponed as a result of the additional regulatory cash requirements that
are required to be retained as explained above.
Prospects
Our strategic growth plans are being implemented with the caution and
responsibility appropriate in these uncertain economic circumstances.
Balancing the protection of our profitability while simultaneously driving
investment in the business, to achieve top-line revenue growth will ensure
the long term sustainability of the group and the delivery of superior
client and shareholder value creation. Periodically, environmental and
economic factors outside of our control may dictate where our emphasis
should lie. Our strategic growth areas and plans are well defined and
showing strong traction. We are managing the pace of transformation of our
business in those areas, while at the same time further developing our
strong position in the more mature areas by remaining agile and innovative
as well as finding operational efficiencies.
Change in directorate
There have been additional changes to the board of directors since the
publication of our results announcement for the year ended 31 March 2011,
on 14 June 2011. The board regrets to advise of the resignations of
Messrs: T Matiwaza and VR Ngalwana with effect from 30 September 2011. Mr
MD Collier was appointed independent director on 1 August 2011, and Mr D
Ngobeni was welcomed to the board, as a non-executive director, with Mr JS
Masondo as his alternate on 24 November 2011. The board would like to
thank the outgoing directors for their valuable contribution and welcome
the new appointees in their new roles.
On behalf of the board of directors:
M S Moloko E Chr Kieswetter
Chairman Group Chief Executive
Johannesburg
12 June 2012
SUMMARY CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2012
31 Mar 31 Mar
2012 2011
Notes Rm Rm
Continuing operations
Fee and commission income 3 4 594 4 189
Net income from insurance operations 4 385 368
Direct expenses attributable to fee and (686) (639)
commission income
Operating income net of direct expenses 4 293 3 918
Operating expenses (3 204) (2 922)
Profit from operations before non-trading and 1 089 996
capital items
Non-trading and capital items 5 (141) (135)
Operating profit 948 861
Investment income 169 49
Finance costs 6 (816) (785)
Share of net profit of associates (net of 1 -
income tax)
Profit before taxation 302 125
Income tax expense (365) (193)
Loss for the year from continuing operations (63) (68)
Discontinued operations
Profit on discontinued operations (net of 7 11 40
income tax)
Accumulated loss for the year (52) (28)
Loss attributable to:
Equity holders (129) (75)
Non-controlling interest holders 77 47
(52) (28)
Basic loss per ordinary share continuing (35) (28)
operations (cents)
Basic loss per ordinary share discontinued 1 8
operations (cents)
Basic loss per ordinary share all operations 8 (34) (20)
(cents)
(34) (22)
Headline loss per ordinary share continuing
operations (cents)
Headline loss per ordinary share continuing 3 8
operations (cents)
Headline loss per ordinary share all 8 (31) (14)
operations (cents)
Weighted average number of shares in issue 8 377 377
(million)
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2012
31 Mar 31 Mar
2012 2011
Notes Rm Rm
Loss for the year (52) (28)
Foreign currency translation differences of 89 10
foreign operations
Changes in fair value of cash flow hedges (39) (19)
Portion of fair value hedge transferred to 71 66
profit or loss
Other comprehensive income for the year (net 121 57
of income tax)
Total comprehensive income for the year 69 29
Total comprehensive (loss)/income
attributable to:
Equity holders (21) (29)
Non-controlling interest holders 90 58
Total comprehensive income for the year 69 29
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2012
31 Mar 31 Mar
2012 2011
Notes Rm Rm
ASSETS
Financial assets held under multi-manager 209 183
investment contracts 994 483
Financial assets of cell captive insurance 9 484 7 738
facilities
Property and equipment 165 201
Purchased and developed computer software 166 151
Goodwill 4 652 5 258
Intangible assets 1 437 1 728
Investments in associates 9 3 8
Deferred tax assets 110 145
Financial assets 1 209 426
Insurance receivables 896 713
Trade and other receivables 944 930
Cash and cash equivalents 3 053 3 093
Assets of disposal group classified as held 288 25
for sale
Total assets 232 203
401 899
EQUITY AND LIABILITIES
Equity holders` funds 2 139 2 142
Non-controlling interest 185 172
Total equity 2 324 2 314
Financial liabilities held under multi- 209 183
manager investment contracts 994 452
Liabilities of cell captive insurance 9 484 7 738
facilities
Borrowings 5 448 5 828
Employee benefits 158 165
Deferred tax liabilities 491 574
Provisions 265 392
Operating lease liability 29 67
Deferred income 69 120
Insurance payables 2 693 2 148
Trade and other payables 1 315 1 101
Liabilities of disposal group classified as 131 -
held for sale
Total liabilities 230 201
077 585
Total equity and liabilities 232 203
401 899
Total equity per above 2 324 2 314
Number of ordinary share in issue (millions) 377 377
Net asset value per ordinary share (cents) 616 614
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2012
31 Mar 31 Mar
2012 2011
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 1 080 1 248
Net finance costs paid (398) (334)
Cash settlement of cash management and (9) (16)
employee benefit commitments
Movement in working capital and insurance 728 452
balances
Taxation paid (242) (228)
Net cash inflow from operating activities 1 159 1 122
before cash flows from policyholder
investment contracts
Cash flows from policyholder investment (3 223) 845
contracts
Cash flows from operating activities - (4) (87)
Discontinued operations
Net cash inflow/(outflow) from operating (2 068) 1 880
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of subsidiaries and (153) 69
businesses
Repayment of assumed debt by acquirer 511 -
Net movement in financial assets (796) (225)
Proceeds from sale of other financial assets 10 49
Proceeds on disposal of property and 1 2
equipment
Capital expenditure for the year (131) (88)
Cash flows from investing activities - (2) 67
Discontinued operations
Net cash outflow from investing activities (560) (126)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings repaid (642) (287)
Payments to non-controlling interest (76) (25)
Cash flows from financing activities - 29 (55)
Discontinued operations
Net cash outflow from financing activities (689) (367)
Net movement in cash and cash equivalents (3 317) 1 387
Cash and cash equivalents at beginning of 22 066 20 690
year
Foreign subsidiaries translation adjustment 82 (11)
CASH AND CASH EQUIVALENTS AT END OF YEAR 18 831 22 066
Analysed as follows:
Cash and cash equivalents of discontinued 44 17
operations
Cash and cash equivalents of continuing 3 053 3 093
operations
Cash held under multimanager investment 14 984 18 469
contracts
Cash held under cell captive insurance 750 487
facilities
18 831 22 066
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2012
Share Non- Accumu- Equity Non- Total
capital distribut lated holders` controlling equity
and able loss interest
premium reserve
Rm Rm Rm Rm Rm Rm
At 31 March 3 261 (313) (777) 2 171 179 2 350
2010
(Loss)/ - - (75) (75) 47 (28)
Profit for
the year
Other - 46 - 46 11 57
comprehensive
income
Total - 46 (75) (29) 58 29
comprehensive
loss
Movement in - 15 (15) - - -
contingency
reserve of
short-term
insurance
company
Other - - - - (65) (65)
movements in
non-
controlling
interest
At 31 March 3 261 (252) (867) 2 142 172 2 314
2011
(Loss)/Profit - - (129) (129) 77 (52)
for the year
Other - 108 - 108 13 121
comprehensive
income
Total - 108 (129) (21) 90 69
comprehensive
loss
Movement in - (29) 29 - - -
contingency
reserve of
short-term
insurance
company
Other - - 18 18 (77) (59)
movements in
non-
controlling
interest
At 31 March 3 261 (173) (949) 2 139 185 2 324
2012
SEGMENTAL RESULTS
for the year ended 31 March 2012
Operating income net Profit from operations
of direct expenses before non-trading and
capital items
31 Var. 31 Mar 31 Mar Var. 31 Mar
Mar
2012 % 2011** 2012 % 2011**
Africa Continuing
Operations (Rm)
SA Financial 1 417 6% 1 339 336 13% 298
Services
AF Compensation 77 5% 73 27 (16%) 32
Technologies
Investment 551 14% 484 299 12% 266
Solutions
Guardrisk 312 10% 284 136 10% 124
AF Insurance 289 12% 258 89 16% 77
AfriNet 181 11% 163 31 19% 26
Total Africa 2 827 9% 2 601 918 12% 823
Continuing Operations
(Rm)
International (GBPm)
Financial Services 118.6 3% 115.0 13.7 (10%) 15.3
Investment 4.5 32% 3.4 0.6 100% 0.3
Solutions
Total International 123.1 4% 118.4 14.3 (8%) 15.6
(GBPm)
Total International 1 466 11% 1 317 171 (1%) 173
(Rm)
Total Continuing 4 293 10% 3 918 1 089 9% 996
Operations (Rm)
Discontinued 516 (26%) 693 93 (31%) 135
operations
Total Group 4 809 4% 4 611 1 182 5% 1 131
Operations (Rm)
Depreciation & Assets
Amortisation
31 Var. 31 Mar 31 Mar Var. 31 Mar
Mar
2012 % 2011** 2012 % 2011
Africa (Rm)
SA Financial 18 17 37 016 28% 28 976
Services
Investment 3 3 190 920 14% 167 891
Solutions
SA Risk Services 9 10 1 014 (25%) 1 357
AF Insurance 2 2 397 14% 347
Guardrisk 2 2 10 948 29% 8 511
AfriNet 3 4 2 307 15% 2 013
Total Africa (Rm) 37 (3%) 38 242 602 16% 209 095
International (GBPm)
Financial Services 1.7 1.4 127 13% 112
Investment - - 1 591 9% 1 454
Solutions
Total International 1.7 21% 1.4 1 718 10% 1 566
(GBPm)
Total International 21 16 21 166 24% 17 027
(Rm) 31%
Discontinued 3 2
operations
Unallocated:
Corporate Services 47 36 392 (64%) 1 099
Goodwill - - 4 652 (9)% 5 258
Consolidation - - (36 418) 28% (28 580)
elimination*
Total Group (Rm) 108 17% 92 232 401 14% 203 899
* This amount relates mainly to assets invested by group companies with
Investment Solutions
** The prior year comparative figures in the table above have been restated
following the disposal of the Risk Services Businesses and to take account
of certain shared services costs that were previously allocated to those
discontinued operations but that will be continuing.
NOTES
The summary consolidated financial statements have been prepared in
accordance with, International Financial Reporting Standards
("IFRS"), and comply with IAS 34 Interim Financial Reporting, the
Listing Requirements of the JSE Limited and the South African
Companies Act No 71 of 2008.
The accounting policies applied in the preparation of these summary
consolidated financial statements are consistent with those applied
in the annual financial statements for the year ended 31 March 2012.
These summary consolidated financial statements were compiled under
the supervision of Deon Viljoen, CA(SA), the Group Chief Financial
Officer.
The results have been audited by PricewaterhouseCoopers Inc and a copy of
their unqualified audit opinion is available for inspection at the
company`s registered office.
31 Mar 31 Mar
2012 2011
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 11.9 11.1
Closing R:GBP rate 12.3 10.9
31 Mar 31 Mar
2012 2011
Rm Rm
3. Fee and commission Income
Brokerage fees and commission income 148 142
Fee income from consulting and administration 3 167 2 850
services
Revenue from investment activities 1 226 1 123
Interest income from lending operations 14 30
Operational interest income 25 28
Other 14 16
Fee and commission Income 4 594 4 189
4. Net income from insurance operations
Insurance premiums earned 5 204 4 462
Less: amounts ceded to reinsurers (3 894) (3 132)
Investment income from insurance operations 129 107
Less: insurance claims and withdrawals (3 317) (2 834)
Plus: insurance claims and benefits covered 2 263 1 765
by reinsurance contracts
Net income from insurance operations 385 368
31 Mar 31 Mar
2012 2011
Rm Rm
5. Non-trading and other capital items
Non trading:
Professional indemnity insurance cell 37 (26)
Amortisation of intangible assets arising (174) (174)
from business combination
Fees relating to High-yield term loan - 3
restructure
Movements in provisions relating to - 79
historical client settlements, claims and
warrantees
- Other non trading items - 5
Capital items:
Goodwill impairment losses (1) -
Capital gain on sale of subsidiary & other (3) (22)
Total impairment losses and other capital (141) (135)
items
6. Finance costs
Finance costs derived from financial
liabilities classified and carried at
amortised costs:
Interest on term debt issued (742) (693)
Amortisation of debt raising fees capitalised (13) (13)
to borrowings
Interest on proposed client settlements (5) (6)
Capacity fee revolving credit facility - (2)
Interest on other borrowings - (17)
(760) (731)
Finance cost derived from financial
liabilities designated as fair value through
profit or loss:
Fair value adjustment on put and call options (56) (54)
Total finance costs (816) (785)
7. Discontinued operations
During the year under review and in the prior year, the group
disposed of certain businesses including the Risk Services
businesses (corporate insurance broking business) in the current
year. These businesses were classified as discontinued
operations for purposes of financial reporting. In line with
the requirements of IFRS 5, the comparative income statement has
been re-presented to show the discontinued operations separately
from continuing operations. As at the end of the financial
year, the sales transactions in respect of certain, less
material, of these discontinued operations are still in the
process of finalisation. Assets and liabilities held at year
end in respect of discontinued operations have been reclassified
as assets and liabilities of disposal groups held for sale. The
segmental results have also been re-presented to show the
effects of discontinued operations including the reallocation of
shared services expenses that were previously allocated to
discontinued operations but which remain in the continuing cost
base of the group. In addition, the operations of Guardrisk and
Alexander Forbes Insurance that were previously reflected as
part of the Risk & Insurance Services segment are now reflected
separately in line with changes in the operational management of
the group following the sale of Risk Services.
31 Mar 31 Mar
2012 2011
Rm Rm
Assets and liabilities of disposal group classified as held for sale
Long term assets 24 -
Goodwill (Including Purchase Price Allocation 110 -
of AF Acquisitions (Pty) Ltd)
Loan to group of companies - 4
Trade and other receivables 106 4
Other current assets 4 -
Cash and cash equivalents 44 17
Total assets 288 25
Deferred income 8 -
Provisions 3 -
Insurance related payables 88 -
Trade and other payables 32 -
Total liabilities 131 -
Summary income statement from discontinued operations
Income from operations 516 693
Operating expenses (423) (558)
Operating profit before non-trading and 93 135
capital items
Investment income 3 3
Non-trading and capital items (4) (12)
Finance costs (70) (81)
Share of profits from associates 4 3
Profit before tax 26 48
Taxation (9) (8)
Net profit for the period 17 40
Loss on disposals (mainly Risk Services & (6) -
Ticketseg)
11 40
31 Mar 31 Mar
2012 2011
Rm Rm
8. Calculation of headline loss per share
8.1 Basic loss per ordinary share
Basic loss per share is calculated by dividing the loss for
the year attributable to equity holders by the weighted
average number of ordinary shares in issue during the year.
8.2 Headline loss per ordinary share
Headline loss per share is calculated by excluding all non-
trading and capital gains and losses from the loss
attributable to ordinary shareholders and dividing the
resultant headline earnings/loss by the weighted average
number of ordinary shares in issue during the year. Headline
earnings/loss are defined in Circular 3/2009 issued by the
South African Institute of Chartered Accountants.
8.3 Calculation of headline loss per share
Loss attributable to equity holders (IAS 33 (129) (75)
earnings)
Adjusting items
- Impairment losses and other capital items 14 22
Headline attributable loss for the year (115) (53)
Weighted average number of shares (millions) 377 377
Basic loss per share (cents) (34) (20)
Headline loss per share (cents) (31) (14)
9. Investments in associates
Carrying value in balance sheet 3 8
Directors` valuation of associates 4 23
10. Capital expenditure for the year 131 88
11. Operating lease commitments
Due within one year 218 195
Thereafter 2 061 1 798
Total operating lease commitments 2 279 1 993
Capital expenditure and commitments will be funded from
internal cash resources.
Independent directors: M D Collier, D Konar, H P Meyer, B Petersen
Non-executive directors: L Hall-Kimm (Ms), N C Kolbe (Ms), D Ngobeni, M C
Ramaphosa, A Roux, J A van Wyk , A C de Beer (Alternate), J C Douin
(Alternate), J S Masondo (Alternate), M Z Mzimba (Ms) (Alternate)
Executive directors: M S Moloko (Chairman), E Chr Kieswetter (Group Chief
Executive),
D M Viljoen (Group Chief Financial Officer)
Company secretary & Investor relations: J E Salvado (Ms)
Registered office: Alexander Forbes Place, 61 Katherine Street, Sandown,
Sandton, 2196
Transfer secretaries: Computershare Investor Services Proprietary 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
Website: www.alexanderforbes.co.za
Date: 13/06/2012 08:46:52 Produced by the JSE SENS Department.
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