| Mon 21 May 2001, 0:00 | | Investment Solutions Holdings - Results |
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INVESTMENT SOLUTIONS HOLDINGS
- Headline EPS +60%
- Revenue +55%
- Dividend +77%
- Assets exceed R34 billion
Investment Solutions Holdings Limited,
operating primarily through its wholly owned subsidiary Investment Solutions
Limited, operates a multi-manager business, targeting institutional funds
and the private investor.
Investment Solutions is the largest provider of multi-manager investment
portfolios in the South African market, with total assets under management
of R34,2 billion at 31 March 2001. A comprehensive and defined investment
process, utilising a skilled and committed investment team and experienced
investment committee, leads to the creation of portfolios designed to
optimise the risk return profile of clients. Institutional funds access the
multi-manager portfolios through linked investment policies written by the
group's life company.
The private investor can access the multi-manager portfolios and a range of
unit trusts through a wide range of savings products and investment
portfolios, including retirement savings investment products, such as living
annuities, preservation funds, retirement annuities and umbrella pension
funds as well as discretionary savings products, such as endowment policies,
unit trusts and wrap funds.
Group income statement
31 March 31 March
2001 2000
Audited Audited
Notes R'000 Increase R'000
Revenue 310 899 55% 201 146
Operating expenses (214 060) 44% (149 080)
Operating profit 96 839 86% 52 066
Net investment income 3 22 804 8 327
Profit before tax 119 643 98% 60 393
Taxation (36 982) (18 079)
Profit attributable to
shareholders 82 661 95% 42 314
Headline earnings
adjustments
- Amortisation of
goodwill 87 -
- Restraint of trade
payments - 4 406
Headline earnings 82 748 77% 46 720
Headline earnings per
share (cents)
basic 29,2 60% 18,2
fully diluted 28,4 60% 17,8
Earnings per share
(cents)
basic 29,2 77% 16,5
fully diluted 28,4 77% 16,1
Dividend per share (cents) 77% 6,5
Number of shares ('000)
- issued 283 512 283 512
- weighted average 283 512 256 285
- diluted weighted average 290 896 263 141
Group balance sheet
31 March 31 March
2001 2000
Audited Audited
Notes R'000 R'000
ASSETS
Assets linked to policyholder
liabilities 2 32 649 417 28 639 526
Investments and loans receivable 60 733 52 321
Goodwill 1 652 -
Fixed assets 4 14 170 8 621
Current assets 224 245 97 183
Investments 55 479 -
Accounts receivable 36 082 26 561
Cash and cash equivalents 132 684 70 622
Total assets 32 950 217 28 797 651
EQUITYANDLIABILITIES
Ordinary shareholders' funds 167 702 103 469
Non-current liabilities 32 654 629 28 660 600
Policyholder liabilities 32 649 417 28 639 526
Deferred income taxes 5 212 21 074
Current liabilities 127 886 33 582
Accounts payable and provisions 77 580 31 885
Current tax liabilities 50 306 1 697
Total equity and liabilities 32 950 217 28 797 651
Supplementary information
31 March 31 March
2001 2000
R'000 R'000
Depreciation 3 447 226
Capital expenditure for the period 8 996 8 537
Capital expenditure for the coming period
Commitments in respect of contracts placed - 3 559
Budgeted expenditure (subject to specific
approval) 6 835 1 000
6 835 4 559
Operating lease commitments
Due within one year 4 562 5 171
Thereafter 15 480 21 334
20 042 26 505
Group cash flow statement
31 March 31 March
2001 2000
Audited Audited
R'000 R'000
Cash flow from operating activities
Cash generated from operations 129 425 48 665
Net investment income 22 804 8 327
Taxation paid (4 235) (4 780)
Dividends paid (18 428) -
129 566 52 212
Net cash movements in assets linked to
policyholder liabilities - (1 196)
Net cash from operating activities 129 566 51 016
Cash flow from investing activities
Fixed assets acquired (8 996) (8 537)
Proceeds on disposal of fixed assets - 610
Net increase in investments and loans
receivable (8 412) (52 321)
Increase in short-term investments (55 479) -
Acquisition of subsidiary (2 000) 1 350
Net cash used in investing activities (74 887) (58 898)
Cash flow from financing activities
Proceeds of share issues - ordinary - 179 106
Proceeds of share issues - preference - 65 000
Redemption of preference shares - (65 000)
Decrease in amounts owing to holding company - (129 000)
Net cash generated by financing activities - 50 106
Net increase in cash and cash equivalents 54 679 42 224
Cash balances of subsidiary acquired 7 383 -
Cash and cash equivalents at beginning
of year 70 622 28 398
Cash and cash equivalents at end of year 132 684 70 622
Statement of changes in equity
Share Share Retained
capital premium profits Total
R'000 R'000 R'000 R'000
Balance as at
1 April 1999 10 000 - 17 406 27 406
Profit attributable to
shareholders - - 42 314 42 314
Issue of shares 4 176 174 930 - 179 106
Capital reduction - (145 357) - (145 357)
Balance as at
31 March 2000 14 176 29 573 59 720 103 469
Balance as at
1 April 2000 14 176 29 573 59 720 103 469
Profit attributable
to shareholders - - 82 661 82 661
Dividend paid - - (18 428) (18 428)
Balance as at
31 March 2001 14 176 29 573 123 953 167 702
Notes
1. Basis of accounting
The results have been prepared on the historical cost basis, adjusted by the
revaluation of investments. The accounting policies as set out in the annual
financial statements for the year ended 31 March 2000 have been consistently
applied in producing the results.
2. Assets under management
In addition to assets linked to policyholder liabilities, off balance sheet
assets amounted to R1,6 billion, resulting in total assets under management
of R34,2 billion.
31 March 31 March
2001 2000
3. Net investment income R'000 R'000
Net interest received 20 361 11 869
Preference dividends received 2 443 -
Preference dividends paid - (3 542)
Net investment income 22 804 8 327
4. Fixed assets
Tangible 9 736 6 772
Intangible - software 4 434 1 849
Total 14 170 8 621
Review of operations
Results
Investment Solutions recorded another successful financial year with
significant growth in earnings and assets despite volatile global and
domestic financial markets.
- Headline earnings per share increased by 60% to 29,2 cents per share
- Total revenue increased by 55% to R311 million
- Headline earnings grew by 77% to R83 million
The significant growth in revenue and earnings resulted primarily from the
increase in average assets under management. Total assets under management
reached R34,2 billion at 31 March 2001. The growth in assets under
management during the year was influenced by weak South African and
international equity markets and it is pleasing to report that nearly all of
Investment Solutions' earnings growth was organic. Investment Solutions
(Jersey) Limited which was acquired in April 2000 made a small contribution
for the first time this year.
The board has declared an annual dividend of 11,5 cents per share
representing a 77% increase on the prior year. The dividend cover of 2,5
times has been maintained.
Strategic developments
There were a number of highlights during the year. In July 2000 the group
concluded a strategic alliance with The Frank Russell Company, the world's
leading multi-manager firm. The alliance was initiated so that Investment
Solutions could enhance its offering in South Africa and accelerate the
development of its international business.
At the beginning of the financial year, the group acquired 100% of
Investment Solutions Jersey Limited (formerly Alexander Forbes International
Limited), a fund management business based in Jersey. The construction of
Investment Solutions Jersey's offshore funds has been realigned subsequent
to the strategic alliance with Frank Russell.
In November 2000, the group finalised a multi-manager joint venture
agreement with Liberty Group Limited and Standard Bank Investment
Corporation Limited. The agreement involves the establishment of a separate
multi-manager joint venture company, Lodestone Investments, to provide multi-
manager products to the extensive distribution networks within the Liberty
and Standard groups. Investment Solutions will provide multi-manager
services to Lodestone for a market-related fee. At 31 March 2005, Investment
Solutions will acquire 40% of the joint venture company in return for the
issue of Investment Solutions shares.
Product developments
At the start of the financial year, Investment Solutions launched its new
"specialist mandate" range of products, tailored to the unique needs of
clients. The range has met with an enthusiastic response from both
institutional and private investors. The performance of this suite of
portfolios is well ahead of benchmark for its first 12-month reporting
period. Investment Solutions' other products have also achieved pleasing
returns and most are in line with or ahead of benchmark.
Share capital and share options
At year-end the number of shares in issue, being 283,5 million ordinary
shares, was unchanged from 31 March 2000. The number of shares over which
options were outstanding at 31 March 2001 was 15,7 million shares with an
average strike price of 263 cents per share. During the year the authorised
share capital was increased to 600 million ordinary shares of 5 cents each.
Strate
The shares of the company will be transferred to the new STRATE electronic
settlement system and commence dematerialisation on 28 May 2001. Trading for
electronic settlement on STRATE will commence on 18 June 2001 and the first
electronic settlements will take place on 25 June 2001. As of 18 June 2001
no paper scrip will be accepted for settlement and therefore shareholders
who have not yet entered the STRATE environment should appoint a Central
Securities Depository Participant (CSDP) as soon as possible.
Prospects
With the multi-manager industry in South Africa still in an early phase of
development, we remain confident that there is significant potential for
both private and institutional investors to place additional assets with
multi-managers. Investment Solutions, as the market leader, is well
positioned to continue to receive a meaningful proportion of these inflows.
The Frank Russell alliance has increased the marketability of our
international portfolios which are attractive not only as part of a total
investment solution for individuals but also as international-only solutions
for some of South Africa's larger institutions.
The additional business channels that have been developed, in particular the
Lodestone joint venture, have the potential to provide Investment Solutions
with increased assets under management.
With further potential for an improvement in the operating margin and a
strong, debt-free balance sheet, Investment Solutions is well placed to
continue delivering meaningful earnings growth.
For and on behalf of the Board
P J J van der Walt R I Gordon Sandton
Chairman Managing director 21 May 2001
Dividend declaration
Notice is hereby given that at a directors' meeting on 18 May 2001, dividend
number 2 of 11,5 cents per share was proposed and declared in respect of the
year ended 31 March 2001. The dividend is payable on or about 6 July 2001 to
ordinary shareholders registered as such on 29 June 2001.
Investment Solutions Holdings Limited
Company registration number: 1997/022540/06
Registered office: Investment Solutions Office Park, 63 Wierda Road East,
Wierda Valley, 2196, P O Box 786055, Sandton, 2146
Telephone: 27 (11) 505-6000 Fax: 27 (11) 505-6492 Email: info@ishltd.co.za
Website: www.investmentsolutions.co.za
Transfer secretaries: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg, 2001. Company secretary: R A Venter
Directors: P J J van der Walt* (Chairman), R I Gordon (Managing director),
TRTBohlmann*, C J Ginsburg, Q J Heaney*+, P L Heinamann*, M G Ilsley*, G W
Kerrigan*+, L D Lewis*, J H Vickers *Non-executive +British
Investor relations: To obtain more information on Investment Solutions or to
receive annnouncements from the company, please contact: Tel: 27 (11) 447-
3301; Fax: 27 (11) 447-3319 or ir@ishltd.co.za
