| Tue 7 Aug 2001, 0:00 | | Liberty Group Limited: Interim Results For The Six |
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LIBERTY GROUP LIMITED
(Registration number 1957/002788/06)
(Incorporated in the Republic of South Africa)
LIBERTY well on course
Capital reduction of R3,5 billion paid to shareholders on 4 April 2001 is
having the desired effect - headline return on equity of continuing
operations increased to 24%.
Strong new business sales delivered despite testing business environment.
Outstanding investment performance continues on policyholder funds.
LIBERTY GROUP LIMITED INTERIM RESULTS
for the six months ended 30 June 2001
HIGHLIGHTS
- Headline earnings* + 15%
- Headline return on equity* 24%
- Total return on equity* 43%
- Annualised return on embedded value 27%
- Embedded value per share + 12%
- New business premium volumes + 18%
- Dividend per share* + 14%
* On continuing operations
COMMENTARY ON RESULTS
Liberty Group has performed well in the first half of 2001 with headline
earnings up 15%, new business sales up 18% and the return on equity
increased to 24%. Good progress has been made on implementing strategies set
for 2001 and the Group is well on course to meet its stated objectives for
the year.
CAPITAL REDUCTION AND RETURN ON EQUITY
The capital reduction of R3,5 billion which was announced in March 2001 was
paid to shareholders on 4 April 2001. In order to make the results for the
six months to 30 June 2001 comparable with those for the same period in
2000, the income attributed to the assets that were converted into cash and
distributed, has been identified and separately presented as proforma
earnings on the capital reduction. The remaining earnings on continuing
operations provide a fair representation of the results of ongoing
operations with the effect of the capital reduction eliminated on a
consistent basis from both the 2001 and 2000 results.
Annualised headline return on equity in respect of continuing operations
for the six months ended 30 June 2001 of 24% was more than 40% better than
the 17% (pre capital reduction) calculated at 31 December 2000.
Total return on equity (annualised) improved from 6% at 31 December 2000
to 43% at 30 June 2001 with the annualised return on embedded value of 27%
at 30 June 2001 increasing from 10% at 31 December 2000. These increases
were due mainly to the effect of the capital reduction as well as large
investment surpluses generated in the second quarter of 2001 in respect of
shareholders' assets.
The capital reduction has reduced the capital adequacy cover requirement
multiple from 5,7 at 31 December 2000 to a more appropriate 3,8 at 30 June
2001. The capital adequacy requirement increased by 15% from R1 693 million
at 31 December 2000 to R1 940 million at 30 June 2001 due to increased
levels of guaranteed products in-force.
HEADLINE EARNINGS
Headline earnings from continuing operations increased by 15% from R605
million for the six months ended 30 June 2000 to R695 million in respect of
the half year to 30 June 2001. On a per share basis headline earnings from
continuing operations reflect an increase of 14% from 223,5 cents in respect
of the six months ended 30 June 2000 to 255,7 cents in respect of the six
months ended 30 June 2001.
LIFE FUND OPERATING SURPLUS
As estimated by the Company's Statutory Actuary, total life fund operating
surplus for the six months ended 30 June 2001 of R594 million increased by
16% on the life fund operating surplus in respect of the six months ended 30
June 2000 of R510 million and reflects primarily the turnaround in
investment performance achieved. Management expenditure has been well
contained and is in line with actuarial assumptions.
NEW BUSINESS PRODUCTION
New business for the Group increased by 18% (17% indexed) from R4 091
million in respect of the six months ended 30 June 2000 to R4 824 million
for the six months ended 30 June 2001 despite a testing economic
environment.
Total new recurring premiums increased by 17% while new single premiums
increased by 18% compared with the same period in 2000.
Innovative products (e.g. United Kingdom Property Bond Product and a
Global Capital Bond Product), good relative investment returns delivered by
Liberty Asset Management (Libam) and a committed sales force contributed to
the pleasing production increases.
The Agency sales force headcount (including Franchise) increased from 1
663 at 31 December 2000 to 1 828 at 30 June 2001 and continues to be a key
driver in the production of new business sales.
NET INSURANCE CASH FLOW
Net cash flow from insurance operations for the Group (net premium inflow
less claims and policyholder benefits) was positive at R1 024 million for
the half year ended 30 June 2001 compared with a positive R1 057 million for
the same period in 2000.
Liberty company cash flow improved by 29% from a positive R598 million
net inflow in respect of the six months ended 30 June 2000 to R771 million
in respect of the current period. Net premium income increased by 17% from
R5 180 million for the six months ended 30 June 2000 to R6 035 million for
the six months to 30 June 2001. Claims and policyholders' benefits increased
by 15% from R4 582 million in the first half year of 2000 to R5 264 million
in the current period.
Cash flow of Liberty Group's wholly-owned subsidiary, Charter Life,
although still positive, has reduced from R512 million in the first half of
2000 to R253 million in the current period. This can be ascribed to a
reduction in single premium income and an increase in maturity claims.
EMBEDDED VALUE AND VALUE OF NEW BUSINESS
Total embedded value at 30 June 2001 of R13 441 million reflects an increase
of 13% on the value at 31 December 2000 of R11 941 million and translates
into an increase in embedded value per share of 12% from R43,95 per share at
31 December 2000 to R49,43 per share at 30 June 2001. It is estimated that
the total embedded value will reduce by R117 million (1% or 43 cents per
share) upon implementation of Capital Gains Tax (CGT) on 1 October 2001.
The 12% increase is largely attributable to the positive investment
surpluses attributable to shareholders' funds of R528 million at 30 June
2001 compared with investment deficits of R499 million at 30 June 2000.
During the first six months of 2001 shareholders' investment in the South
African Breweries plc (SAB) increased by R321 million (net of sales of R309
million), Metro Cash and Carry Limited (Metcash) by R54 million and other
investments by R153 million (mainly Gold Fields Limited and the general
pooled assets).
Total value of new business for the six months ended 30 June 2001 of R232
million is 12% higher than the R208 million calculated in respect of the
comparative period in 2000. The value of new business for the six months
ended 30 June 2001 is estimated to reduce by R7 million had CGT been taken
into account.
The new business margin (value of new business as a percentage of indexed
new business sales excluding natural inflationary increases in premiums) at
30 June 2001 of 20% was in line with the margin achieved in respect of the
full year ended 31 December 1999 of 20% and an improvement on the 18%
achieved for the full year ended 31 December 2000.
FINANCIAL SERVICES SUBSIDIARIES
Income from financial services subsidiary companies of R20 million for the
six months ended 30 June 2001 is 53% down on the R43 million recorded for
the comparative period in 2000 largely due to losses incurred by Electric
Liberty (R28 million including an amortisation and asset impairment charge
of R13 million) and Liberty Healthcare (R9 million for the six months ended
30 June 2001 compared with a profit of R5 million for the period ended 30
June 2000) as a result of the strain in acquiring increased new business
during the first half of 2001. Liberty Healthcare's principal membership
base has grown by 23% from the 19 000 at 31 December 2000 to the current
level of 23 300 following upon the launch on 1 April 2001 of ProCure, a
healthcare scheme for individual members. The R28 million
charge incurred by Electric Liberty during the first half of 2001 will not
be repeated in the second half of the year and is budgeted to be at R1
million per month for the remainder of the year. Liberty Unit Trusts
experienced an extremely successful flow of funds for the six months to 30
June 2001, increasing its net inflows (excluding money market funds) by 68%
from R547 million to R920 million. Liberty Ermitage has performed according
to budget.
Other subsidiary companies' results were on target or better than
expected.
INVESTMENT PERFORMANCE
The life fund operating surplus has been calculated based upon actual
investment returns achieved on policyholders' funds for the six months to 30
June 2001. The Managed portfolio return was positive for the six months
under review at 8,8% and compares with a negative return for the half year
ended 30 June 2000 of -2,2%.
The positive turnaround in investment returns is attributable to stronger
local equity and bond markets in the second quarter of 2001 as well as
Libam's continued outstanding relative investment performance. The Preferred
Assets portfolio has continued to be ranked in the first quartile of
performance for three, six and twelve months as well as three year rolling
periods. Thirteen of the sixteen Liberty Unit Trusts achieved first and
second quartile performance in respect of the twelve month period ended 30
June 2001. Liberty Ermitage's Alpha and Asset Select funds have produced
positive investment returns year to date against significantly negative
performance of world markets.
SECONDARY TAX ON COMPANIES (STC)
Due to the required change in accounting policy regarding the timing of
accounting for dividends and related STC, the headline earnings of
continuing operations for the current period under review do not include an
STC charge. The capital reduction included a notional final dividend, but
because the reduction was taken against the share premium account, this
notional final dividend was free of any STC liability. The dividend proposed
in respect of the half year ended 30 June 2001 of R348 million (to be
accounted for in the second half of 2001) will accordingly attract STC of
approximately R34 million. This will impact upon headline earnings for the
2001 full year.
PROSPECTS
Headline and total earnings, returns on equity and embedded value, new
business, value of new business and embedded value reflect good results for
the first half of 2001.
The life fund operating surplus for the full year remains dependent on
the performance of local and international equity and bond markets. Economic
conditions are expected to continue to be difficult, with market volatility
expected to continue until the World economy recovers.
A strong management focus will be retained towards achieving the
objectives set for Liberty in respect of 2001.
DIVIDEND
In keeping with the commitment to maintain a stable dividend cover linked to
medium-term trends, the Board has declared a dividend of 128,0 cents per
share in South African currency, payable to shareholders registered in the
books of the Company at the close of business on Friday, 24 August 2001.
This represents an increase of 14% compared with the proforma interim
dividend on continuing operations declared in 2000 (112,0 cents) at a cover
of 2 times on headline earnings per share of continuing operations as per
the income statement.
Payment in respect of dividends issued by the United Kingdom transfer
secretaries will be converted from Rand to the Sterling equivalent on 31
August 2001. Dividend cheques will be posted on or about 7 September 2001.
Derek Cooper Roy Andersen
Chairman Group Chief Executive
7 August 2001
REPORT BACK ON 2001 OBJECTIVES
Redeploy shareholder investments into financial services
Excess capital has been returned to shareholders by way of a capital
reduction of R3,5 billion which was completed on 4 April 2001. Evaluation of
local and offshore financial services opportunities is being actively
pursued in relation to remaining shareholders' funds.
Individual business - leverage the strong position in the upper-income
market
New business sales of Liberty Personal Benefits have increased by 17%
(indexed), with new single premiums up 35% and new recurring premiums up
11%. Liberty Ermitage funds were launched during the second quarter with
strong sales from South Africa of R153 million already recorded. A number
of other products were also successfully launched and include a United
Kingdom Property Bond Product and a Global Capital Bond Product. A new range
of freestanding dread disease products with market leading benefits
especially positioned for women and children was developed during the second
quarter and launched to the market in July 2001. Early sales figures are
encouraging.
Implement customer value management programme
A number of initiatives are in progress with the initial focus on improved
customer interaction, market analytics and intermediary productivity. Each
initiative is individually cost justified and early results are positive,
with higher retention rates achieved for a targeted tranche of maturities.
Expand Liberty Corporate Benefits' business
Indexed corporate new business sales increased by 14% with recurring new
business premiums increasing by 16%. The efforts of the past two years have
started to show positive results in respect of volume of new recurring
business, profitability, service delivery and implementation of system
enhancements. The foundation has been laid for attaining preferred provider
status and ongoing profitable growth into next year.
Drive continued growth in Bancassurance
Sales of 'complex business' products through Stanfin have been adversely
affected by restructuring within Stanfin. Total new business premiums
generated through the Bancassurance relationship with Standard Bank for the
six months to 30 June 2001 amounted to R686 million, 8% up on the R632
million in respect of the six months ended 30 June 2000. Credit Life and
Group Life business is selling well and volumes are up 53% to R116 million
for the six months to 30 June 2001. Funeral policies are being sold at over
5 000 per week (currently 267 000 policies on record against 120 000 at 30
June 2000). Charter Life has launched a new Child Education Plan for
Stanfin's consultants which is expected to be very popular.
Provide private banking services to clients
The private banking services initiative is on track and is being developed
by Standard Bank with support from Liberty. Liberty will benefit from the
private banking profits on the clients and sales it introduces.
Achieve further synergies with Stanbic
Lodestone, the multi-manager joint venture between Liberty, Investment
Solutions and Standard Bank is operational and is set to deliver new
business in the second half of 2001. Further synergies are being actively
pursued.
Establish an empowerment partnership
On 4 July 2001 Liberty announced an entry into the empowerment arena with
the formation of a new Financial Services company - Simeka Financial
Services (Pty) Limited . Simeka have an excellent track record with their
client base in the Public Sector as management consultants. Liberty will be
providing its experience and financial services infrastructure to Simeka
who, in turn, will provide financial services solutions to its target market
of the Public Service with the initial focus on asset management.
Position Liberty Ermitage for international expansion
The Liberty Ermitage private client business is integrating well with South
African demand for private client funds. Liberty is generating good new
business sales through this operation and will continue to expand its
product range and distribution capabilities using Liberty Ermitage as a
base. In addition, Ermitage's focus on the wholesale and high net worth
market in continental Europe and the United States is being addressed
through significant strengthening of its own international distribution
force. Liberty Ermitage's sales for the six months to 30 June 2001 in
respect of its Hedge funds and Long funds amounted to US$100 million (R795
million).
SUMMARISED GROUP BALANCE SHEET
(unaudited) (audited)
30 June 31 December
2001 2000*
Rm Rm
Assets
Investments 74 986 71 543
Goodwill 115 123
Intangible assets 44 58
Office furniture, computer equipment
and other tangible assets 362 310
Deferred taxation 65 63
Current assets 2 879 3 848
Total assets 78 451 75 945
Capital, reserves and liabilities
Shareholders' funds 7 397 9 616
Minority interests 1 1
Life funds 66 187 62 138
Convertible bonds 1 906 1 827
Retirement benefit obligation 122 114
Current liabilities 2 838 2 249
Total capital, reserves and liabilities 78 451 75 945
Total assets under management 118 435 113 675
Capital adequacy requirement 1 940 1 693
Capital adequacy multiple 3,8 5,7
* Restated for changes in accounting policies.
SUMMARISED GROUP INCOME STATEMENT
Continuing Capital Total
operations reduction operations
(unaudited) (unaudited) (unaudited)
Six months Six months Six months
ended ended ended
30 June 30 June 30 June
2001 2000* Change 2001 2000* 2001 2000*
Rm Rm % Rm Rm Rm Rm
Life fund
operating surplus 594 510 16 594 510
Revenue earnings
attributable to
shareholders' funds 121 95 27 47# 92# 168 187
Preference dividend
in subsidiary
company (20) (20)
Headline earnings 695 605 15 47 92 742 697
STC relating to
capital reduction (233) (233)
Goodwill
amortisation (8) (8)
Investment surpluses
/(deficits)
attributable to
shareholders' funds 515 (425) 221 13 (74) 528 (499)
Total earnings 1 202 180 568 (173) 18 1 029 198
Earnings per share details:
Headline earnings per share
- Basic (cents) 255,7 223,5 14 17,3 34,0 273,0 257,5
- Fully diluted
(cents) 248,2 220,6 13 15,8 31,5 264,0 252,1
Total earnings per share
- Basic (cents) 442,2 66,5 565 (63,6) 6,6 378,6 73,1
- Fully diluted
(cents) 418,3 74,8 459 (58,0) 6,2 360,3 81,0
Weighted average
number of ordinary
shares in issue
(millions) 271,8 270,7 - 271,8 270,7 271,8 270,7
Number of ordinary
shares in issue
(millions) 271,9 270,8 - 271,9 270,8 271,9 270,8
Fully diluted
weighted average
number of
ordinary shares
in issue (millions) 298,1 291,5 2 298,1 291,5 298,1 291,5
* Restated for changes in accounting policies.
# The proforma earnings attributable to the capital reduction for the six
months ended 30 June 2000 represent the earnings that were attributed to
shareholders' assets that were utilised to fund the capital reduction on 4
April 2001. The proforma earnings for the six months ended 30 June 2001
represent the earnings determined as outlined above up to 4 April 2001.
EMBEDDED VALUE AND VALUE OF NEW BUSINESS
Post-CGT(1) Pre-CGT
(unaudited) (unaudited) (audited)(3)
30 June 30 June 31 December
2001 2001 2000 Change
Rm Rm Rm %
Risk discount rate 13,25% 13,25% 15,00%
Shareholders' net assets 7 397 7 397 9 616
Capital reduction including STC (3 493)
Shareholders' net assets after
capital reduction 7 397 7 397 6 123 21
Net value of life business in force 4 846 4 963 4 822 3
Value of life business in force 4 918 4 963 4 832 3
Cost of solvency capital (2) (72) (10)
Financial services subsidiaries
fair value adjustment 1 081 1 081 996 9
Embedded value 13 324 13 441 11 941 13
Embedded value per share R49,00 R49,43 R43,95 12
Six months Six months Six months
ended ended ended
30 June 30 June 30 June
2001(1) 2001 2000
Value of new business
written during period 225 232 208 12
The risk discount rate and other economic assumptions used are consistent
with the actual market conditions in the South African economy as at 30 June
2001 with the more significant assumptions being:
30 June 31 December
2001 2000
% %
Government stock return 11,25 13,00
Equity return 13,25 15,00
Property return 12,25 14,00
Risk discount rate 13,25 15,00
Maintenance expense inflation rate 7,43 9,05
(1) Capital Gains Tax (CGT) is scheduled to be introduced on 1 October 2001.
The column headed Pre-CGT provides the embedded value making no allowance
for CGT and is consistent with the values shown for the previous year. In
order to show the impact CGT is likely to have the column headed Post-CGT
provides the values assuming CGT applies.
(2) The cost of solvency capital arises from the difference between the net
after-tax expected return on the shareholders' assets backing the capital
adequacy requirement and the risk discount rate. This difference is
increased by the introduction of CGT.
(3) The shareholders' net assets after capital reduction and consequently
the embedded value at 31 December 2000, have been reduced by R30 million for
changes in accounting policies compared with the figures previously
published.
STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
(unaudited) (audited)
30 June 31 December
2001 2000
Rm Rm
Shareholders' funds at beginning of period
as previously published 6 152 9 172
Prior year adjustments
Capital reduction of 1 200 cents
- LDR 30 March 2001 3 260
STC relating to the capital reduction 233
1999 final dividend No. 68 of 140 cents
- LDR 31 March 2000 378
STC relating to the 1999 final dividend 35
Provision for leave pay (29) (32)
Restated shareholders' funds at
beginning of period 9 616 9 553
Total earnings as restated for changes
in accounting policies 1 029 722
Total earnings as previously published 521
Prior year adjustments
STC relating to capital reduction 233
STC relating to the 1999 final dividend (35)
Provision for leave pay 3
Ordinary dividends (738)
1999 final dividend No. 68 of 140 cents
- LDR 31 March 2000 (378)
2000 interim dividend No. 69 of 133 cents
- LDR 1 September 2000 (360)
Capital reduction of 1 200 cents
- LDR 30 March 2001 (3 260)
Exchange difference relating to
equity component of the convertible bond 3 19
Subscriptions for shares 9 60
Shareholders' funds at end of period 7 397 9 616
ANALYSIS OF SHAREHOLDERS' FUNDS
Group Group Group
investment
Funds invested Net revenue earned Surpluses/
(deficits)
(unaudited) (audited) (unaudited) (unaudited)
At Six months ended Six months ended
30 June 31 December 30 June 30 June 30 June 30 June
2001 2000* 2001 2000* 2001 2000*
Rm Rm Rm Rm Rm Rm
Charter Life
(excluding life fund
operating surplus) 587 521 14 14 38 (11)
Operating income from
financial services
subsidiaries 715 673 20 43 12 (24)
Listed investments 2 434 2 447 56 90 432 (502)
Edcon 66 59 1 2 7 (27)
Liberty International 30 324
Metcash 169 83 - 6 54 (220)
The South African
Breweries 1 957 2 109 47 50 321 (549)
Other equities 242 196 8 2 50 (30)
Other investments 3 661 5 975 120 142 46 38
Cash and
cash equivalents 418 3 002 65 120 (3) -
Cash and
cash equivalents
- Jersey assets 2 043 1 983 75 2 120 (3)
Convertible bonds (1 906) (1 827) (76) (62) (120) (160)
Unlisted equities 5 5 - - - -
Share of pooled
portfolios, etc. 3 101 2 812 56 82 49 201
Management expenses (23) (20)
Taxation (19) (82)
7 397 9 616 168 187 528 (499)
* Restated for changes in accounting policies.
ANALYSIS OF NEW BUSINESS SALES
Single Recurring Total
premiums premiums premiums
(unaudited) (unaudited) (unaudited)
Six months ended Six months ended Six months ended
30 June 30 June 30 June
2001 2000 2001 2000 2001 2000 Change
Rm Rm Rm Rm Rm Rm %
Personal Benefits 2 937 2 420 829 709 3 766 3 129 20
Corporate Benefits 892 819 166 143 1 058 962 10
Total new business 3 829 3 239 995 852 4 824 4 091 18
Change 18% 17% 18%
New business index 1 378 1 176 17
NET CASH INFLOWS FROM INSURANCE OPERATIONS
Personal Corporate
Benefits Benefits Total
(unaudited) (unaudited) (unaudited)
Six months ended Six months ended Six months ended
30 June 30 June 30 June
2001 2000 2001 2000 2001 2000 Change
Rm Rm Rm Rm Rm Rm %
Total premium
income 5 132 4 417 1 650 1 501 6 782 5 918 15
Single premiums 2 801 2 297 892 822 3 693 3 119 18
Recurring premiums 2 331 2 120 758 679 3 089 2 799 10
Total claims and
policyholders'
benefits (4 338) (3 599) (1 420) (1 262) (5 758) (4 861) 18
Net premium /
benefit cash flow 794 818 230 239 1 024 1 057 (3)
COMMITMENTS
(unaudited) (audited)
30 June 31 December
2001 2000
Rm Rm
Estimated amounts of commitments
for future expenditure 90 126
Under contracts 57 100
Authorised by the directors
but not contracted 33 26
The expenditure will be financed by available bank facilities, existing cash
resources and funds internally generated.
SUMMARISED GROUP CASH FLOW STATEMENT
(unaudited)
Six months ended
30 June
2001 2000
Rm Rm
Cash flow from operating activities 1 844 1 361
Capital reduction including related STC paid (3 493)
Net disposal/(purchase) of investments 743 (1 452)
Cash flow from financing activities 13 84
Net decrease in cash and cash equivalents (893) (7)
Cash and cash equivalents at beginning of period 1 424 734
Foreign exchange movements on cash balances (1) 95
Cash and cash equivalents at end of period 530 822
RELATED PARTY TRANSACTIONS
Holding company
Liberty's immediate holding company is Liberty Holdings Limited, which in
turn is controlled by Standard Bank Investment Corporation Limited, the
Company's ultimate holding company. Liberty provides certain administrative
and secretarial services to Liberty Holdings Limited for which it is
reimbursed at cost.
Banking arrangements
The group makes use of banking facilities provided by its ultimate holding
company (Standard Bank Investment Corporation Limited). At 30 June 2001
substantially all of the cash and cash equivalents amounting to R396 million
(31 December 2000: R648 million) were held with Stanbic. In addition, term
deposits and other money market securities with Standard Bank amount to R203
million at 30 June 2001 (31 December 2000: R597 million). These deposits
were made in the normal course of business at prevailing market rates.
Property lease agreements
Certain related parties of the Group are lessees in terms of arms' length
property lease agreements with Liberty Group Limited. Rentals and management
fees received by Liberty Group Limited from related parties for the six
months ended 30 June 2001 amount to R23 million (2000: R20 million).
Bancassurance
Liberty and Charter Life have entered into a joint venture agreement with
Standard Bank Investment Corporation for the sale and promotion of life
insurance products. New business premium income received in respect of this
business generated by Liberty and Charter Life for the six months ended 30
June 2001 amounted to R686 million (2000: R632 million).
Insurance policies
Inter-group insurance policies are eliminated on consolidation. No premium
income was received in this regard in respect of the six months ended 30
June 2001 (2000: R52 million).
Investment in Lodestone Investments
During the period under review Liberty Group Limited invested R10 million in
Lodestone Investments Limited, the multi-manager joint venture between
Liberty, Standard Bank and Investment Solutions.
ACCOUNTING POLICIES AND PRESENTATION
The accounting policies adopted for purposes of reporting at 30 June 2001
comply, in all material respects, with South African Statements of Generally
Accepted Accounting Practice, as well as the South African Companies Act of
1973 and the Long-term Insurance Act of 1998.
These accounting policies are consistent with those applied at 31 December
2000 except for:
* the adoption of the new accounting statement on Events After The Balance
Sheet Date (AC 107). In terms of this statement, dividends proposed or
declared after the balance sheet date and related STC are not recognised as
a liability at the balance sheet date. This change in the recognition of
liabilities relating to dividends has been applied retrospectively and
comparative figures have also been restated. The capital reduction which
was paid on 4 April 2001 has also been accounted for as a first half 2001
transaction in accordance with the new accounting statement;
* the adoption of the revised accounting statement on Employee Benefits (AC
116) in terms of which leave pay provisions have been recognised in respect
of past service of employees. This change has been applied retrospectively
and comparative figures as well as opening retained earnings in respect of
2000 have been restated;
* the determination of the life fund operating surplus and capital adequacy
requirement, which reflect the Statutory Actuary's best estimate for interim
reporting purposes. A full actuarial valuation is not performed at the half
year.
The income statement reflects earnings from continuing operations separately
from proforma earnings attributable to the capital reduction in order to
make comparison of results more meaningful. The proforma earnings
attributable to the capital reduction for the six months ended 30 June 2000
represent the earnings that were attributed to shareholders' assets that
were utilised to fund the capital reduction on 4 April 2001. The proforma
earnings for the six months ended 30 June 2001 represent the earnings
determined as outlined above up to 4 April 2001.
Transfer secretaries - South Africa Transfer secretaries - United Kingdom
Mercantile Registrars Limited Capita IRG plc
10th Floor, 11 Diagonal Street, Bourne House
Johannesburg, 2001 34 Beckenham Road
PO Box 1053, Johannesburg,2000 Beckenham, Kent BR34TU
Telephone (011) 370-5000 Telephone (0208) 639-2000
