| Mon 5 Nov 2001, 0:00 | | Investment Solutions Holdings Limited - Unaudited |
|
to 30 September 2001
Company registration number: 1997/022540/06.
Share code: SLU
ISIN no.: ZAE 000019279.
- Revenue +27%
- Headline EPS +51%
- Assets of R37,8 billion
Investment Solutions Holdings Limited
Investment Solutions is the largest provider of multi-manager investment
portfolios in the South African market, with total assets under management
of R37,8 billion at 30 September 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
and unit trusts.
Unaudited results for the six months ended 30 September 2001
Group income statement
Six months ended Year ended
30 September 30 September 31 March
2001 2000 2001
Unaudited Increase Unaudited Audited
R'000 R'000 R'000
Revenue 177 395 27% 140 185 310 899
Operating expenses (116 033) 17% (99 059) (214 060)
Operating profit 61 362 49% 41 126 96 839
Net investment
income 11 916 8 132 22 804
Profit before
taxation 73 278 49% 49 258 119 643
Taxation (22 794) (15 930) (36 982)
Profit attributable
to shareholders 50 484 51% 33 328 82 661
Headline earnings
adjustment
Amortisation of
goodwill 63 - 87
Headline earnings 50 547 52% 33 328 82 748
Headline earnings
per share
- Basic (cents) 17,77 51% 11,76 29,19
- Diluted (cents) 17,31 51% 11,46 28,45
Earnings per share
- Basic (cents) 17,75 51% 11,76 29,16
- Diluted (cents) 17,29 51% 11,46 28,42
Number of shares
('000)
- issued 288 322 283 512 283 512
- weighted average 284 423 283 512 283 512
- weighted average
- diluted 292 020 290 832 290 896
Group balance sheet
30 September 31 March
2001 2001
Unaudited Audited
R'000 R'000
ASSETS
Assets linked to policyholder liabilities 36 266 922 32 649 417
Investments and loans receivable 83 569 60 733
Goodwill 3 073 1 652
Fixed assets 16 765 14 170
Current assets 207 581 224 245
Investments and loans receivable 56 513 55 479
Accounts receivable 45 552 36 082
Cash and cash equivalents 105 516 132 684
Total assets 36 577 910 32 950 217
EQUITYANDLIABILITIES
Ordinary shareholders' funds 202 283 167 702
Share capital and share premium 60 450 43 749
Retained profits 141 833 123 953
Outside shareholders' interests 497 -
Non-current liabilities 36 273 134 32 654 629
Policyholder liabilities 36 266 922 32 649 417
Long term liabilities 1 000 -
Deferred income taxes 5 212 5 212
Current liabilities 101 996 127 886
Trade and other payables 82 128 76 202
Provisions 931 1 378
Current tax liabilities 18 937 50 306
Total equity and liabilities 36 577 910 32 950 217
Supplementary information
30 September 30 September
2001 2000
Unaudited Unaudited
R'000 R'000
Depreciation 2 564 1 329
Capital expenditure for the period 5 145 5 569
Capital expenditure for the coming period
Commitments in respect of contracts
placed 1 601 1 337
Budgeted expenditure (subject to
specific approval) 1 174 6 328
2 775 7 665
Operating lease commitments
Due within one year 4 705 4 262
Thereafter 12 920 17 633
17 625 21 895
Group cash flow statement
30 September 30 September
2001 2000
Unaudited Unaudited
R'000 R'000
Cash flow from operating activities
Cash generated by operating activities 59 942 60 842
Net investment income 11 916 8 132
Dividends paid (32 604) (18 428)
Taxation paid (54 163) (3 332)
(14 909) 47 214
Net cash outflow from investing activities
Increase in investments and loans
receivable (23 870) (6 486)
Acquisition of subsidiaries (1 000) -
Fixed assets (5 145) (5 569)
(30 015) (12 055)
Net cash inflow from financing activities
Net proceeds of share issues - ordinary 16 701 -
Long-term liabilities raised 1 000 -
17 701 -
Net (decrease)/increase in cash and
cash equivalents (27 223) 35 159
Cash and cash equivalents at beginning
of period 132 684 70 622
Cash and cash equivalents of
subsidiary acquired 55 7 383
Cash and cash equivalents at end of
period 105 516 113 164
Statement of changes in equity
Share Share Retained Total
capital premium profits
R'000 R'000 R'000 R'000
Balance as at 1 April 2000 14 176 29 573 59 720 103 469
Profit attributable to
shareholders - - 82 661 82 661
Dividends paid - - (18 428) (18 428)
Balance as at 31 March 2001 14 176 29 573 123 953 167 702
Profit attributable to
shareholders - - 50 484 50 484
Dividends paid - - (32 604) (32 604)
Issue of share capital 240 16 461 - 16 701
Balance as at
30 September 2001 14 416 46 034 141 833 202 283
Embedded value
Embedded value and value of new business written
The embedded value of Investment Solutions Holdings as at 30 September 2001
is as follows:
30 September 31 March
2001 2001
R'000 R'000
Net value of in force business 1 542 814 1 189 097
Shareholder assets as per financial
statements 202 283 167 702
Total embedded value 1 745 097 1 356 799
The value at point of sale of new business written over the last six months
included above is R146 million.
Assumptions
The main assumptions in the embedded value of Investment Solutions Holdings
as at 30 September 2001 are as follows:
30 September 31 March
2001 2001
Risk discount rate 15.03% 16.57%
Investment returns Equities 14.03% 15.57%
Fixed interest
securities 11.03% 12.57%
Cash and short dated gilts 9.03% 10.00%
Expense inflation 8.00% 8.00%
Contribution/withdrawal inflation 10.00% 10.00%
Projection period 30 Years 30 Years
Note: Allowance has been made for capital gains tax where appropriate.
Analysis of change in embedded value
The embedded value over the past six months has experienced a rapid
increase. This is primarily due to a change in economic assumptions,
favourable operating experience and new business as noted above.
A full analysis of change will be reported at the end of the financial year.
Independent review
The methodology and assumptions have been independently reviewed by Southern
Africa Actuarial Consultants, who have confirmed that these are reasonable.
Review of operations
Results
Despite a period of extreme market volatility, Investment Solutions has
produced another strong set of financial results.
- Revenue increased by 27% to R177,4 million;
- Headline earnings increased by 52% to R50,5 million; and
- Headline earnings per share increased by 51% to 17,77 cents per share;
- Embedded value increased by 29%.
The strong growth in revenue arose primarily from an increase in average
assets under management. Profit growth was almost double revenue growth
reflecting the continued benefits of operational gearing.
Total assets reached R38 billion at the end of August 2001, but, as a result
of market conditions following the tragedy of 11 September closed the period
slightly lower at R37,8 billion (R34,2 billion at 31 March 2001). The growth
in assets resulted from continued pleasing new business flows with a
reasonable contribution from the market in the six months under review.
Dividend
Investment Solutions' policy is to declare a single annual dividend at the
end of each financial year.
Strategic developments
During the period, the group concluded the acquisition of an effective 76%
stake in Equip Direct Lending Solutions (Pty) Limited. Investment Solutions
has appointed Equip to conduct direct securities lending activities on its
behalf while continuing to lend scrip via the current arrangements with
agents. Investment Solutions believes that there is potential to accelerate
the development of its securities lending business. The benefits from
securities lending are shared between Investment Solutions' policyholders
and the company.
The progress of Investment Solutions (Jersey) has continued, with the
realignment of the portfolios now complete. Investment Solutions (Jersey)
recently received approval to market its products to investors in South
Africa.
Progress of the Lodestone Investments joint venture with Liberty Group and
Standard Bank has been slower than anticipated. Discussions are under way to
give impetus to the development of this business.
During September, Investment Solutions launched a new unit trust management
company, Investment Solutions Unit Trusts Limited. This move has enabled the
private investor to access the full multi-manager process through a wider
range of investment vehicles.
Investment Solutions (Namibia) was launched in September to bring multi-
manager products to the Namibian market.
Steven Braudo has been appointed deputy managing director of Investment
Solutions responsible for the operations of the business.
Prospects
The continued volatility being experienced in both the South African and
international equity markets represents an opportunity for multi-managers as
the multi-manager process is designed to reduce relative risk and volatility
in portfolios. Investment Solutions believes that there is significant
potential for multi-managers to attract new assets and remains confident
that, as the market leader, it will be able to capture a significant portion
of these assets. Structured portfolios is an area of Investment Solutions'
business that has also grown significantly during the current period.
The board anticipates that initiatives such as Investment Solutions' multi-
manager unit trust range, securities lending and the Namibian subsidiary
will begin to bear fruit in the second six months. However, the volatility
in equity markets, which is expected to continue, will have an impact on
assets under management.
The growth rate in headline earnings per share for the full year may be
lower than that achieved in the first six months because of the higher base
earnings in the second six months of the previous financial year. Earnings
will also be impacted by equity market conditions in the second six months.
Shareholders, however, can anticipate a satisfactory result for the full
financial year.
For and on behalf of the board
P J J van der Walt, Chairman Rael Gordon, Managing director
Sandton 5 November 2001
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
financial statements for the year ended 31 March 2001 have been consistently
applied in producing the results.
2. Share capital
Authorised share capital comprises 400 million ordinary shares of 5 cents
each. Issued share capital comprises 288322189 ordinary shares of 5 cents
each (2000: 283511578 ordinary shares of 5 cents each).
The unissued shares are under the control of the directors of the company
until the next annual general meeting of shareholders. 4810611 shares were
issued during the period at an average price of R3,47 per share in terms of
the Investment Solutions Share Incentive Scheme and Option Offer Scheme.
The number of shares over which options were outstanding at 30 September
2001 was 19 million shares with an average strike price of R2,83 per share.
Investment Solutions Holdings Limited
Company registration number: 1997/022540/06. Share code: SLU. ISIN: ZAE
000019279.
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
Executive management: S I M Braudo, R I Gordon, G K Silverman, J Taurog, N
van Hees, J H Vickers
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
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