| Mon 27 May 2002, 0:00 | | Investment Solutions Holdings Limited - Audited |
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Investment Solutions Holdings Limited - Audited Results For The Year Ended
31 March 2002
Share code : SLU
ISIN Code : ZAE000019279
Investment Solutions Holdings Limited
- Headline EPS +43%
- Revenue +29%
- Distribution per share +61%
- Assets reach R46,2 billion
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2002
Investment Solutions Holdings Limited operates a multi-manager business for
institutional funds and private investors. Investment Solutions is the
largest provider of multi-manager investment portfolios in the South African
market, with total assets under management of R46,2 billion at 31 March
2002.
A comprehensive and defined investment process, utilising a skilled and
committed investment team and an 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 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.
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
2002 2001
Audited Audited
R`000 Increase R`000
Revenue 400 444 29% 310 899
Operating expenses (257 162) 20% (214 060)
Operating profit 143 282 48% 96 839
Net investment income 27 729 22% 22 804
Equity accounted start up
loss of associate (520) -
Profit before taxation 170 491 42% 119 643
Taxation (50 690) (36 982)
Profit attributable to
shareholders 119 801 45% 82 661
Headline earnings adjustment
- Amortisation of goodwill 155 87
Headline earnings 119 956 45% 82 748
Headline earnings per share
(cents) 41,8 43% 29,2
Diluted headline earnings per
share (cents) 40,9 44% 28,4
Earnings per share (cents) 41,8 43% 29,2
Diluted earnings per share
(cents) 40,8 44% 28,4
Distribution per share (cents)18,5 61% 11,5
Number of shares (`000)
- issued 288 669 283 512
- weighted average 286 944 283 512
- diluted weighted average 293 583 290 896
CONSOLIDATED BALANCE SHEET
31 March 31 March
2002 2001
Audited Audited
R`000 R`000
ASSETS
Assets linked to policyholder liabilities 43 272 537 32 649 417
Investments and loans receivable 99 097 60 733
Investment in associate company 1 970 -
Goodwill 2 048 1 652
Fixed assets 17 369 14 170
Current assets 312 377 224 245
Investments and loans receivable 99 500 55 479
Accounts receivable 59 574 36 082
Cash and cash equivalents 153 303 132 684
Total assets 43 705 398 32 950 217
EQUITYANDLIABILITIES
Ordinary shareholders` funds 277 573 167 702
Share capital and share premium 61 060 43 749
Non-distributable reserve 5 363 -
Retained profits 211 150 123 953
Non-current liabilities 43 272 067 32 654 629
Policyholder liabilities 43 272 537 32 649 417
Deferred income tax (470) 5 212
Current liabilities 155 758 127 886
Trade and other payables 104 386 76 202
Provisions 1 566 1 378
Current tax liabilities 49 806 50 306
Total equity and liabilities 43 705 398 32 950 217
SUPPLEMENTARY INFORMATION
31 March 31 March
2002 2001
Audited Audited
R`000 R`000
Operating lease commitments
Due within one year 4 787 4 562
Thereafter 9 991 15 480
14 778 20 042
Depreciation 5 517 3 447
Capital expenditure for the period 8 716 8 996
Capital expenditure for the next
financial year 15 531 6 835
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 March 31 March
2002 2001
Audited Audited
R`000 R`000
Cash flow from operating activities
Cash generated from operations 159 141 129 425
Net investment income 27 729 22 804
Taxation paid (56 872) (4 235)
Dividends paid (32 604) (18 428)
97 394 129 566
Cash flow from investing activities
Fixed assets acquired (8 716) (8 996)
Increase in investments and loans
receivable (39 364) (8 412)
Increase in short term investments (44 021) (55 479)
Acquisition of subsidiaries and associate (1 985) (2 000)
(94 086) (74 887)
Cash flow from financing activities
Proceeds of ordinary share issues 17 311 -
17 311 -
Net increase in cash and cash equivalents 20 619 54 679
Cash and cash equivalents at beginning
of year 132 684 70 622
Cash and cash equivalents of subsidiary
acquired - 7 383
Cash and cash equivalents at end of year 153 303 132 684
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS` FUNDS
Year ended Year ended
31 March 31 March
2002 2001
Audited Audited
R`000 R`000
Balance at beginning of year 167 702 103 469
Profit attributable to shareholders 119 801 82 661
Dividends paid (32 604) (18 428)
Foreign subsidiaries` translation
adjustment 5 363 -
Issue of share capital 17 311 -
Balance at end of year 277 573 167 702
NOTES
1. Basis of accounting
The results have been prepared on the historical cost basis, adjusted by the
revaluation of investments and have been prepared in accordance with
statements of Generally Accepted Accounting Practice in South Africa. 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,
except for the reclassification of the foreign operation to a foreign
entity.
2. Share capital
Authorised share capital comprises 600 million ordinary shares of 5 cents
each. Issued share capital comprises 288668659 ordinary shares of 5 cents
each (2001: 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. 5157081 shares were issued during the
period at an average price of R3,36 per share.
EMBEDDED VALUE
Embedded value and value of new business written
The embedded value of Investment Solutions Holdings Limited as at 31 March
2002 is as follows:
31 March 31 March
2002 2001
R`000 R`000
Net value of in force business 1 528 415 1 189 097
Shareholder assets as per financial
statements 277 573 167 702
Total embedded value 1 805 988 1 356 799
The embedded value per share at 31 March 2002 is 625 cents.
The value at point of sale of new business written over the last 12 months
included above is R246 million or 85 cents per share.
A detailed analysis of change in embedded value for the year will be
included in the annual report.
ASSUMPTIONS
The main assumptions in the embedded value of Investment Solutions Holdings
as at31 March 2002 are as follows:
31 March 31 March
2002 2001
Risk discount rate 17,65% 16,57%
Investment returns
Equities 16,65% 15,57%
Fixed interest securities 13,65% 12,57%
Cash and short dated gilts 11,65% 10,00%
Expense inflation 8,65% 8,00%
Contribution/withdrawal inflation 10,65% 10,00%
Projection period 30 years 30 years
Note: Allowance has been made for capital gains tax where appropriate.
INDEPENDENT REVIEW
Southern Africa Actuarial Consultants, have independently reviewed the
methodology and assumptions and have confirmed that these are reasonable.
REVIEW OF OPERATIONS
RESULTS
Investment Solutions has had another year of excellent growth.
- Revenue increased by 29% to just over R400 million;
- Headline earnings reached R120 million, an increase of 45%; and
- Headline earnings per share rose 43% to 41,8 cents per share.
The strong growth in revenue and profits was organic as reflected by the 25%
increase in average assets under management. Total assets under management
climbed from R34,2 billion at the beginning of the financial year to R46,2
billion at 31March 2002, including R2,9 billion of non-life company assets.
The increase was made up of net new cash flows of R3,8 billion and market
growth of R8,2 billion. The investment performance of the underlying client
portfolios was very pleasing with all but one portfolio ahead of their
respective benchmarks for the 12 month period. Investment Solutions is thus
delivering on its promise of consistent, incremental out-performance over
time at reduced levels of risk.
STRATEGIC DEVELOPMENTS
In the first half of the year, the group concluded the acquisition of an
associate interest in Equip Securities Consultants (Pty) Limited ("Equip"),
a company involved in the business of securities lending. Equip has been
awarded the contract for conducting securities lending on behalf of
Investment Solutions Limited, whereby Equip shares in a portion of the
revenue earned from these activities. Although Equip made a loss in its
first year of operation, the team was successful in growing the loan book to
over R3 billion at year-end and the Equip business has now reached break-
even. The net profits to Investment Solutions from securities lending are
shared between the company and the policyholder portfolios from which the
securities are lent.
The Lodestone portfolios have now been seeded and have assets in excess of
R200 million. The group remains optimistic about the long-term prospects of
Lodestone.
Following the launch in September 2001 of Investment Solutions Unit Trusts
Limited, the group is able to offer multi-manager portfolios to a wider
potential customer base. Initially, three local unit trusts were registered
along similar lines to the specialist profile range offered by Investment
Solutions Limited. The group intends launching risk profiled funds and
international funds during the next financial year.
The group launched a business in Namibia during the financial year by
establishing a long term insurance company in Namibia. This company has
already had pleasing new business successes and is expected to reach break-
even in the next financial year.
The group established a subsidiary in the United Kingdom in the latter part
of 2001 with the intention of developing a business in that market. Justin
Taurog, a director of Investment Solutions Limited, has recently relocated
to the UK to spearhead this initiative.
MANAGEMENT AND BOARD CHANGES
The board wishes to express its appreciation to Rael Gordon, the managing
director of Investment Solutions from inception to 31 March 2002, for his
contribution to the success of the business over the last four and a half
years. The directors wish Rael every success in his new role at Alexander
Forbes Limited.
Steven Braudo was appointed managing director of the group with effect from
1 April 2002 and the board has every confidence that the business will
continue to flourish under the guidance of Steven and the executive team.
Leon Lewis will succeed Peet van der Walt as non-executive chairman on 1
July 2002. The board wishes to thank Peet for his contribution as chairman
and is pleased that he has agreed to remain on the board as a non-executive
director.
PROSPECTS
Continued market and industry volatility, coupled with the ever-increasing
complexity of investment choice, acts as a catalyst for the further growth
in the South African multi-manager market. As such, Investment Solutions
believes that significant potential exists for additional assets to move
across to multi-management and to Investment Solutions in particular. This
should lead to meaningful earnings growth in the year ahead.
For and on behalf of the board
P J J van der Walt S IM Braudo Sandton
Chairman Managing director 27 May 2002
CAPITAL DISTRIBUTION AND DIVIDEND DECLARATION
Notice is hereby given that at a directors` meeting on 24 May 2002, a
capital distribution out of share premium of 16 cents per ordinary share as
well as a dividend of 2,5 cents per ordinary share (collectively "the
distribution") was proposed and declared in respect of the year ended 31
March 2002, subject to specific approval by shareholders at the forthcoming
annual general meeting. The distribution is payable to ordinary shareholders
recorded in the register as such on 2 August 2002.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last day to trade cum the capital distribution
and dividend Friday, 26 July 2002
Date trading commences ex the capital
distribution and dividend Monday, 29 July 2002
Record date Friday, 2 August 2002
Date of payment Monday, 5 August 2002
Shares may not be dematerialised or rematerialised between Monday, 22 July
2002 and Friday, 2 August 2002.
INVESTMENT SOLUTIONS HOLDINGS LIMITED
Company registration number: 1997/022540/06 JSECode: SLU
ISIN:ZAE000019279
Registered office: Investment Solutions Office Park, 63 Wierda Road East,
Wierda Valley, 2196,PO 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: Computershare Investor Services Limited, 41 Fox
Street, Johannesburg, 2001.
Company secretary: R A Venter
Directors: P J J van der Walt* (Chairman), SIMBraudo (Managing director),
TRTBohlmann*,C J Ginsburg*, RIGordon*, 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, 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
