| Mon 4 Nov 2002, 10:03 | | Investments Solutions Holdings Limited - Unaudited |
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Investments Solutions Holdings Limited - Unaudited Results for the six months
ended 30 September 2002
Investments Solutions Holdings Limited
Isin code : ZAE000019279
Share code : SLU
- Headline EPS +32%
- Assets maintained above R45 billion despite market conditions
- Gross inflows in excess of R4,5 billion
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 R45,3 billion at 30 September 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.
Unaudited results for the six months ended 30 September 2002
CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 September 30 September 31 March
2002 2001 2002
Unaudited Increase Unaudited Audited
R`000 R`000 R`000
Revenue 223 904 26% 177 184 400 444
Operating expenses (145 902) (115 151) (257 162)
Operating profit 78 002 26% 62 033 143 282
Net investment
income 18 419 11 877 27 729
Equity accounted
loss of associate
company (44) (332) (520)
Profit before
taxation 96 377 31% 73 578 170 491
Taxation (28 330) (22 794) (50 690)
Profit attributable
to shareholders 68 047 34% 50 784 119 801
Headline earnings
adjustment
Amortisation of
goodwill 56 44 155
Headline earnings 68 103 34% 50 828 119 956
Headline earnings
per share (cents) 23,6 32% 17,9 41,8
Diluted headline
earnings per share
(cents) 22,9 32% 17,4 40,9
Earnings per share
(cents) 23,6 32% 17,9 41,8
Diluted earnings
per share (cents) 22,9 32% 17,4 40,8
Number of shares
- issued (`000) 288 965 288 322 288 669
- weighted average
(`000) 288 751 284 423 286 944
- weighted average
(`000)
- diluted 297 538 292 020 293 583
CONSOLIDATED BALANCE SHEET
30 September 31 March
2002 2002
Unaudited Audited
R`000 R`000
ASSETS
Assets linked to policyholder
liabilities 42 390 610 43 272 537
Investments and loans receivable 109 087 99 097
Investment in associate company 1 503 1 970
Goodwill 1 992 2 048
Fixed assets 15 308 17 369
Current assets 302 153 312 377
Investments and loans receivable 99 500 99 500
Accounts receivable 72 912 59 574
Cash and cash equivalents 129 741 153 303
Total assets 42 820 653 43 705 398
EQUITYANDLIABILITIES
Ordinary shareholders` funds 294 164 277 573
Share capital and share premium 15 501 61 060
Non-distributable reserve 6 686 5 363
Retained profits 271 977 211 150
Non-current liabilities 42 390 140 43 272 067
Policyholder liabilities 42 390 610 43 272 537
Deferred income taxes (470) (470)
Current liabilities 136 349 155 758
Trade and other payables 103 839 104 386
Provisions 1 566 1 566
Current tax liabilities 30 944 49 806
Total equity and liabilities 42 820 653 43 705 398
SUPPLEMENTARY INFORMATION
30 September 30 September
2002 2001
R`000 R`000
Depreciation 4 868 2 654
Capital expenditure for the period 2 807 5 145
Capital expenditure for the coming
period 6 794 2 775
Operating lease commitments
Due within one year 5 038 4 705
Thereafter 7 543 12 920
12 581 17 625
CONSOLIDATED CASH FLOW STATEMENT
Six months ended
30 September 30 September
2002 2001
Unaudited Unaudited
R`000 R`000
Cash flow from operations 70 787 61 373
Net investment income 18 419 11 877
Taxation paid (47 192) (54 163)
Dividends paid (7 220) (32 604)
Net cash flow from/(utilised in)
operating activities 34 794 (13 517)
Cash flow from investing activities
Fixed assets acquired (2 807) (5 145)
Increase in investments and loans
receivable (9 990) (22 836)
Increase in short term investments - (1 034)
Acquisition of associate - (1 490)
Net cash utilised in investing
activities (12 797) (30 505)
Cash flow from financing activities
Proceeds of ordinary share issues 650 16 701
Capital distribution (46 209) -
Net cash flow (utilised by)/from
financing activities (45 559) 16 701
Net decrease in cash and cash
equivalents (23 562) (27 321)
Cash and cash equivalents at beginning
of period 153 303 132 684
Cash and cash equivalents at end
of period 129 741 105 363
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Year ended
ended ended
30 September 31 March
2002 2002
Unaudited Audited
R`000 R`000
Balance at beginning of period 277 573 167 702
Profit attributable to shareholders 68 047 119 801
Dividends paid (7 220) (32 604)
Capital distribution (46 209) -
Foreign subsidiaries translation
adjustment 1 323 5 363
Issue of share capital 650 17 311
Balance at end of period 294 164 277 573
EMBEDDED VALUE
Embedded value and value of new business written
The embedded value of Investment Solutions Holdings as at 30 September 2002 is:
30 September 31 March
2002 2002
R`000 R`000
Net value of in force business 1 458 495 1 528 415
Shareholder assets as per financial
statements 294 164 277 573
Total embedded value 1 752 659 1 805 988
Total embedded value per share before
allowance for new business (cents) 606 626
The value at point of sale of new business written over the last six months
included above is R114 million.
Assumptions
The main assumptions in the embedded value of Investment Solutions Holdings as
at 30 September 2002 are as follows:
30 September 31 March
2002 2002
Risk discount rate 15,53% 17,65%
Investment returns
Equities 14,53% 16,65%
Fixed interest securities 11,53% 13,65%
Cash and short dated gilts 9,53% 11,65%
Expense inflation 6,53% 8,65%
Contribution/withdrawal inflation 8,53% 10,65%
Projection period 30 years 30 years
Note: Allowance has been made for capital gains tax where appropriate.
Analysis of change in embedded value over the past six months
Changes in the embedded value are primarily due to a reduction in asset values
as a result of unfavourable investment market conditions.
Independent review
The methodology and assumptions have been independently reviewed by external
actuaries, B&W Deloitte, who have confirmed that these are reasonable.
REVIEW OF OPERATIONS
Results
Despite volatile and difficult international and local equity markets,
Investment Solutions has again produced a strong set of results for the six
months ended 30September 2002.
- Revenue increased by 26% to just under R224 million;
- Headline earnings reached R68 million, an increase of 34%; and
- Headline earnings per share was up 32% to 23,6 cents per share.
The growth in revenue and profits was purely organic and was primarily due to an
increase in average assets under management from R37 billion in the first six
months of the previous financial year to R45,8 billion for the current six month
period, an increase of 24%. Total assets under management were R45,3 billion at
30 September 2002. Gross inflows of R4,6 billion were received during the six
months and the bulk of the outflows of R4,1 billion were attributable to partial
withdrawals to meet benefit payments, transfers and client fund restructures.
This net inflow of R500 million was countered by a R1,4 billion negative market
impact on assets during the six months.
It is noteworthy that most of Investment Solutions` income is recurring in
nature in that it is accounted for and received monthly, based on assets under
management. This is illustrated by the fact that less than 5% of the group`s
revenue for the six months arose from initial fees.
The investment performance of the underlying client portfolios was very
satisfactory with virtually all portfolios ahead of benchmark for the 12 month
period ending 30September 2002, delivering on our promise of consistent, above
average performance over time at reduced levels of risk. The Performer
portfolio, which is our largest portfolio, has delivered top quartile
performance over time when compared to the other managers in the Alexander
Forbes South African Large Manager Watch Survey.
Offer by Alexander Forbes
On 18 September 2002, it was announced that, subject to various conditions
precedent including the approval of Alexander Forbes shareholders, Alexander
Forbes would make an offer to acquire the shares in Investment Solutions
Holdings Limited not already owned by Alexander Forbes.
The offer proposed by Alexander Forbes is part of a greater black-empowerment
deal which provides for the sale of 30% of the South African business of
Alexander Forbes to a black empowerment company controlled by Millennium
Consolidated Investments (Proprietary) Limited. The sale will include the South
African business of Investment Solutions. The successful conclusion of the offer
by Alexander Forbes is a condition precedent to the empowerment transaction.
As announced on 18 September 2002, Alexander Forbes PLC has granted a call
option over 50,1% of Schroder Pensions Group to Investment Solutions at the
original transaction price agreed, which may be exercised should the offer by
Alexander Forbes (referred to above) not proceed for any reason.
The board of Investment Solutions appointed a sub-committee of directors who are
not also directors of Alexander Forbes to consider the offer. The sub-committee
appointed KPMG to advise the board and shareholders as to whether the offer is
fair to the minority shareholders and share incentive scheme participants of
Investment Solutions. KPMG has advised that it is of the opinion that the offer
is fair and reasonable to these parties. The sub-committee will be recommending
that shareholders accept the offer.
It is anticipated that comprehensive documentation relating to the offer will be
mailed to shareholders on or about 7 November 2002.
Prospects
Investment Solutions believes that there is still significant potential in the
South African market for additional assets to move to multi-management. As the
market leader, Investment Solutions is well positioned to receive a significant
proportion of these new multi-manager mandates.
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 high base earnings
achieved in the second half of the previous financial year. Earnings will also
be impacted by investment market conditions in the second six months.
Shareholders can however anticipate a satisfactory result for the full financial
year.
For and on behalf of the board
Leon Lewis, Chairman Steven Braudo, Managing director
Sandton 4 November 2002
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 2002 have been consistently applied in
producing the results.
2. Share capital
Authorised share capital comprises 600 million ordinary shares of 5 cents each.
Issued share capital comprises 288964909 ordinary shares of 5 cents each (2001:
288322189 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. 296250 shares were issued
during the period at an average price of R2,20 per share.
INVESTMENT SOLUTIONS HOLDINGS LIMITED
Company registration number:
1997/022540/06.
JSE 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: Computershare Investor Services Limited, 41 Fox Street,
Johannesburg, 2001. Company secretary: R A Venter
Directors: L D Lewis* (Chairman), SIMBraudo (Managing director), TRTBohlmann*, C
J Ginsburg*, RIGordon*, Q J Heaney*+, P L Heinamann*, M G Ilsley*, G W
Kerrigan*+,P J J van der Walt*, 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
Date: 04/11/2002 08:00:01 AM Produced by the JSE SENS Department
