| Mon 4 Oct 2004, 9:02 | | DISPOSAL OF BUSINESS AND RENEWAL OF CAUTIONARY |
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IFS - DISPOSAL OF BUSINESS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
INDEPENDENT FINANCIAL SERVICES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1950/037061/06)
Share code: IND ISIN code: ZAE000025300
(`IFS` or `the company`)
DISPOSAL OF BUSINESS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Disposal of the insurance broking business
Shareholders are advised that an agreement has been concluded for the disposal
of the insurance broking business of IFS Insurance Brokers (Pty) Limited
(`IFSIB`), a wholly-owned subsidiary of IFS, to Multifund Financial and
Insurance Services (Pty) Limited (`the purchaser`), with effect from 1 October
2004 (`the disposal`). The unsolicited offer by the purchaser was made at a
market-related price and the rationale for the disposal is to realise value and
distribute the proceeds to IFS shareholders.
The determination of the purchase consideration is formula-linked, having regard
to different types of premium income and underwriting profit actually earned
during the 12 month period ending 30 September 2005. Based on the past
performance of the business, the quantum of the purchase consideration is
expected to amount to approximately R11 million. The purchase consideration is
payable in cash as to R4 891 124 on 1 October 2004, and, as to the balance,
subject to adjustment based on performance, after the final determination of the
total purchase consideration following the first anniversary of the effective
date.
The disposal agreement is subject to warranties which are normal for a
transaction of this nature. Mr John Walter Simpson (`Mr Simpson`), the chief
executive officer and controlling shareholder of the company, has undertaken to
vote in favour of the transaction. He has also agreed to a 7-year restraint of
trade for no consideration. In order to facilitate the transfer of the business
to the purchaser, Mr Simpson has agreed to provide the purchaser with consulting
services at a nominal remuneration of R15 000 per month for a minimum period of
3 months, subject to termination on a month`s notice. It is expected that this
arrangement will last for approximately 4 months.
The disposal is subject to fulfilment of the following resolutive conditions:
- the regulatory approvals of the Johannesburg Securities Exchange South
Africa and the Securities Regulation Panel; and
- the approval of IFS shareholders in general meeting.
Financial effects
Set out in the table below are the unaudited pro forma financial effects in
respect of the disposal of the IFS business on the audited results of the
company for the financial year ended 30 June 2004. The pro forma financial
effects are provided for illustrative purposes only in order to show the effect
of the abovementioned disposal and because of their pro forma nature may not
give a true picture of the financial position of IFS at 30 June 2004 or the
financial results for the period then ended.
Before the After the Change
disposal disposal (%)
Earnings per share (cents) 4,21 16,34 287,85%
Headline earnings per share (cents) 10,10 10,17 0,73%
Net asset value per share (cents) 41,90 55,23 31,81%
Tangible net asset value per share 13,28 26,61 100,40%
(cents)
Number of shares in issue and weighted
average number of shares in issue 34 000 34 000 -
(000`s)
Notes:
The pro forma financial effects above are based in their calculation on the
following assumptions:
- the effect on net asset value and tangible net asset value per share is
based on:
* 34 million shares in issue on 30 June 2004; and
* the disposal having been implemented on 30 June 2004;
- the effect on earnings per share and headline earnings per share is based
on:
* 34 million shares in issue during the period from 1 July 2003 to 30
June 2004; and
* the disposal having been effected on 1 July 2003;
* an after tax interest rate of 5,5% per annum; and
* that the gains in respect of the disposal are of a capital nature.
Realisation of remaining assets
The company has commenced a process of realising the assets of the car rental
business, Red Car Hire, on a piecemeal basis.
The suspensive condition relating to the sale by 62 Juta Street Braamfontein
(Proprietary) Limited, a wholly-owned subsidiary of IFS, of the company`s head
office building situated at 62 Juta Street, Braamfontein, Johannesburg, had not
been fulfilled and the agreement was accordingly cancelled. As a result, the
board has initiated steps to sell this property and the Norwood property on
auction subject to approval of shareholders in general meeting.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
In view of the ongoing process of realisation of assets, shareholders are
advised that these events may have an impact on the company`s share price and,
accordingly, that shareholders should continue exercising caution when dealing
in the company`s shares.
Johannesburg
1 October 2004
Sponsor
Merchant Sponsors (Proprietary) Limited
Corporate advisor
Corporate and Merchant Advisors Limited
Date: 04/10/2004 09:00:15 AM
Produced by the JSE SENS Department
