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Alexander Forbes Limited - Trading Update - Year Ended 31 March 2005 ALEXANDER FORBES LIMITED (Incorporated in the Republic of South Africa) (Registration number 1958/001974/06) Sharecode: AFB ISIN code: ZAE 000018230 TRADING UPDATE - YEAR ENDED 31 MARCH 2005 The following trading update is issued for the year ended 31 March 2005 and provides information concerning the operational performance of the group and the results of the review we advised would be undertaken of our International Risk Services business. Operational performance Africa region (principally South Africa) - Risk Services: The Risk Services (corporate insurance broking), Personal Services (personal lines insurance) and Guardrisk (cell captive insurance facilities) have combined to deliver strong growth in operating profit. - Financial Services: The Financial Services business has continued to record good results in line with the revenue and profit growth recorded at the half year. - Investment Solutions: The multi-manager investment business has delivered strong revenue and profit growth, benefiting from further net inflows of assets under management and favourable market conditions. Assets under management exceeded R82 billion at 31 March 2005. International region (principally United Kingdom) - Risk Services: Soft insurance markets, the weak dollar and cost pressures in the business continued to have an adverse impact on general trading of the International Risk Services business in the second half of the year. While revenues have decreased modestly by approximately 5%, the effect on profit is more significant with operating profit reducing to around GBP5.5 million for the full year. - Financial Services: The Financial Services businesses have recorded strong growth in the second half of the year, reflecting continued good growth in the UK Independent Financial Advisory business, an improved performance in Lane Clark & Peacock`s core UK actuarial consulting business and the benefits of its European acquisitions. This has resulted in a significant increase in the combined revenue and operating profit for the full year. - Investment Solutions: The UK business continued to successfully grow assets and members under administration. Strong new business has resulted in assets under management increasing to GBP450 million (R5 billion). As a result of the growth, the intragroup profit elimination highlighted previously has increased commensurately. - International Direct Marketing: The UK direct marketing business has continued to trade on a smaller scale in line with previous communications to shareholders. Overall effect on consolidated group results In aggregate, the provisional results reported by the various business units reflect a slight increase in consolidated revenue and a marginal decrease in consolidated operating profit for the year ended 31 March 2005. Review undertaken of International Risk Services At the time of the half year results announcement on 15 November 2004, we advised that we were undertaking a specific review of our International Risk Services business and indicated that there would be one-off costs associated with this review. Arising from the review, we have instituted a number of focussed actions within this business including: - Aggressively focusing on client retention, new business and revenue generation to capitalise on enhanced opportunities in the market. - Cutting costs with annualised savings of approximately GBP4 million achieved to date. Most of the benefit from these savings will only be felt in the new financial year. - Selectively recruiting key resources including the appointment of a new Operations Director and Head of our Retail business. We continue to recruit successfully from a number of our competitors. - Dealing with legacy issues. This has resulted in some provisions being required for bad debts and onerous leases. - Sale of our 20% shareholding in National Britannia for GBP5 million. One-off costs of approximately GBP9 million have been incurred resulting from the review. These costs, which include redundancy payments, bad debt write offs and provisions for onerous leases, will be separately reported as non- recurring costs in the group`s results. The combination of action already taken and plans in place will leave the International Risk Services business in a stronger position to capitalise on the growing number of opportunities in the market. Effect on headline earnings per share As detailed above, there has been a strong operational performance across most of the group`s businesses. This has been offset by the reduction in operating profit contribution from the UK Direct Marketing and International Risk Services businesses and the GBP9 million of non-recurring costs referred to above. The combined effect of these items, and the earnings dilution resulting from the repurchase of exchangeable bonds and equity issue to VenFin during the year, is that the group expects to record headline earnings per share of between 115 and 108 cents for the year ended 31 March 2005. This reflects a 15% to 20% decrease compared to the headline earnings per share reported for the previous financial year of 135 cents (as restated for the changes in accounting policies adopted in the interim results and reported in the interim report published on 15 November 2004). The above earnings information is based on the provisional results reported by the various business units and has not been audited or reviewed by the company`s auditors. The group is now in a closed period, which will end upon publication of the group`s results on or about 30 May 2005. Full details of the group`s audited results for the year ending 31 March 2005 will be published at this time. Johannesburg, South Africa 14 April 2005 Enquiries: Group Chief Executive Rael Gordon +44 207 933 2150 +27 11 269 0001 Group Finance Director Mike Ilsley +27 11 269 0153 Investor Relations Manager Debbie Kotzen +27 11 269 0024 This announcement is available on the company website, www.alexanderforbes.com. Lead Sponsor J.P. Morgan Equities Limited Joint Sponsor Investec Securities Limited
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