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African Life/ Momentum - Revised financial effects on the proposed disposal
African Life Assurance Company Limited
(Incorporated in the Republic of South Africa)
Registration Number: 1911/003818/06
JSE code: AFI
ISIN code: ZAE000000246
(`African Life`)
Momentum Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1904/002186/06)
(`Momentum`)
REVISED FINANCIAL EFFECTS ON THE PROPOSED DISPOSAL BY AFRICAN LIFE OF AFRICAN
LIFE HEALTH PROPRIETARY LIMITED (`ALH`) TO MOMENTUM
1. Introduction
Further to the detailed terms announcement published on SENS on 10 August 2005
and in the press on 11 August 2005, relating to the proposed disposal of the
entire issued share capital of and shareholders loans in ALH to Momentum (`the
disposal`) for a cash consideration of R175.8 million plus the reimbursement of
transaction costs of R11.1 million (plus VAT).
African Life shareholders are advised that the financial effects which were
published in the announcement relating to the disposal have been revised.
2. Revised financial effects on the disposal
2.1 The table below sets out the unaudited pro forma financial effects of the
disposal on African Life ordinary shareholders based on the assumptions set
out below. The unaudited pro forma financial effects have been prepared
for illustrative purposes only, in order to provide information about how
the disposal may have affected African Life ordinary shareholders pursuant
to the disposal had the disposal been implemented on 31 March 2005 for the
purpose of adjusting the net asset value and the embedded value, and on 1
April 2004, for the purpose of adjusting the earnings. Due to their
nature, the unaudited pro forma financial effects may not give a fair
reflection of the financial effects of the disposal. These pro forma
financial effects are the responsibility of the African Life board of
directors.
2.2 The revised calculation of the financial effects now takes into account the
settlement after 31 March 2005 of certain ALH third party debt against
shareholder loans. This includes the last tranche payment in respect of
the acquisition by ALH in January 2004 of the entire issued share capital
of and claims against Amanzi Health Administrators (Proprietary) Limited
(`Amanzi`). The revision impacts profit on the disposal, Capital Gains Tax
and interest on net proceeds of the disposal. The revised table of
financial effects is shown below.
% change
Adjustments before vs.
Before the arising from After the after the
disposal(1) the disposal(2) disposal disposal
Basic earnings per
share(cents)(3, 4, 5) 281.9 72.7 354.6 25.8
Headline earnings per
shares (cents)(5) 244.2 (6.2) 238.0 (2.5)
Net asset value per
share (Rand)(3, 4) 18.59 0.79 19.38 4.2
Net tangible asset
value per share
(Rand)(3, 4) 17.67 1.26 18.93 7.1
Embedded value per
share (Rand)(3, 4) 22.76 0.79 23.55 3.5
Notes on assumptions:
1 The column `Before the disposal` has been extracted from African Life`s
audited published results for the year ended 31 March 2005 and does not
take into account the final dividend of 63.5 cents per ordinary share
declared by African Life on 7 June 2005 and paid to African Life ordinary
shareholders on 4 July 2005.
2 The earnings and asset value of ALH have been deconsolidated from the
consolidated African Life earnings, net asset values and embedded value.
3 The cash consideration of R175.8 million for ALH is allocated to the
shareholders loans and to the consolidated net asset value of ALH,
resulting in a profit of R84.4 million. The net cash proceeds and the
profit on the disposal take into consideration adjustments of R25 million
for HDS Medical (Pty) Ltd against shareholders loans, the last tranche
payment on the Amanzi acquisition of R28.5 million against shareholders
loans and the reimbursement of transaction costs of R11.1 million. The
profit on disposal is of a non-recurring nature. The profit on disposal for
the purpose of adjusting earnings has been assumed to be the same as the
profit for purposes of adjusting the net asset values and the embedded
value.
4 Costs relating to the disposal are an estimated R0.8 million. The costs are
of a non-recurring nature and are expensed.
5 The earnings have been increased by interest received on net cash proceeds
at a rate of 7.5% before tax.
Houghton
26 August 2005
Corporate advisor to African Life Sponsor to African Life
Metier Investment and Advisory Merrill Lynch South Africa
Services (Pty) Ltd (Pty) Ltd
Reporting accountants and auditors Corporate law advisor
to African Life to African Life
PricewaterhouseCoopers Inc Edward Nathan (Pty) Ltd
Attorneys to African Life Independent professional
Knowles Husain Lindsay Inc expert to African Life
KPMG Services (Pty) Limited
Corporate advisor to Momentum Attorneys to Momentum
Rand Merchant Bank Hofmeyr, Herbstein & Gihwala Inc.
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