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AFB
AFB
Alexander Forbes Limited - Trading Statement
Alexander Forbes Limited
Registration number 1958/001974/06
Share code: AFB
ISIN: ZAE000018230
("Alexander Forbes" or the "Company")
Trading Statement
This Trading Statement is issued in accordance with section 3.4 (b) of the JSE
Limited listings requirements.
Headline earnings per share
The group"s provisional results for the six months ending 30 September 2006
reflect trading results from operations which are broadly in line with those
reported for the comparative period. There are a number of non-trading items
and related financial effects however which have impacted the group"s headline
earnings for the current and prior reporting periods. These will result in a
25% to 35% decrease in headline earnings per share reported for the six months
to 30 September 2006. The main items are:
Approximately R35 million of professional fees and other costs associated with
the sale of the group"s International Risk Services" business, which are
required to be recognised as operational expenditure in the current period"s
results. When the sale concludes, these costs, together with additional costs
which will accrue upon conclusion of the transaction, will be offset against the
net capital proceeds received on the sale of GBP67.5 million and will be
excluded from headline earnings reported for the full year. Regulatory
approvals are the only remaining conditions precedent to the conclusion of the
transaction.
The R20 million increase in the general provision for potential historical
exposures advised to shareholders on 20 September 2006 and R17 million of
interest costs which accrue on the provision for client settlements in the
current period;
A R7 million loss arising in the current period on consolidation of the group"s
cell captive insurance arrangement compared to a profit of R19 million reported
in the prior period (the aggregate year-on year impact is thus R26 million);
The R22 million exceptional profit reported in the prior period resulting from
the reduction of onerous lease provisions which does not recur in the current
period;
The above negative effects on headline earnings are partly offset by a reduced
impact on the current period of the previously reported accounting mismatch
resulting from accounting for Alexander Forbes" shares held by the group"s multi
manager investment subsidiary for its policyholders as treasury shares in the
group accounts. The reported loss resulting from this accounting mismatch will
be R31 million in the current period (in respect of 18 million shares deducted
from equity) compared to R66 million for the prior period (in respect of 17
million shares deducted from equity). Details of the restated headline earnings
per share for the prior interim reporting period are provided in Note 1 below.
The aggregate year-on-year impact of the above items net of any related tax
effects is approximately R70 million or 16 cents per share.
Basic earnings per share
There will be a slightly lower decrease in attributable earnings per share
compared to the decrease in headline earnings per share detailed above as a
result of the R14 million capital profit realized on the sale of the group"s
associate investment in Medscheme during the current period. This profit is
excluded from headline earnings being of a capital nature.
Financial information contained in Trading Statement
The financial information contained in this Trading Statement has not been
reviewed and reported on by the company"s auditors.
Full details of the group"s results for the six months ended 30 September 2006
will be published on or about 13 November 2006.
Note 1 to Trading Statement
As previously advised, in terms of International Financial Reporting Standards
(IFRS), Alexander Forbes" shares held by the group"s multi-manager investment
subsidiary for policyholders are required to be accounted for as treasury shares
and deducted from equity in the group"s accounts. The retrospective application
of this accounting treatment results in the previously reported headline
earnings per share for the six months ended 30 September 2005 reducing from 70
to 57 cents per share calculated as follows:
Attributable headline profit as previously 321
reported (Rm)
Less: Reported loss arising from accounting
for policyholder investments as treasury
shares: (54)
- Loss arising from increase in Alexander (12)
Forbes share price (Rm)
- Distributions to policyholders on Alexander
Forbes shares (Rm)
Restated attributable headline profit (Rm) 255
Weighted average number of shares as 461
previously reported (millions)
Less: Alexander Forbes shares held as
policyholder investments deducted from equity (17)
under IFRS requirement (millions)
Restated weighted average number of shares in 444
issue (millions)
Restated headline earnings per share (cents) 57
Cautionary announcement
Shareholders are referred to the relevant cautionary announcements, the last of
which was published on 2 October 2006, in terms of which shareholders were
advised that the Company was continuing in discussions with a consortium of
private equity investors ("the Consortium") regarding a potential transaction to
acquire the entire issued share capital of the Company but that the Consortium
has not yet submitted a binding offer for the Company.
Shareholders are advised to continue to exercise caution in dealing in the
company"s securities until a further announcement is made.
Johannesburg, South Africa
16 October 2006
JP Morgan
Sponsoring Brokers
Date: 16/10/2006 09:25:13 AM Produced by the JSE SENS Department
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