Wrap Text
AFP - Alexander Forbes Preference Share Investments Limited - Unaudited
interim results for the six months ended 30 September 2011
ALEXANDER FORBES PREFERENCE SHARE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/031561/06)
ISIN code: ZAE000098067
Share code: AFP
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
- Investment income increases by 17% to R174 million
- Headline earnings per linked unit increases by 9% to 63 cents per
linked unit for the six month period
- Equity accounted loss from Alexander Forbes Equity Holdings totals R23
million
REVIEW OF ACTIVITIES
Introduction
Alexander Forbes Preference Share Investments Limited ("AF Pref") was
incorporated on 10 October 2006. The sole purpose of the company is to
incorporate the special purpose vehicle through which certain existing
shareholders of Alexander Forbes Limited could remain invested following
the private equity buyout of the Alexander Forbes group with effect 26 July
2007.
AF Pref holds 26.5% of the issued ordinary shares in Alexander Forbes
Equity Holdings Proprietary Limited ("AFEH") and also holds 31,8% of the
preference shares in AFEH. In addition, AF Pref holds 100% of the Pay-in-
Kind ("PIK") debentures issued by a subsidiary of AFEH, Alexander Forbes
PIK Funding Proprietary Limited ("AF PIK"), as well as 26.5% of the High-
yield Term Loan and relevant assets ("HYTL") issued by Alexander Forbes
Funding Proprietary Limited ("AF Funding").
Results for the six month period
This announcement should be read in conjunction with the announcement made
available by AFEH which provides an overview of the results of the AFEH
group for the six month period ended 30 September 2011. In summary, AFEH`s
revenue from continuing operations, net of direct product cost, increased
by 10% to over R2 billion and profit from continuing operations before non-
trading items increased by 14% to R484 million.
Investment income for the six month period of R174 million is 17% higher
than the first six months of the previous financial year. This income is
largely offset by the corresponding finance cost payable to debenture
holders (linked unit holders) of R169 million.
The loss attributable to AFEH equity holders (i.e. after finance cost
related to the funding structure and after tax) increased by 18% to R85
million from a loss of R72 million for the first half of the previous
financial year. AF Pref`s share of this net loss amounts to R23 million
which is equity accounted in these financial statements and is the main
contributor to the loss reported by AF Pref for the six months ended 30
September 2011 of R19 million.
In addition to the investment in the equity of AFEH, AF Pref also owns
certain debt instruments issued by the group as described above. Investment
income increased by 17% to R174 million as the six months` interest income
is recognised following the acquisition of 26.5% of the HYTL issued by
Alexander Forbes Funding Proprietary Limited following a rights offer
during the previous financial year. This investment income is largely
mirrored in the interest expense on the debentures issued in turn by AF
Pref and which form part of the linked unit in issue.
This results announcement should be read in conjunction with the results
announcement made available to AF Pref preference shareholders by AFEH.
On behalf of the board of directors:
JRP Doidge TJ Fearnhead
Chairman Director
Johannesburg
28 November 2011
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2011
30 Sep 30 Sep 12
months
31 Mar
2011 2010 2011
Note Rm Rm Rm
s
Investment income 2 174 149 311
Operating expenses (1) (2) (3)
Finance costs 3 (169) (142) (298)
Share of net loss of associates 4 (23) (19) (18)
(net of income tax)
Loss before taxation (19) (14) (8)
Income tax expense - - -
Loss for the period (19) (14) (8)
Loss attributable to:
- Equity holders 5 - - -
- Preference shareholders 5 (19) (14) (8)
(19) (14) (8)
Headline earnings /(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (8) (6) (0)
- per debenture 71 64 125
- per linked unit 6 63 58 125
Basic earnings /(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (8) (6) (3)
- per debenture 71 64 125
- per linked unit 6 63 58 122
STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 30 September 2011
Loss for the period (19) (14) (8)
Share of other comprehensive 20 (4) 13
income/(loss) of associates
Other comprehensive income/(loss) 20 (4) 13
for the period (net of income
tax)
Total comprehensive income/(loss) 1 (18) 5
for the period
Total comprehensive income/(loss)
attributable to:
- Equity holders - - -
- Preference shareholders 1 (18) 5
Total comprehensive income/(loss) 1 (18) 5
for the period
STATEMENT OF FINANCIAL POSITION
at 30 September 2011
30 Sep 30 Sep 31 Mar
2011 2010 2011
Note Rm Rm Rm
s
ASSETS
Investment in associate 7 707 692 711
Financial assets 8 1 961 1 653 1 787
Other receivables 1 1 1
Cash and cash equivalents 6 9 7
Total assets 2 675 2 355 2 506
EQUITY AND LIABILITIES
Ordinary shareholders` equity - - -
Preference shareholders` 1 037 1 037 1 037
interest - component of linked
units
Non-distributable reserve (85) (122) (105)
Accumulated loss (214) (201) (195)
Total equity 738 714 737
Debentures - component of linked 1 937 1 641 1 769
units
Total liabilities 1 937 1 641 1 769
Total equity and liabilities 2 675 2 355 2 506
Total equity attributable to ordinary 0 0 0
shareholders
Number of ordinary shares in 1 1 1
issue (`000s)
Net asset value per ordinary share 0 0 0
(cents per share)
Total equity attributable to 738 714 737
preference shareholders
Number of preference shares in 237 237 237
issue (million)
Net asset value per preference share 3.1 3.0 3.1
(cents per share)
Total equity attributable to 738 714 737
linked unit holders
Number of linked units in issue 237 221 237
(million)
Net asset value per linked units (cents 3.1 3.2 3.1
per unit)
STATEMENT OF CASH FLOWS
for the six months ended 30 September 2011
30 Sep 30 Sep 12
months
31 Mar
2011 2010 2011
Rm Rm Rm
Cash flow from operating activities
Cash utilised from operations (1) (2) (2)
Taxation paid - - -
Net cash outflow from operating (1) (2) (2)
activities
Cash flows from investing activities
Repayment of loan from associate - (5) (6)
Interest received on High-yield term - - 27
loan
Net cash inflow/(outflow) from - (5) 21
investing activities
Cash flows from financing activities
Payment of interest on debentures - - (28)
Net cash outflow from financing - - (28)
activities
Net movement in cash and cash (1) (7) (9)
equivalents
Cash and cash equivalents at 7 16 16
beginning of period
Cash and cash equivalents at end of 6 9 7
period
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2011
Ordina Preferen Non- Accumu- Total
ry ce share- distribut lated equit
share- holders` able loss y
holder interest reserve
s`
equity
Rm Rm Rm Rm Rm
At 31 March 2010 - 1 037 (118) (187) 732
Loss for the period - - - (14) (14)
Other comprehensive - - (4) - (4)
loss
Total comprehensive - - (4) (14) (18)
loss
At 30 September 2010 - 1 037 (122) (201) 714
Profit for the - - - 6 6
period
Other comprehensive - - 17 - 17
income
Total comprehensive - - 17 6 23
income
At 31 March 2011 - 1 037 (105) (195) 737
Loss for the period - - - (19) (19)
Other comprehensive - - 20 - 20
loss
Total comprehensive - - 20 (19) 1
income
At 30 September 2011 - 1 037 (85) (214) 738
NOTES
1. Basis of preparation
These results have been prepared in accordance with, and
comply with, International Financial Reporting Standards
("IFRS"), and comply with IAS 34 Interim Financial
Reporting, the listing requirements of the JSE Limited and
the South African Companies Act No 71 of 2008.
The accounting policies applied in the preparation of these
results are consistent with those applied in the annual
financial statements for the year ended 31 March 2011.
These financial statements were compiled under the
supervision of Deon Viljoen,CA(SA), the Group Chief
Financial Officer of AFEH.
30 Sep 30 Sep 12
months
31 Mar
2011 2010 2011
Rm Rm Rm
2. Investment income
Interest and investment income on
held-to-maturity financial assets:
PIK Debentures 117 99 207
High Yield term loan 49 43 88
Put & call option agreement 7 7 14
Amendment fee 1 - 1
Interest on cash balances - - 1
174 149 311
3. Finance costs
Interest cost on financial (169) (142) (298)
liability held at amortised cost
(debentures)
4. Share of net loss of associate (net
of income tax)
Net (loss)/profit of associate for
the period:
Continuing operations (28) (25) (26)
Discontinued operations 5 6 8
(23) (19) (18)
5. Loss attributable to equity holders and preference
shareholders
The economic rights to return of capital and dividends for
equity holders, preference shareholders and debenture
holders are detailed in section 5 of the pre-listing
statement issued by AF Pref on 10 July 2007 and in the
published annual financial statements.
6. Earnings per share
The preference shareholders have the economic rights to return
of capital and dividends and as such earnings and headline
earnings per share are all attributable to preference
shareholders and are nil for ordinary shareholders. Basic and
headline earnings per share for ordinary shareholders is
therefore not provided.
6.1 Basic loss per preference share
Basic loss per share is calculated by dividing the loss for
the year attributable to equity holders by the weighted
average number of preference shares in issue during the
period.
6.2 Headline loss per preference share
Headline loss per share is calculated by excluding all
impairment charges and capital gains and losses from the loss
attributable to shareholders and dividing the resultant
headline earnings by the weighted average number of preference
shares in issue during the period. Headline earnings are
defined in Circular 3/2009 issued by the South African
Institute of Chartered Accountants.
6.3 Calculation of earnings per share
30 Sep 30 Sep 12
months
31 Mar
2011 2010 2011
Loss for the period (R (a) (19) (14) (8)
million)
Earnings attributable to (b) 169 142 298
debenture holders (R
million)
Headline adjusting items:
Share of impairment charge (c) - - 6
and other capital items of
associate
Weighted average number of (d) 237 237 237
preference shares in issue
(millions)
Weighted average number of (e) 237 221 237
linked units in issue
(millions)
Basic loss per preference (a)/(d) (8) (6) (3)
share (cents)
Headline loss per preference (a+c)/(d) (8) (6) (0)
share (cents)
Basic earnings per linked (a+b)/(e) 63 58 122
unit (cents)
Headline earnings per linked (a+b+c) 63 58 125
unit (cents) /(e)
30 Sep 30 Sep 31 Mar
2011 2010 2011
Rm Rm Rm
7. Investment in associate
Cost 1 038 1 038 1 038
Share of cumulative post - (85) (122) (105)
acquisition movement in non-
distributable reserves
Share of cumulative post - (246) (223) (222)
acquisition losses
Loan from associate - (1) -
Carrying value in balance sheet 707 692 711
Directors` valuation of associate 992 989 990
In terms of the South African Companies Act No. 71 of 2008
directors are required to provide a valuation of the
associate investment in AFEH. Shareholders are alerted to
the fact that this valuation is particularly sensitive to
the relevant valuation assumptions that are required to be
made in performing such valuation. At 30 September 2011, the
directors are of the opinion that the value of the
investment in AFEH is R992 million.
8. Financial assets
Opening balance 1 787 1 504 1 504
High-yield term loan repaid - - (27)
Interest accrued 168 142 296
Fair value adjustment 6 7 14
Closing balance 1 961 1 653 1 787
Analysed as follows:
High-yield term loan receivable 417 348 367
Put and call option asset 58 43 50
Investment in PIK debentures 1 486 1 262 1 370
1 961 1 653 1 787
9. Debenture interest
Interest on debentures accrues on a daily basis and will,
subject to the terms in the debenture agreement, be
capitalised semi-annually on the last day of each interest
period.
In terms of the debenture agreement, AF Pref is entitled, at
its election, to either pay the accrued interest in respect
of each interest period or capitalise such interest not paid
in cash by adding it to the principal outstanding.
The terms of the PIK debentures held by the company
anticipate the roll-up of accrued interest until exit date
of the private equity holding or refinance date while the
High Yield term loan held may either service interest in
cash or capitalise such interest from time to time.
The most recent interest payment date of the High Yield term
loan was 18 June 2011. On that date interest was accrued
and not paid in cash mainly in order to fund increases in
regulatory capital requirements within the group as detailed
in the financial statements for the year ended 31 March
2011.
The next interest payment date is 18 December 2011 and it is
anticipated that interest on the High Yield term loan for
the period will be paid in full which will result in receipt
of approximately R43 million in cash by AF Pref.
In addition, unit holders` attention is drawn to the
announcement made on 15 November 2011 which, if approved at
the debenture holders meeting to be held on 30 November
2011, explains that agreement has been reached with Senior
Preference Shareholders to allow a portion of proceeds
receivable from the sale of the Risk Services business, to
flow past Senior Preference Lenders and which will then be
applied to pay arrears interest on the High Yield term loan.
These cash flows are expected to occur in tranches depending
firstly on the closure date of the Threshold Transactions
and followed by the closing of other subsidiary disposals
within AfriNet.
These transactions are currently still subject to certain
conditions precedent, amongst others competition commission
approval in South Africa.
Independent directors: JRP Doidge (Chairman), TJ Fearnhead, B Harmse, J
Wandrag (Alternate)
Company secretary and Investor relations: JE Salvado (Ms)
Transfer secretaries: Computershare Investor Services Proprietary Limited.
Ground Floor, 70 Marshall Street, Johannesburg.
PO Box 61051, Marshalltown, 2107
Registered office: 3rd Floor, 200 On Main,Cnr Main and Bowwood Roads,
Claremont, 7708
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Website: www.alexanderforbes.co.za
Date: 28/11/2011 16:24:01 Supplied by www.sharenet.co.za
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