Wrap Text
Alexander Forbes Equity Holdings (Proprietary) Limited - Audited results for the
year ended 31 March 2011
Alexander Forbes Equity Holdings (Proprietary) Limited
Registration number: 2006/025226/07
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2011
- Income from operations, net of direct product costs increases by 2.7% to
R4.6 billion
- Profit from operations before non-trading items increases by 8% to R1.1
billion
- Operating loss after non-trading items, finance costs and taxation improves
by 64% to R28 million
- Continuing investment in strategic growth areas, leadership development and
branding
- Strategic growth initiatives showing strong traction, particularly in the
individual client sectors with combined revenue growth of 11%
REVIEW OF ACTIVITIES
Introduction
Alexander Forbes Equity Holdings (Proprietary) Limited ("AFEH") is the ultimate
holding company of the Alexander Forbes group of companies ("the Group") and its
financial results are made publicly available solely for purposes of further
informing the financial results of the listed Alexander Forbes Preference Share
Investments Limited ("AF Pref"), which holds a 26.5% of the issued ordinary
shares of AFEH and 31.8% of the issued A preference shares of AFEH as well as
certain debt instruments issued by subsidiaries of the group.
On 1 April 2010, the group, under the leadership of its new CEO, introduced a
clear message that we exist to serve a higher purpose. This meant that every
employee has to become more aware how the work that they do impacts on key
stakeholders. In living up to that higher purpose, we have taken steps to
entrench a more client-focused and caring institutional culture, because we
believe that this is the best way to ensure the sustainability of our business.
To this end, we have invested much time and resources in building our leadership
and relaunching our brand, in improving our employee engagement and performance
management, in building our reputation for innovative products and services, in
addressing our legacy and reputation issues, and in entering the retail arena
with determination and acuity.
At the start of the financial year under review we crystallised four key
strategic themes that frames our plans:
- Increasing value for clients;
- Expanding the Alexander Forbes brand;
- Investing and innovating for growth; and
- Extending the group`s sales and service capacity.
In addition, four primary growth drivers have been identified being the
Individual Client Market (Retail), Public Sector, Africa outside of South Africa
and the UK markets. The group embarked on the significant challenge of not only
implementing the above strategic themes at a practical level but to instil these
themes in all aspects of activity in the group. This transition is significant
and continues to demand considerable management time as well as investment.
Most notably, substantial investment was made during the year and continues to
be made in leadership development amongst the senior members of the management
team in order to enhance the capability within the organisation under a common
"leadership brand". The legacy issues faced by the group such as bulking and
the Lifecare matter that was the topic of negative press for many years have all
been dealt with and in management`s view no further risk remains in this regard.
Major progress was also made with regard to performance management in the group
and to align the rewards systems with the stated objectives for the group and
each business unit. With the interests of clients firmly in mind, we have
confirmed our brand promise, in this year when we have relaunched and
revitalised the Alexander Forbes brand, as an unerring mission to positively
impact on the financial well-being of our clients. That means that we have a
duty of care to our clients as well as our shareholders, staff and other
stakeholders.
Review of results
In addition to the progress made in respect of the intangible items mentioned
above, the group`s overall financial results for the year ended 31 March 2011
were satisfactory and characterised by marginal growth in revenue with stringent
control of cost whilst still continuing to make the necessary investments in its
strategic growth areas as well as leadership development, marketing and
branding. These investments and capacity building are important to drive the
targeted level of growth in top line revenue in the medium to long term. The
successes and positive trends reflected in the retail (individual client) space
in both Financial Services and Risk Services are very encouraging and the
turnaround brought about in the Financial Services Business in the UK, to return
to profitability, was particularly pleasing. The recovery in equity markets
supported the results in both Investment Solutions and certain parts of the
Financial Services businesses.
Gross income from operations of R5.2 billion increased by 3.6% while income from
operations, net of direct product costs of R4.6 billion is 2.7% up on the
previous financial year. The stronger Rand against the Sterling impacted
negatively on this overall growth rate in revenue. The Africa region`s net
revenue (largely Rand denominated) increased by 7% while the International
region delivered net revenue growth in Sterling terms of 4%.
Operating expenses of R3.4 billion increased by 1% in Rand terms compared to the
previous year. Exchange rate impact aside, this increase reflects the continued
effort to balance disciplined cost management in the more established business
areas with investment in the strategic growth areas, particularly to support the
expansion in the individual client market. Operating expenses in the Africa
region grew by 8%, reflecting some of the investments and capacity building
mentioned, while in the International business, in Sterling terms, expenses
remained in line with that of the previous year.
Profit from operations before non-trading items and capital items increased by
8% to R1.11 billion compared to the R1.03 billion of the previous year. The
operating loss for the year after non-trading items, interest and taxation has
reduced by 64% from a loss of R78 million in the previous year to R28 million.
Headline loss per ordinary share for the period of 14 cents has halved from the
29 cents loss per ordinary share in the prior year.
A brief commentary on the operating results for each of the main businesses
follows.
SA Risk & Insurance Services
Income from operations increased by 8% to R1.1 billion and trading profit
increased by 9% to R299 million. In line with the group`s strategic drive into
the retail market, investment in sales capacity continued in our target retail
(individual household and motor insurance) business as well as in the commercial
insurance broking businesses. As a result, pleasing sales growth was achieved
in retail insurance business with gross written premiums increasing by 17% above
the comparative period. Guardrisk continues to perform well while more modest
year on year improvement was delivered by the Corporate Insurance Broking and
Commercial Broking businesses. Alexander Forbes Compensation Technologies
("AFCT") showed reasonable results despite a difficult trading year.
The modest organic growth in our corporate insurance broking businesses was
mainly the result of highly competitive insurance broking markets, softer rates
and the impact of lower economic growth which reduced client demand for
insurance cover. The declining interest rate environment also had an adverse
impact on operational interest income.
The cell captive insurer, Guardrisk, continues to invest in innovation and has
brought several new products to market over the past year. This resulted in
solid organic growth in this business, notwithstanding the macro-economic
environment.
AFCT, our compensation claims administrator, faced continued challenges and
processing delays at their clients. Despite these challenges, the result was
better than the previous year with an improvement in cash flows.
We draw shareholders` attention to the cautionary announcement issued on 3 May
2011 by AF Pref wherein shareholders were advised that AFEH is in discussions
with an interested party regarding a potential transaction affecting a portion
of its Risk Services business. Shareholders will be informed as and when there
are further developments in this regard.
SA Financial Services
Net income from operations increased by 5% to R1.3 billion while trading profit
for the year remained in line with that of the previous year at R303 million
reflecting further investment in the strategic development of our individual
client offering. The past year was characterised by strong new business growth
in all our major divisions. A total of 179 new client appointments were gained
in our core retirement funds division and healthcare broking business. Client
retention has remained strong despite a competitive operating environment.
Growth in members under administration in our retirement fund administration
business was particularly strong and grew by 11% over the year to reach in
excess of 806 000 active contributing members at year end. In addition, we
administer the monthly payments to more than 157 000 pensioners.
We continue to invest in operational efficiencies in our administration areas
with a focus on improving the client experience and automation of manual
processes.
We are seeing strong growth in our umbrella retirement fund offering with our
flagship fund, The Alexander Forbes Retirement Fund, growing to over 170,000
members, making it the largest fund of its kind in the market. We also launched
a new umbrella fund offering, AF Access, for the independent financial advisory
market, which has been well received. In addition, we launched a General
Insurance Consulting business, which promises to make a meaningful contribution
into our forecasted business growth during 2012 and beyond. The bedding down
and effective implementation of our holistic employee benefits consulting model
is a key focus as this presents us with significant potential in achieving our
business growth objective through our consulting division.
Our retail investment platform continued to enjoy strong net new cash flows with
significant new business flows written in the year and assets under management
on our retail administration platform totaling R28.8 billion at year end. In
line with our focus on the retail (individual client) segment of the market, we
increased the size of our internal advisory force during the year by 25% and
have established three new offices. We are also engaging the wider financial
advisory market in the distribution of some of our offering.
Alexander Forbes Life achieved strong new business growth, increasing premiums
by 36%. The underwriting result for the group life book was below our
expectation and interventions have been put in place to improve the result.
We reported in the previous report that we were conducting a review of our
pension-backed lending business Homeplan. In November 2010, we announced the
conclusion of the sale of this business to the bank who had previously been our
funding partners. The results of this business for the period until sale are
reflected under discontinued operations in line with the treatment in the prior
year.
We launched the Alexander Forbes Research Institute towards the end of the year
to confirm our group as the thought leaders in the savings and investment
industry and to organise, share and collaborate on current topical ideas that
will help shape Government`s efforts to establish a stronger savings and
investment culture in the future.
Our focus for the next year is to continue growing our market share in all our
divisions with the aim of providing holistic employee benefit solutions to
corporate and individual clients.
Investment Solutions
Assets under management increased from R151 billion at March 2010 to R168
billion at March 2011 driven largely by the recovery in equity markets. Income
from operations, net of direct product cost, increased by 11% to R484 million
for the year while trading profit increased by 9% to R269 million. The increase
in revenue does not reflect the growth in assets under management mainly due to
the fact that the previous year`s income was partly hedged against the equity
market downturn experienced in prior years. New business flows have been
encouraging for the period although ongoing benefit payments to fund members
remain relatively high, reflecting the underlying pressure the South African
economy is still facing.
The results reflect a focus during the period on increasing the depth of
expertise throughout the organisation, the restructuring of the operations and
processing areas to achieve optimal efficiencies and superior investment
performance. It is also pleasing to note that most of our investment portfolios
are ahead of their respective benchmarks over medium to long term measurement
periods.
AfriNet (covering all operations in Africa outside of South Africa)
The stronger Rand compared with most currencies in the rest of Africa has had a
negative effect on the AfriNet reported results. In Rand terms, revenue grew by
6% to R307 million and the various operations delivered a consolidated trading
profit of R69 million 3% below the previous year. Ignoring the impact of
exchange rates, this result is still somewhat below expectation and resulted in
a determined effort to contain cost inflation. The year was also characterised
by a strong competitive environment in each of the regions in which AfriNet
operates. The Risk Services businesses in particular were affected not only by
this increased competition but also softer insurance markets. The Financial
Services businesses delivered a pleasing result. Challenging operating
environments still remain the key issue for most of our operations in the rest
of Africa but despite this backdrop, our operations remain resilient and are
benefiting from an increased focus on governance, control and strategic
positioning.
Our focus remains on revenue growth and ensuring efficient operations with good
governance in all areas. Our strategic initiatives, in particular the Alexander
Forbes Insurance business in Namibia, are starting to bear fruit. We continue
to search for similar expansion opportunities on the African continent.
International Financial Services
The International operations continued to improve their performance, with income
from operations increasing by 4% to GBP118 million and trading results of GBP16
million, GBP4.1 million or 36% up on the prior year. The businesses continued
to benefit from new client wins and strong client retention. The significant
cost saving measures implemented over the past two years drove the improved
performance and it is very pleasing to see the Alexander Forbes Financial
Services (AFFS) business returning to solid profitability.
The United Kingdom and Europe continue to be affected by the uncertain economic
environment. Unemployment and wage inflation appear to have stabilised
providing clients with the confidence to focus on employee benefits once again.
Fees remain under pressure as clients manage their costs. However, demand for
pension de-risking solutions, as well as advice on the impact of recent taxation
and pending pension changes, remains strong.
Insurers are reducing commission and AFFS, particularly, has responded by
targeting larger clients than its traditional SME client base, with increasing
success off its realigned cost base. In addition, the business continues to make
good progress in growing its renewable income in anticipation of the
implementation of the Financial Service Authority`s Retail Distribution Review.
This will impact on AFFS`s initial commission revenues, particularly after the
implementation of new defined contribution schemes as of 2013.
Lane Clark & Peacock ended the year on a strong note and trading profit for the
year increased by 10%. Operations in both the United Kingdom and Europe
continued to achieve good client wins across all lines of business. However,
fee pressures impacted across the board. The Swiss business, in particular, was
impacted during the first half of the year but the business has taken the
appropriate actions to restore performance.
In our International Investment Solutions business, assets under management grew
from GBP1.0 billion at March 2010 to GBP1.4 billion in the year under review
mainly through growth in group assets, in line with a strategy of consolidating
the management of the group`s international assets in-house. As a result, net
revenue for the year increased by 21% to GBP3.4 million with trading profit of
GBP331,000 considered a modest milestone for the business after some investment
over a number of years. International Investment Solutions is now consistently
trading profitably, having achieved the required critical mass of assets under
management and it continues to focus on delivering pension and investment
solutions to both the United Kingdom and the South African markets.
Regulatory capital changes and impact on the High-yield term loan interest
As reported at half-year, the introduction of the new capital adequacy
requirements for long-term insurers by the Financial Services Board (FSB) took
effect in June 2010. This is an interim measure in advance of the
implementation of the Solvency Assessment and Management framework expected to
take effect in 2013. The new requirements significantly impacted on the level
of capital required to be carried by our regulated entities in particular by
Investment Solutions as the required capital is currently mainly a function of
insurance related liabilities. This requirement is irrespective of whether
those liabilities are solely as a result of linked investment contracts (as in
the case of Investment Solutions where no underwriting risk is taken) or long
term insurance liabilities where actual underwriting risk is taken.
In addition, the new capital adequacy requirements for financial advisory and
intermediary (FAIS) registered businesses as of 31 December 2010 also had a
significant impact on the level of cash required to be retained in the
businesses to meet these capital requirements.
The necessary capital has been introduced as required in these regulated
entities throughout the group and further introduction is being made in line
with the phasing requirements agreed with the FSB. The net effect of these
requirements in the current financial year is in excess of R300 million of
additional capital injection across various entities. In most instances, the
capital is required to be backed by cash or near cash assets in terms of the
regulatory assets spreading requirements which had, and will have, a significant
impact on the available free cash resources of the Group. This impact was
largely felt in the financial year under review with further, but less onerous,
phasing-in requirements over the next two years.
As a result of these higher than expected capital requirements in the past
financial year, certain payments of interest on the High-yield term loan have
been deferred as is allowed under the terms of the loan. It was however,
considered more efficient to pay R100 million of the R152 million interest that
became due on 18 December 2010 and to instead defer the payment due on 18 June
2011. This more efficiently aligns with the additional capital phasing
requirements of Investment Solutions and in our view also results in a better
cash flow profile for investors in the term loan.
As reported previously, although further impact is expected in future years,
these impacts will be far less onerous than this introductory phase. Subsequent
to the June 2011 deferral, we would anticipate resuming normal service of the
High-yield term loan interest subject to meeting the required financial
distribution covenants.
Prospects
To ensure a sustainable growth trajectory, the group-wide initiatives we have
launched are essential to strengthen our institutional capability.
In response to these institutional initiatives, it is pleasing to report that
many pockets of excellence continue to emerge throughout our companies, here in
Africa and in the UK.
During the 3rd Quarter of 2010/11 we undertook a further strategic assessment of
the group. The purpose of this was to evaluate whether we were still on track to
achieve our growth objectives. The result of this has produced a further
enhancement to our strategic plan.
Core to our strategy is aspiring to a higher purpose of the long-term
enhancement of the lives of our clients through impactful service. And it is
only through investing in and delivering on our chosen strategies and our growth
markets that we will achieve this. This is where we will continue to focus.
In responding to these challenges, we will endeavour to continue to protect our
profitability and our ability to produce the cash flow requirements necessary to
service our capital structure while also driving investment in the growth areas
of our business. Balancing both sides of this equation will ensure not only
the long-term sustainability of the Group by ultimately achieving the level of
top-line revenue growth that we are targeting but will also deliver superior
shareholder value creation. This will require significant cost discipline in
all parts of the business and will also require very clear prioritisation of
investment spend. Periodically, environmental and economic factors outside of
our control may dictate where our emphasis should lie. Our strategic growth
areas and plans are well defined and managing the pace of transformation of our
business in those areas, without forfeiting our strong position in the more
mature areas of our business, is of paramount importance.
Change in directorate
Further to the changes in directorate included in the interim results
announcement, the Board regrets to advise of the resignations of Mr P Schmid as
a Director of the Company with effect from 15 February 2011 and of Mr K A Mills
as Alternate Director to Mr T Matiwaza with effect from 1 April 2011. The Board
would like to thank Messrs Schmid and Mills for their valuable contribution. On
9 June 2011 Ms N Kolbe resigned as alternate director to Mr J van Wyk and was
appointed as a director of the board and Ms M Mzimba was appointed as alternate
director to Mr J van Wyk. Mr H Meyer was appointed to the board on the same
date. The board thanks Mesdames Kolbe and Mzimba and Mr Meyer for accepting
their new roles.
M S Moloko E Chr Kieswetter
Chairman Group Chief Executive
14 June 2011
SUMMARY CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2011
31 Mar 31 Mar
2011 2010
Notes Rm Rm
Continuing operations
Fee and commission income 3 4 846 4 726
Net income from insurance operations 4 368 309
Direct expenses attributable to fee and (647) (586)
commission income
Operating income net of direct expenses 4 567 4 449
Operating expenses (3 (3
454) 418)
Profit from operations before non-trading and 1 113 1 031
capital items
Non-trading and capital items 5 (149) (179)
Operating profit 964 852
Investment income 68 80
Finance costs 6 (866) (841)
Share of net profit of associates (net of 3 2
income tax)
Profit before taxation 169 93
Income tax expense (201) (174)
Loss for the year from continuing operations (32) (81)
Discontinued operations
Profit on discontinued operations (net of 7 4 3
income tax)
Accumulated loss for the year (28) (78)
Loss attributable to:
Equity holders (75) (129)
Non-controlling interest holders 47 51
(28) (78)
Headline loss per ordinary share (cents) 8 (14) (29)
Basic loss per ordinary share (cents) 8 (20) (34)
Number of ordinary shares (million)
Issued 377 377
Weighted average (from effective date) 377 377
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2011
31 Mar 31 Mar
2011 2010
Notes Rm Rm
Loss for the year (28) (78)
Foreign currency translation differences of 10 (142)
foreign operations
Changes in fair value of cash flow hedges (19) (203)
Portion of fair value hedge recycled to 66 60
profit or loss
Taxation effect on the fee income hedge - (3)
Other comprehensive income/(loss) for the 57 (288)
year (net of income tax)
Total comprehensive income/(loss) for the 29 (366)
year
Total comprehensive loss attributable to:
Equity holders (29) (407)
Non-controlling interest holders 58 41
Total comprehensive income/(loss) for the 29 (366)
year
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2011
31 Mar 31 Mar
2011 2010
Notes Rm Rm
ASSETS
Financial assets held under multi-manager 183 161 660
investment contracts 483
Financial assets of cell captive insurance 7 738 7 582
facilities
Property and equipment 201 205
Purchased and developed computer software 151 166
Goodwill 5 258 5 258
Intangible assets 1 728 1 900
Investments in associates 9 8 7
Deferred tax assets 145 158
Financial assets 426 285
Insurance receivables 713 528
Trade and other receivables 930 1 115
Cash and cash equivalents 3 093 2 480
Assets of disposal group classified as 25 944
held for sale
Total assets 203 182 288
899
EQUITY AND LIABILITIES
Equity holders` funds 2 142 2 171
Non-controlling interest 172 179
Total equity 2 314 2 350
Financial liabilities held under multi- 183 161 614
manager investment contracts 452
Liabilities of cell captive insurance 7 738 7 582
facilities
Borrowings 5 828 5 597
Employee benefits 165 158
Deferred tax liabilities 574 615
Provisions 392 650
Operating lease liability 67 103
Deferred income 120 107
Insurance payables 2 148 1 610
Trade and other payables 1 101 1 074
Liabilities of disposal group classified - 828
as held for sale
Total liabilities 201 179 938
585
Total equity and liabilities 203 182 288
899
Total equity per above 2 314 2 350
Number of ordinary share in issue 377 377
(millions)
Net asset value per ordinary share (cents) 614 623
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2011
31 Mar 31 Mar
2011 2010
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 1 253 1 291
Net finance costs paid (315) (318)
Cash settlement of cash management and (16) (36)
employee benefit commitments
Movement in working capital and insurance 382 (113)
balances
Taxation paid (236) (220)
Net cash inflow from operating activities 1 068 604
before cash flows from policyholder
investment contracts
Cash flows from policyholder investment 845 (11 887)
contracts
Net cash inflow/(outflow) from operating 1 913 (11 283)
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net movement in subsidiaries and 69 45
businesses disposed
Net movement in financial assets (225) (53)
Proceeds from sale of other financial 69 5
assets
Proceeds on disposal of property and 2 58
equipment
Capital expenditure for the year (95) (95)
Net cash outflow from investing activities (180) (40)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings repaid (239) (694)
Proceeds on foreign currency swap - 374
agreements closed out
Payments to non-controlling interest (25) (67)
Net cash outflow from financing activities (264) (387)
Net cash (outflow)/inflow from (82) 48
discontinued operations
Net movement in cash and cash equivalents 1 387 (11 662)
Cash and cash equivalents at beginning of 20 690 32 493
year
Foreign subsidiaries translation (11) (141)
adjustment
CASH AND CASH EQUIVALENTS AT END OF YEAR 22 066 20 690
Analysed as follows:
Cash and cash equivalents of discontinued 17 99
operations
Cash and cash equivalents of continuing 3 093 2 480
operations
Cash held under multimanager investment 18 469 17 393
contracts
Cash held under cell captive insurance 487 718
facilities
22 066 20 690
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2011
Share Non- Accumu- Equity Non- Total
capital distribut lated holders` controlli equity
and able loss ng
premium reserve interest
Rm Rm Rm Rm Rm Rm
At 31 March 3 261 (47) (636) 2 578 205 2 783
2009
Loss for the - - (129) (129) 51 (78)
year
Other - (278) - (278) (10) (288)
comprehensive
loss
Total - (278) (129) (407) 41 (366)
comprehensive
loss
Movement in - 12 (12) - - -
contingency
reserve for
short-term
insurance
company
Other - - - - (67) (67)
movements in
non-
controlling
interest
At 31 March 3 261 (313) (777) 2 171 179 2 350
2010
Loss for the - - (75) (75) 47 (28)
year
Other - 46 - 46 11 57
comprehensive
income
Total - 46 (75) (29) 58 29
comprehensive
loss
Movement in - 15 (15) - - -
contingency
reserve for
short-term
insurance
company
Other - - - - (65) (65)
movements in
non-
controlling
interest
At 31 March 3 261 (252) (867) 2 142 172 2 314
2011
SEGMENTAL RESULTS
for the year ended 31 March 2011
Operating income Profit from operations
net of direct before non-trading and
product cost capital items
31 Var. 31 31 Mar Var. 31 Mar
Mar Mar
2011 % 2010 2011 % 2010
Africa (Rm)
SA Risk & Insurance 1 120 8% 1 041 299 9% 275
Services
SA Financial Services 1 339 5% 1 276 303 0.3% 302
Investment Solutions 484 11% 437 269 9% 247
AfriNet (Africa 307 6% 290 69 (3%) 71
excluding-South
Africa)
Total Africa (Rm) 3 250 7% 3 044 940 5% 895
International (GBPm)
Financial Services 115.0 3% 111.6 15.3 31% 11.7
Investment Solutions 3.4 21% 2.8 0.3 250% (0.2)
Total International 118.4 4% 114.4 15.6 36% 11.5
(GBPm)
Total International (Rm) 1 317 (6%) 1 405 173 27% 136
Total Group (Rm) 4 567 3% 4 449 1 113 8% 1 031
Depreciation & Assets
Amortisation
31 Var. 31 31 Mar Var. 31 Mar
Mar Mar
2011 % 2010 2011 % 2010
Africa (Rm)
SA Risk & Insurance 14 15 10 215 9 670
Services
SA Financial Services 17 15 28 976 22 700
Investment Solutions 3 2 167 891 150 517
AfriNet (Africa 6 6 2 013 1 656
excluding-South
Africa)
Total Africa (Rm) 40 8% 38 209 095 13% 184 543
International (GBPm)
Financial Services 1.4 1.4 112 102
Investment Solutions - - 1 454 1 010
Total International 1.4 - 1.4 1 566 41% 1 112
(GBPm)
Total International (Rm) 16 (11%) 18 17 027 38% 12 330
Unallocated:
Corporate Services 36 36 1 099 1 554
Goodwill - - 5 258 5 258
Consolidation - - (28 580) (21 397)
elimination
Total Group (Rm) 92 92 203 899 12% 182 288
NOTES
for the year ended 31 March 2011
1. Basis of preparation
These summary preliminary financial statements have been
derived from the audited group annual financial statements in
accordance with the requirements of Section 8.57 of the JSE
Limited Listings Requirements. The preliminary group annual
financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and in the
manner required by the Companies Act of South Africa. These
summary preliminary financial statements have been prepared in
terms of IAS34, Interim Financial Reporting.
The accounting policies applied in the preparation of these
preliminary results are consistent with those detailed in the
group financial statements issued by Alexander Forbes Equity
Holdings (Proprietary) Limited for the year ended 31 March
2010. During the year, the group adopted all the IFRS and
interpretations being effective and deemed applicable to the
group. None of these had a material impact on the results of
the group.
The results have been audited by PricewaterhouseCoopers Inc
and a copy of their unqualified audit opinion is available at
the company`s registered office.
31 Mar 31 Mar
2011 2010
2. Exchange rates
The income statements and balance sheets of
significant foreign subsidiaries have been
translated to Rands as follows:
Weighted average R:GBP rate 11.1 12.3
Closing R:GBP rate 10.9 11.1
31 Mar 31 Mar
2011 2010
Rm Rm
3. Fee and commission Income
Brokerage fees and commission income 600 600
Fee income from consulting and 3 045 3 047
administration services
Revenue from investment activities 1 123 1 000
Interest income from lending operations 30 20
Operational interest income 30 37
Other 18 22
Fee and commission income 4 846 4 726
4. Net income from insurance operations
Insurance premiums earned 4 462 3 481
Less: amounts ceded to reinsurers (3 132) (2 416)
Investment income from insurance operations 107 128
Less: insurance claims and withdrawals (2 834) (2 228)
Plus: insurance claims and benefits covered 1 765 1 344
by reinsurance contracts
Net income from insurance operations 368 309
31 Mar 31 Mar
2011 2010
Rm Rm
5. Non-trading and other capital items
Non trading:
Professional indemnity insurance cell (26) 26
Amortisation of intangible assets (187) (191)
arising from business combination
Fees relating to High-yield term loan 3 (25)
restructure
Movements in provisions relating to 82 30
historical client settlements, claims and
warrantees
Capital items:
Goodwill impairment losses - (75)
Capital gain on sale of subsidiary & (21) 56
other
Total impairment losses and other capital (149) (179)
items
6. Finance costs
Finance costs derived from financial
liabilities classified and carried at
amortised costs:
Interest on term debt issued (774) (660)
Amortisation of debt raising fees (13) (12)
capitalised to borrowings
Write-off of debt raising fees capitalised - (65)
Interest on proposed client settlements (6) (20)
Capacity fee revolving credit facility (2) (14)
Interest on other borrowings (17) (11)
(812) (782)
Finance cost derived from financial
liabilities designated as fair value
through profit or loss:
Fair value adjustment on put and call (54) (59)
options
Total finance costs (866) (841)
7. Discontinued operations
The group has discontinued certain non core business divisions
as part of its strategic plan. These businesses were
classified as discontinued operations in the previous
financial reporting year. The sales processes of all these
businesses previously classified as discontinued operations
have now been concluded. Based on the requirements of IFRS 5
the comparative income statement has been re-presented to show
the discontinued operation separately from continuing
operations. Assets and liabilities held at year end in
discontinued operations have been classified as assets and
liabilities of disposal group held for sale. The segmental
report has also been re-presented to show the effect of
discontinued operations.
8. Calculation of headline loss per share
8.1 Basic loss per ordinary share
Basic loss per share is calculated by dividing the loss for
the year attributable to equity holders by the weighted
average number of ordinary shares in issue during the year.
8.2 Headline loss per ordinary share
Headline loss per share is calculated by excluding all non-
trading and capital gains and losses from the loss
attributable to equity holders and dividing the resultant
headline earnings/loss by the weighted average number of
ordinary shares in issue during the year. Headline
earnings/loss are defined in Circular 3/2009 issued by the
South African Institute of Chartered Accountants.
31 Mar 31 Mar
2011 2010
Rm Rm
8. Calculation of headline loss per share
(continued)
8.3 Calculation of headline loss per share
Loss attributable to equity holders (IAS 33 (75) (129)
earnings)
Adjusting items
- Impairment losses and other capital items 21 19
- Tax effect on above adjustment - -
Headline attributable loss for the year (54) (110)
Weighted average number of shares (from 377 377
effective date)
Basic losses per share (cents) (20) (34)
Headline losses per share (cents) (14) (29)
9. Investments in associates
Carrying value in balance sheet 8 7
Directors` valuation of associates 23 24
10. Capital expenditure for the year 95 95
11. Operating lease commitments
Due within one year 195 192
Thereafter 1 798 501
Total operating lease commitments 1 993 693
Capital expenditure and commitments will be funded from
internal cash resources.
Directors:
Independent directors:
D Konar, H P Meyer, V R Ngalwana, B Petersen
Non-executive directors:
A C de Beer (Alternate), J C E Douin (Alternate), L Hall-Kimm,
N C Kolbe, T Matiwaza, M Z Mzimba (Alternate), M C Ramaphosa, A Roux, J A van
Wyk
Executive directors:
M S Moloko (Chairman), E Chr Kieswetter (Group Chief Executive),
D M Viljoen (Group Finance Director)
Company secretary & Investor relations:
J E Salvado
Registered office:
Alexander Forbes Place, 61 Katherine Street, Sandown, Sandton, 2196
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg
PO Box 61051, Marshalltown, 2107
Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Independent auditors:
PricewaterhouseCoopers Inc
2 Eglin Road, Sunninghill, 2157
Date: 14/06/2011 13:03:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
