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Unaudited interim results for the six months
ended 30 September 2012
Alexander Forbes Preference Share Investments Limited
Registration number: 2006/031561/06
Share code: AFP
ISIN code: ZAE 000098067
Unaudited interim results for the six months
ended 30 September 2012
- Headline earnings per linked unit
increases by 21% to 76 cents per linked
unit for the six month period
- Investment income increases by 13% to
R196 million
- Equity accounted loss from Alexander
Forbes Equity Holdings increases by 4%
to R24 million
REVIEW OF ACTIVITIES
Introduction
Alexander Forbes Preference Share Investments Limited ("AF Pref") was incorporated on
10 October 2006 following the bid by a private equity consortium to take private the then listed Alexander
Forbes Limited. The purpose of the company is to serve as the special purpose vehicle through which
certain existing shareholders of Alexander Forbes Limited could remain invested following the private equity
buyout of the Group with effect 26 July 2007. The ultimate holding company of the Alexander Forbes Group
is now Alexander Forbes Equity Holdings Proprietary Limited ("AFEH").
AF Pref issued linked units that are listed on the JSE Limited and these consist of preference shares issued
by AF Pref (effectively representing an interest in the ordinary and preference equity of AFEH) and
debentures (effectively representing an interest in certain debt instruments issued by subsidiaries of AFEH).
AF Pref holds 26.5% of the issued ordinary shares in AFEH and also holds 31.8% of the issued preference
shares issued by 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 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 months ended 30 September 2012. In
summary, AFEH's revenue from continuing operations, net of direct product cost, increased by 11% to R2.1
billion, and profit from continuing operations before non-trading items increased by 8% to R524 million.
These results are in respect of the continuing operations of AFEH following the disposal of its Risk Services
businesses (corporate insurance broking) in Africa in the previous financial year and the International
Consultants and Actuaries business in the UK during the period under review. The last mentioned disposal
is subject to regulatory approvals while the disposals of certain of the smaller Risk Services businesses are
currently being finalised.
The loss attributable to AFEH ordinary equity holders (i.e. after amortisation of intangible assets, finance cost
related to the funding structure and after tax) increased by 5% to R89 million, from a loss of R85 million in
the first six months of the previous financial year. The reported loss is largely attributable to the accounting
amortisation of intangible assets arising on the acquisition in 2007. AF Pref's share of this net loss amounts
to R24 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 2012 of R21 million.
In addition to the investment in the equity of AFEH, AF Pref also owns certain debt instruments and related
assets issued by subsidiaries of AFEH as described above. The investment income represents income
earned on these various instruments and is largely offset by interest expense on the debentures issued in
turn by AF Pref and which form part of the linked unit in issue. Investment income for the six months of R196
million is 13% higher than the first six months of the previous financial year. The corresponding finance cost
paid or payable to debenture holders (linked unit holders) amounts to R191 million, also 13% up on the
previous period.
Further detail of the results of AFEH and its subsidiaries for the six months ended 30 September 2012 is
contained in the results announcement made available to AF Pref linked unit holders by AFEH.
Change in directorate
There has been no change in the directorate during the period under review.
On behalf of the board of directors:
JRP Doidge TJ Fearnhead
Director Director
Johannesburg Johannesburg
3 December 2012 3 December 2012
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2012
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Notes Rm Rm Rm
Investment income 2 196 174 367
Operating expenses (1) (1) (2)
Finance costs 3 (191) (169) (353)
Share of net loss of associates (net of income tax) (24) (23) (34)
Loss before taxation (20) (19) (22)
Income tax expense 4 (1) - (6)
Loss for the period (21) (19) (28)
Loss attributable to:
- Equity holders 5 - - -
- Preference shareholders 5 (21) (19) (28)
(21) (19) (28)
Headline earnings /(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (5) (8) (10)
- per debenture 81 71 149
- per linked unit 6 76 63 139
Basic earnings /(loss) (cents)
- per ordinary share 6 - - -
- per preference share 6 (9) (8) (12)
- per debenture 81 71 149
- per linked unit 6 72 63 137
STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 30 September 2012
Loss for the period (21) (19) (28)
Share of other comprehensive income of associates 19 20 32
Other comprehensive income for the period (net of
income tax) 19 20 32
Total comprehensive income/(loss) for the period (2) 1 5
Total comprehensive income/(loss) attributable to:
- Equity holders - - -
- Preference shareholders (2) 1 5
Total comprehensive income/(loss) for the period (2) 1 5
CONDENSED STATEMENT OF FINANCIAL POSITION
at 30 September 2012
30 Sep 30 Sep 31 Mar
2012 2011 2012
Notes Rm Rm Rm
ASSETS
Investment in associate 7 707 707 710
Financial assets 8 2 232 1 961 2 050
Other receivables 1 1 1
Cash and cash equivalents 5 6 6
Total assets 2 945 2 675 2 767
EQUITY AND LIABILITIES
Ordinary shareholders' equity - - -
Preference shareholders' interest 1 037 1 037 1 037
Non-distributable reserve (58) (85) (77)
Accumulated loss (239) (214) (218)
Total equity 740 738 742
Debentures in issue 2 198 1 937 2 019
Deferred tax 7 - 6
Total liabilities 2 205 1 937 2 025
Total equity and liabilities 2 945 2 675 2 767
Total equity attributable to ordinary shareholders - - -
Number of ordinary shares in issue ('000s) 1 1 1
Net asset value per ordinary share (rand per share) - - -
Total equity attributable to preference shareholders 740 738 742
Number of preference shares in issue (million) 237 237 237
Net asset value per preference share (rand per share) 3.12 3.11 3.13
Total equity attributable to linked unit holders 740 738 742
Value of debentures attributable to linked unit
holders 2 198 1 937 2 019
Net asset value attributable to linked unit holders 2 938 2 675 2 761
Number of linked units in issue (million) 237 237 237
Net asset value per linked unit (rand per unit) 12.40 11.29 11.65
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2012
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
Cash flow from operating activities
Cash utilised from operations (1) (1) (1)
Investment income on high yield term loan received in cash - - 104
Interest on debentures paid - - (104)
Net cash outflow from operating activities (1) (1) (1)
Cash flows from investing activities - - -
Cash flows from financing activities - - -
Net movement in cash and cash equivalents (1) (1) (1)
Cash and cash equivalents at beginning of period 6 7 7
Cash and cash equivalents at end of period 5 6 6
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2012
Ordinary Preference
share- share- Non-
holders' holders' distributable Accumu- Total
equity interest reserve lated loss equity
Rm Rm Rm Rm Rm
At 31 March 2011 - 1 037 (105) (195) 737
Loss for the period - - - (19) (19)
Other comprehensive income - - 20 - 20
Total comprehensive income (loss) - - 20 (19) 1
At 30 September 2011 - 1 037 (85) (214) 738
Profit for the period - - - (8) (8)
Other comprehensive income - - 8 - 8
Other movements in minority interests - - - 5 5
Total comprehensive income - - 8 (3) 5
At 31 March 2012 - 1 037 (77) (218) 742
Loss for the period - - - (21) (21)
Other comprehensive income - - 19 - 19
Total comprehensive income - - 19 (21) (2)
At 30 September 2012 - 1 037 (58) (239) 740
NOTES
For the six months ended 30 September 2012
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 2012.
These abridged financial statements were compiled under the supervision of Deon Viljoen, CA
(SA), a director on the board and the Group Chief Financial Officer of AFEH, in his capacity as
director of Alexander Forbes Group and Technology Services Proprietary Limited, which is
providing accounting and other services to the company.
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
2. Investment income
Interest and investment income on held-to-maturity
financial assets:
- PIK Debentures 137 117 243
- High Yield term loan 50 49 106
- Put & call option agreement 8 7 15
- Amendment fee 1 1 2
Interest on cash balances - - 1
196 174 367
3. Finance costs
Interest cost on financial liability held at amortised cost
(debentures) (191) (169) (253)
4. Income tax expense
South African income tax
Deferred tax:
- Current year (1) - (4)
- Prior year adjustment - - (2)
(1) - (6)
The deferred tax balance has been adjusted for the increase in the fair value adjustment from the
revaluation of the Put and Call option asset.
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 all the economic rights to return of capital and dividends and
as such earnings and headline earnings per share are all attributable to preference shareholders.
Basic and headline earnings per share for ordinary shareholders are therefore zero.
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 preference 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 3/2012 issued by the South African Institute of
Chartered Accountants.
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
6.3 Calculation of earnings per share and per
linked unit
Loss for the period (R million) (a) (21) (19) (28)
Earnings attributable to debenture holders (R
million) (b) 191 169 353
Headline adjusting items:
Share of impairment charge and other capital
items of associate (c) 10 - 4
Weighted average number of preference
shares in issue (millions) (d) 237 237 237
Weighted average number of linked units in
issue (millions) (e) 237 237 237
Basic loss per preference share (cents) (a)/(d) (9) (8) (12)
Headline loss per preference share (cents) (a+c)/(d) (5) (8) (10)
Basic earnings per linked unit (cents) (a+b)/(e) 72 63 137
Headline earnings per linked unit (cents) (a+b+c)/(e) 76 63 139
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
7. Investment in associate
Cost 1 038 1 038 1 038
Share of cumulative post-acquisition movement in non-
distributable reserves (52) (85) (73)
Share of cumulative post-acquisition losses (279) (246) (255)
Carrying value in balance sheet 707 707 710
8. Financial assets
Opening balance 2 050 1 787 1 787
High-yield term loan repaid - - (104)
Interest accrued 191 168 352
Fair value adjustment (9) 6 15
Closing balance 2 232 1 961 2 050
Analysed as follows:
High-yield term loan receivable 409 417 372
Put and call option asset 73 58 65
Investment in PIK debentures 1 750 1 486 1 613
2 232 1 961 2 050
The face value of the HYTL receivable as at 30 September 2012 amounts to R512 million which
includes capitalised interest of R93 million.
9. Debenture interest
Interest on debentures accrues on a daily basis and will, subject to the terms of 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 (HYTL) held
may either service interest in cash or capitalise such interest from time to time.
In respect of the HYTL, as previously announced, the normal interest payment that was due on 18
June 2012 was deferred in order to fund further increases in regulatory capital requirements. The
next scheduled interest payment date on the HYTL is 18 December 2012. It is anticipated that this
interest for the six months will be paid in full by the issuer and payment to linked unit holders will be
made as soon as possible (only subject to compulsory JSE notification periods) after receipt by AF
Pref.
As previously announced on the proceeds from the sale of the UK Consultants and Actuaries
business by AFEH will be received as soon as the transaction becomes unconditional. The
transaction is currently subject to regulatory approvals. Proceeds from disposals are required to first
be offered to the Senior Preference Share Funders. However, the Senior Lenders have given their
approval for these proceeds to be paid to the HYTL holders. The net cash proceeds will be applied
to settle historically accrued interest. The net amount is expected to be approximately R220 million
of which 26.5% will be due to AF Pref.
10. Dividends
In line with the original expectations of the entity, no dividends are proposed for the foreseeable future.
Independent directors: JRP Doidge (Chairman)
TJ Fearnhead
B Harmse
J Wandrag (Alternate)
Non-executive director: DM Viljoen
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
Corner 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
Alexander Forbes Preference Share Investments Limited
Registration number: 2006/031561/06
Share code: AFP
ISIN code: ZAE 000098067
Website: www.alexanderforbes.co.za
Date: 03/12/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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