Wrap Text
Unaudited interim results for the six
months ended 30 September 2012
Alexander Forbes Equity Holdings Proprietary Limited
Registration number: 2006/025226/07
(Incorporated in the Republic of South Africa)
Unaudited interim results for the six
months ended 30 September 2012
- Income from continuing operations,
net of direct product costs, increases
by 11% to R2.1 billion
- Profit from operations before non-
trading items increases by 8% to R524
million
- UK based Alexander Forbes
Consultants and Actuaries business
disposed of during the period
REVIEW OF ACTIVITIES
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, which holds a 26.5% stake in the issued ordinary shares of
AFEH and also holds various other instruments issued by the AFEH and its subsidiaries.
Alexander Forbes has an impressive track record of building significant and sustainable businesses in
line with our strategic intent. At the start of the 2011 financial year, we refined this intent to focus on
our strategies to continue to grow off our core employee benefit, asset management and insurance
businesses through a sharper focus on retail, public sector and our Africa businesses post the sale of
the Risk Services division. We continuously review our portfolio of businesses in support of our
strategy and to maximise the value for shareholders.
We remain committed to our Higher Purpose of impacting peoples' lives positively through securing
their long term financial wellbeing and hard earned assets. We continue to embed our SERVE values
which are embodied in providing with Simplicity, our Expert innovative solutions, to establish lasting
Relationships, backed by the Value of trust, in order to Enrich our lives.
Overall the Group's results for the 6 months ended 30 September 2012 continued to show promising
growth. It is encouraging to see credible top line revenue growth as our strategic intent continues to
gain momentum as indicated through its early success. Specifically trading profit growth from Retail
(Individual Clients) for the reporting period is 18% compared to last year underpinned by asset growth
of 19% and insurance gross premium growth of 16%.
Operating income for the group's continuing operations exceeded R2 billion for the six months ended
30 September 2012. This result was 11% higher than the first six months of the previous financial
year.
Operating expenses from continuing operations (excluding non-trading items) of R1.5 billion
increased by 12% compared to the previous period. This includes our continued investment in the
strategic growth areas, particularly to support expansion in the individual client market as well as
branding, marketing and leadership.
Profit from continuing operations, before non-trading items, increased by 8% to R524 million
compared to R483 million for the first six months of the previous financial period. The Africa region
delivered a pleasing 12% growth in trading profit for the six months under review to end the period at
R466 million.
After non-trading items and finance charges, the group's profit before taxation from continuing
operations of R90 million is significantly higher than the R3 million reported in the previous period.
After taxation, the group reported a loss of R25 million compared to the R84 million loss in the first six
months of the previous financial year. As previously explained, this loss should be viewed in light of
the ongoing accounting amortisation of the intangible assets which arose from the business
combination (acquisition by the current shareholders in 2007) amounting to R87 million for the six
months (refer note 5).
Further to our announcement of 4 January 2012 regarding the disposal of our Risk Services
businesses, we have completed the disposal of our Ugandan and Malawian businesses. In addition,
the Tanzanian business has been sold, subject to regulatory approval.
We also announced in October 2012 the disposal of our UK based Alexander Forbes Consultants and
Actuaries business (AFCA UK) creating a merged entity with JLT that is significantly better positioned
to respond to the regulatory and local market changes. We retain our interest in Lane Clark &
Peacock, our UK and European actuarial employee benefit consulting business.
The disposals over the past year have resulted in the restatement of the statement of financial
position and income statement, including restatement of prior year comparative income statement and
cash flow numbers, in line with the required accounting treatment of discontinued operations. The
effects of these changes are set out in note 7.
A brief commentary on the operating results for each of the main business segments follows:
- SA Financial Services
Income from operations increased by 6% to R759 million for the six month period and trading profit
increased by 12% to R166 million. Strong new business growth was achieved in almost all of the
major divisions. A pleasing number of new client appointments were gained in the core retirement
funds division and healthcare broking business during the six months. Client retention remained
strong despite a highly competitive operating environment.
Growth in members under administration in the retirement fund administration business was 6%
compared to the previous period. Continued investment is being made in operational efficiencies in
the administration areas with a focus on improving client experience and automation of manual
processes. Our administration business was the first, and is still the only, administrator to achieve an
unqualified SAS70 Type II or the more recent ISAE 3402 audit result for the last 8 consecutive years.
Strong growth in the umbrella retirement fund offering continues with the flagship fund, The Alexander
Forbes Retirement Fund, being one of the largest funds of its kind in the market. The assets under
management have increased by 32% compared to September 2011.
The retail investment platform has been well received and enjoyed strong net cash flows for the
period. Assets under management on our retail administration platform, now totals R36 billion at 30
September 2012 which is a growth of 19% year on year. In line with the focus on the retail
(individual client) segment of the market, the size of the internal advisory force continued to increase
during the six month period.
Two specialised divisions have been created, the aim of which is to provide sustainability and long
term growth. The Research and Product Development division aims to support the business strategy,
through the production of research and associated advice and product solutions for institutional and
retail clients as well as other relevant stakeholders. The Public Sector Consulting division is a
specialised area focusing on the needs of specialist markets such as the State, Parastatal and Union
sectors. Through the division's comprehensive understanding of the financial services environment,
tailor-made financial solutions are created to serve these clients in a unique way for both employers
and employees.
We were awarded the Professional Management Research 2012 Diamond Arrow Award for best
administrator for the 6th consecutive year and for the best consulting and actuarial firm for the 5th
consecutive year.
AF Compensation Technologies, previously a division of Risk & Insurance Services, has now been
integrated into the management structure of Financial Services. Income from operations decreased
by 12% to R26 million for the six month period. The business experienced difficulties with regard to
new business and the extension of some existing contracts as a result of delays from clients in
awarding/renewing service agreements. Some of this effect was mitigated by strict cost
management.
- Investment Solutions - Africa
Assets under management ended on R190 billion at 30 September 2012 with additional assets under
administration of R27 billion bringing total assets under management and administration to R217
billion, an increase of R24 billion or 12% from R193 billion at 31 March 2012.
Income from operations grew by 15% to R299 million for the six month period under review. The
trading profit increased from R149 million to R164 million, this represents a 10% growth year on year.
The business recorded very strong new business flows of R13 billion in the first six months as a result
of coordinated and focused asset accumulation strategies. The rally in some equity markets
continued, buoyed by actions by central banks, mainly in Europe and some emerging markets. The
ALSI set a local record high in September of 36 363. Approximately 60% of investment portfolios
recorded performance that is ahead of their respective benchmarks over a medium to long term
measurement periods.
The continuous improvement of operational integrity and depth of expertise throughout the business
focuses on enhancing the value add for clients.
- Guardrisk
Income from operations increased by 15% to R175 million for the six month period and trading profit
increased by 14% to R81 million. Strong new business growth was achieved in the Corporate Risk
Services and Affinity divisions as well as good organic growth in the Life and Underwriting Managers
divisions. Underwriting results were negatively impacted by increased claims ratios as well as
continued competitive pressures on premium rates.
Selected specialised products in the Guardrisk Allied Products and Services division performed well,
while others operating and competing with the traditional insurance market were negatively impacted
by lower business volumes and market rates.
Trading margin remains healthy but is under pressure due to the high cost of implementing regulatory
changes. Increased resource requirements to further enhance our technical capabilities to meet the
challenges posed by the changing business landscape resulted in an increase in personnel cost.
- Alexander Forbes Insurance ("AF Insurance")
Market indications are that the insurance arena remains depressed, particularly in the personal lines
segment. This is mainly due to increased competition from new entrants in the market coupled with
financial pressure on consumers.
Despite the general weak market, AFI was able to grow gross written premiums by 16% to R514
million for the first half of the financial year. The growth was mainly driven by new client acquisitions
and extending further services to existing clients.
Net revenue from operations grew by 8% year on year. Underwriting results were impacted by a
number of weather related and other events and remains an area of focus.
Expense growth of 7.7% includes the investment in the start up Alexander Forbes Business
Insurance. AFI grew trading results by 8% over the period.
The business continues its commitment to the retail strategy and increased the number of consultant,
call centres and business development consultants compared to the previous year. Growth in new
business premiums remained strong.
In addition to the retail focus, the launch of Alexander Forbes Business Insurance in April 2012 marks
an exciting new diversification opportunity. Investment continues in this area combined with an
increase in the commercial product offering and early signs are encouraging.
- AfriNet (covering all operations in Africa outside of South Africa)
Income from operations increased by 24% to R99 million for the six month period and trading profit
increased by 44% to R13 million from its reduced base following the sale of the Risk services
businesses. Most business operations performed in line with expectation with annuitised revenue
streams providing most of the growth contribution.
The Botswana operation successfully launched a new with-profit annuity product and asset consulting
service which have gained good traction in that market. The consulting division within our Kenyan
operation benefitted from actuarial assignments for several regional clients. The operations in
Namibia, which comprise financial services, asset management and short term insurance, grew in line
with expectations experiencing good growth in the retail financial planning and short term insurance
divisions.
Focus on selective value accretive growth opportunities continues in these exciting markets.
Significant attention is being paid to ensuring that operations maintain high standards of risk
management and governance in order to position these businesses for growth.
- International Financial Services
Income from continuing operations of £42.7m remained broadly static against prior period income of
£42m. A relatively small increase in income within LCP reflected continuing pressure on fees as
economies across the UK and Europe continued to experience tougher trading conditions. The
International Financial Services operations continue to win new business; however capacity building
and wage inflation resulted in trading profits of £4.9m, down by £0.9m on the comparative period.
Following the sale of AFCA UK, the International Group retains its interest in LCP, Alexander Forbes
Trustees, Media Insurance Services, International Investment Solutions and Alexander Forbes
Channel Islands, which continue to perform in line with expectation.
- International Investment Solutions
The International Investment Solutions business continues to grow its UK sourced assets under
management, with assets under management increasing by £0.2bn from £1.6bn to £1.8bn since the
beginning of this financial year. This growth was negatively impacted by a transfer of assets under
management and the associated income to Investment Solutions in South Africa.
- Discontinued operations
The disposal of our Risk Services business was implemented in the previous financial year with effect
1 January 2012. The results included within discontinued operations therefore include results of all
Risk Services operations for the full comparative six months period but in the current period under
review include the results of only certain smaller operations in the rest of Africa. These remaining
operations are still in the process of sale completion and in most instances awaiting regulatory
approval. During the period under review, further disposals became unconditional including the Risk
Services operations in Malawi and Uganda. As mentioned above, discontinued operations now also
include the results of AFCA UK.
Regulatory capital changes
As previously reported, the introduction by the Financial Services Board (FSB) over the past two
years of the revised capital adequacy requirements for insurance companies, significantly impacted
on the level of capital required to be carried by all the insurance entities in the group. These are
interim measures in advance of the implementation of the Solvency Assessment and Management
framework (SAM) expected to be implemented in 2015.
In addition, the new liquidity requirements for financial advisory and intermediary (FAIS registered)
businesses also required additional cash to be retained by the group.
Both the above issues resulted in withholding of cash generated by the group that would otherwise
have been available to reduce outstanding debt.
These capital requirements have now largely been funded but may change from time to time. In
addition, the FSB indicated that the implementation of consolidated or group supervision is likely take
effect during 2013. As a consequence, the current capital and debt structure of the group is being
reviewed to ensure that it best meets the long term regulatory and operational requirements of the
group.
As noted in previous announcements, the group made full payment of the interest on the High Yield
Term Loan (HYTL) issued by Alexander Forbes Funding Proprietary Limited for the six months ended
18 December 2011 and also made two additional interest payments on the HYTL resulting from the
proceeds of the sale of the Risk Services businesses. As communicated in an announcement dated
1 June 2012, the normal HYTL interest due on 18 June 2012, was postponed as a result of the
additional regulatory capital requirements. Full interest payment will be made for the six month period
ending 18 December 2012.
Prospects
The strategic repositioning of the group continues despite difficult trading environments in many areas
and uncertainties in the global economy. The recent disposals have resulted in greater focus for the
remainder of the group on the strategic growth areas such as individual clients and public sector
clients as well as markets such as the rest of Africa.
Our strategic growth areas and plans are well defined and showing strong traction. We continue
managing the pace of transformation of our business in those areas, while at the same time further
developing our strong position in the more mature areas by remaining agile and innovative as well as
finding operational efficiencies.
Changes in directorate
There have been additional changes to the board of directors since the publication of our results
announcement for the year ended 31 March 2012, on 12 June 2012. The board regrets to advise of
the resignation of Ms M Mzimba. Mr N Waithaka was appointed as Mr van Wyk's alternate director
with effect from 1 September 2012. Mr R Govender has also been welcomed as a member of the
board with effect from 27 November 2012, replacing Mr D Ngobeni. The board would like to thank the
outgoing directors for their valuable contribution and welcome the new appointees.
On behalf of the board of directors
M S Moloko E Chr Kieswetter
Chairman Group Chief Executive
Johannesburg
3 December 2012
SUMMARY CONSOLIDATED INCOME STATEMENT
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
Continuing operations
Fee and commission income 3 2 193 1 974 4 269
Net income from insurance operations 4 235 221 385
Direct expenses attributable to fee and commission income (367) (344) (686)
Operating income net of direct expenses 2 061 1 851 3 968
Operating expenses (1 537) (1 368) (2 896)
Profit from operations before non-trading and capital
items 524 483 1 072
Non-trading and capital items 5 (44) (87) (141)
Operating profit 480 396 931
Investment income 36 7 169
Finance costs 6 (425) (399) (816)
Share of net profit of associates (net of income tax) (1) (1) 1
Profit before taxation 90 3 285
Income tax expense (115) (87) (361)
Loss for the year from continuing operations (25) (84) (76)
Discontinued operations
(Loss)/Profit on discontinued operations (net of income tax) 7 (33) 19 24
Accumulated loss for the year (58) (65) (52)
Loss attributable to:
Equity holders (89) (85) (129)
Non-controlling interest holders 31 20 77
(58) (65) (52)
Basic (loss)/profit per ordinary share continuing operations
(cents) (15) (28) (41)
Basic (loss)/profit per ordinary share discontinued operations
(cents) (9) 5 7
Basic loss per ordinary share all operations (cents) 8 (24) (23) (34)
Headline (loss)/profit per ordinary share continuing
operations (cents) (15) (27) (41)
Headline (loss)/profit per ordinary share discontinued
operations (cents) (2) 7 10
Headline loss per ordinary share all operations (cents) 8 (17) (20) (31)
Weighted average number of shares in issue (million) 8 377 377 377
SUMMARY CONSOLIDATED 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
Loss for the year (58) (65) (52)
Foreign currency translation differences of foreign
operations 67 79 89
Changes in fair value of cash flow hedges (13) (40) (39)
Portion of fair value hedge transferred to profit or loss 25 41 71
Other comprehensive income for the year (net of
income tax) 79 80 121
Total comprehensive income for the year 21 15 69
Total comprehensive (loss)/income attributable to:
Equity holders (18) (15) (21)
Non-controlling interest holders 39 30 90
Total comprehensive income for the year 21 15 69
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2012
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
ASSETS
Financial assets held under multi-manager investment contracts 227 378 190 277 209 994
Financial assets of cell captive insurance facilities 10 413 8 519 9 484
Property and equipment 132 167 165
Purchased and developed computer software 137 143 166
Goodwill 4 518 4 716 4 652
Intangible assets 1 304 1 517 1 437
Deferred tax assets 113 131 110
Financial assets 1 715 775 1 212
Insurance receivables 1 000 840 896
Trade and other receivables 922 943 944
Cash and cash equivalents 3 278 2 819 3 053
Assets of disposal group classified as held for sale 549 1 341 288
Total assets 251 459 212 188 232 401
EQUITY AND LIABILITIES
Equity holders' funds 2 121 2 127 2 139
Non-controlling interest 143 149 185
Total equity 2 264 2 276 2 324
Financial liabilities held under multi-manager investment
contracts 227 378 190 249 209 994
Liabilities of cell captive insurance facilities 10 413 8 519 9 484
Borrowings 5 605 6 013 5 448
Employee benefits 106 157 158
Deferred tax liabilities 440 548 491
Provisions 292 362 265
Operating lease liability 11 50 29
Deferred income 76 55 69
Insurance payables 3 467 2 347 2 693
Trade and other payables 1 249 1 034 1 315
Liabilities of disposal group classified as held for sale 158 578 131
Total liabilities 249 195 209 912 230 077
Total equity and liabilities 251 459 212 188 232 401
Total equity per above 2 264 2 276 2 324
Number of ordinary share in issue (millions) 377 377 377
Net asset value per ordinary share (cents) 601 604 616
SUMMARY CONSOLIDATED 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 FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 690 589 1 104
Net finance costs paid (110) (84) (398)
Cash settlement of cash management and employee benefit
commitments (11) (9) (9)
Movement in working capital and insurance balances 509 208 678
Taxation paid (173) (119) (231)
Net cash inflow from operating activities before cash flows
from policyholder investment contracts 905 585 1 144
Cash flows from policyholder investment contracts (1 868) (11 128) (3 223)
Cash flows from operating activities Discontinued operations 2 (18) 11
Net cash inflow/(outflow) from operating activities (961) (10 561) (2 068)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of subsidiaries and businesses 30 - (153)
Repayment of assumed debt by acquirer - - 511
Net movement in financial assets (505) (350) (786)
Proceeds on disposal of property and equipment 6 2 1
Capital expenditure for the year (24) (48) (103)
Cash flows from investing activities Discontinued operations (2) (18) (30)
Net cash outflow from investing activities (495) (414) (560)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings repaid (119) (136) (642)
Payments to non-controlling interest (61) (53) (76)
Cash flows from financing activities Discontinued operations - 153 29
Net cash outflow from financing activities (180) (36) (689)
Net movement in cash and cash equivalents (1 636) (11 011) (3 317)
Cash and cash equivalents at beginning of year 18 831 22 066 22 066
Foreign subsidiaries translation adjustment 29 53 82
CASH AND CASH EQUIVALENTS AT END OF YEAR 17 224 11 108 18 831
Analysed as follows:
Cash and cash equivalents of discontinued operations* 80 516 79
Cash and cash equivalents of continuing operations* 3 278 2 764 3 018
Cash held under multimanager investment contracts 12 722 6 696 14 984
Cash held under cell captive insurance facilities 1 144 1 132 750
17 224 11 108 18 831
* The prior year balances have been restated for the classification of the discontinued AFCA UK division in the amounts of R55
million and R35 million for 30 September 2011 and 31 March 2012 respectively. The comparative balances do not agree to the
Statement of Financial Position as comparative balances are not restated for businesses recently discontinued.
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months 30 March 2012
Share
capital Non- Non-
and distributable Accumu- Equity controlling Total
premium reserve lated loss holders' interest equity
Rm Rm Rm Rm Rm Rm
At 31 March 2011 3 261 (252) (867) 2 142 172 2 314
(Loss)/profit for the period - - (85) (85) 20 (65)
Other comprehensive income - 70 - 70 10 80
Total comprehensive
(loss)/profit - 70 (85) (15) 30 15
Movement in contingency
reserve of short-term
insurance company - 4 (4) - - -
Other movements in non-
controlling interest - - - - (53) (53)
At 30 September 2011 3 261 (178) (956) 2 127 149 2 276
(Loss)/profit for the year - - (44) (44) 57 13
Other comprehensive income - 38 - 38 3 41
Total comprehensive
(loss)/profit - 38 (44) (6) 60 54
Movement in contingency
reserve of short-term
insurance company - (33) 33 - - -
Other movements in non-
controlling interest - - 18 18 (24) (6)
At 31 March 2012 3 261 (173) (949) 2 139 185 2 324
(Loss)/profit for the period - - (89) (89) 31 (58)
Other comprehensive income - 71 - 71 8 79
Total comprehensive
(loss)/profit - 71 (89) (18) 39 21
Movement in contingency
reserve of short-term
insurance company - 1 (1) - - -
Other movements in non-
controlling interest - - - - (81) (81)
At 30 September 2012 3 261 (101) (1 039) 2 121 143 2 264
SEGMENTAL RESULTS
for the six months ended 30 September 2012
Operating income net of direct Profit from operations before non-
expenses trading and capital items
30 Sep Var. 30 Sep 30 Sep Var. 30 Sep
2012 % 2011** 2012 % 2011**
Africa Continuing Operations (Rm)
SA Financial Services 759 6% 715 166 12% 148
Investment Solutions 299 15% 260 164 10% 149
Guardrisk 175 15% 152 81 14% 71
AF Insurance 151 8% 140 42 8% 39
AfriNet 99 24% 80 13 44% 9
Total Africa Continuing Operations (Rm) 1 483 10% 1 347 466 12% 416
International (GBPm)
Financial Services 42.7 2% 42.0 4.9 (12%) 5.5
Investment Solutions 1.6 (33%) 2.4 (0.5) (198%) 0.4
Total International (GBPm) 44.3 0% 44.4 4.4 (25%) 5.9
Total International (Rm) 578 15% 504 58 (14%) 67
Total Continuing Operations (Rm) 2 061 11% 1 851 524 8% 483
Depreciation & Amortisation Assets
30 Sep Var. 30 Sep 30 Sep Var. 30 Sep
2012 % 2011** 2012 % 2011
Africa (Rm)
SA Financial Services 9 9 41 460 31 696
Investment Solutions 2 2 203 495 173 143
AF Insurance 1 1 411 345
Guardrisk 1 1 12 500 9 651
AfriNet 2 2 2 388 2 071
Total Africa (Rm) 15 - 15 260 254 20% 216 906
International (GBPm)
Financial Services 1.0 1.1 118 130
Investment Solutions - - 1 810 1 429
Total International (GBPm) 1.0 (9%) 1.1 1 928 24% 1 559
Total International (Rm) 12 33% 9 25 187 33% 19 009
Unallocated:
Corporate Services 21 23 591 785
Discontinued operations - - 547 1 341
Goodwill - - 4 716 5 258
Consolidation elimination* (39 838) (31 111)
Total Group (Rm) 48 2% 47 251 457 19% 212 188
* This amount relates mainly to assets invested by group companies with Investment Solutions.
** The prior year comparative figures in the table above have been restated following the disposal of AFCA UK and to take
account of certain shared services costs that were previously allocated to discontinued operations but that will be continuing.
NOTES
1. The summary consolidated financial statements have been prepared in accordance 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 summary consolidated financial statements
are consistent with those applied in the annual financial statements for the year ended 31 March 2012.
These summary consolidated financial statements were compiled under the supervision of Deon
Viljoen, CA(SA), the Group Chief Financial Officer.
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
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 13.0 11.3 11.9
Closing R:GBP rate 13.4 12.2 12.3
3. Fee and commission income
Brokerage fees and commission income 54 84 148
Fee income from consulting and administration services 1 416 1 262 2 842
Revenue from investment activities 636 605 1 226
Interest income from lending operations 9 16 14
Operational interest income 4 4 25
Other income 74 3 14
Fee and commission income 2 193 1 974 4 269
4. Net income from insurance operations
Insurance premiums earned 4 003 2 793 5 204
Less: amounts ceded to reinsurers (2 418) (1 804) (3 894)
Investment income from insurance operations 119 58 129
Less: insurance claims and withdrawals (2 674) (1 893) (3 317)
Plus: insurance claims and benefits covered by reinsurance
contracts 1 205 1 067 2 263
Net income from insurance operations 235 221 385
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
5. Non-trading and other capital items
Non trading:
Professional indemnity insurance cell 28 1 37
Amortisation of intangible assets arising from business
combination (87) (87) (174)
Income from transitional service agreement for discontinued
operation 14
Capital items:
Goodwill impairment losses - - (1)
Capital gain on sale of subsidiary & other 1 (1) (3)
Total non-trading and other capital items (44) (87) (141)
6. Finance costs
Finance costs derived from financial liabilities classified and
carried at amortised costs:
Interest on term debt issued (388) (360) (742)
Amortisation of debt raising fees capitalised to borrowings (6) (6) (13)
Other interest costs (2) (5) (5)
Finance cost derived from financial liabilities designated as fair
value through profit or loss: (396) (371) (760)
Fair value adjustment on put and call options (29) (28) (56)
Total finance costs (425) (399) (816)
7. Discontinued operations
During the period under review and in the prior year, the group disposed of certain businesses
including the AFCA UK business in the current year and Risk Services businesses (corporate
insurance broking business) in the prior year. These businesses were classified as discontinued
operations for purposes of financial reporting. In line with the requirements of IFRS 5, the
comparative income statement has been re-presented to show the discontinued operations
separately from continuing operations. As at 30 September 2012, the sales transaction in respect
of AFCA UK is still subject to regulatory approval. Assets and liabilities held at year end in
respect of discontinued operations have been reclassified as assets and liabilities of disposal
groups held for sale. The segmental results have also been re-presented to exclude the effects of
discontinued operations including the reallocation of shared services expenses that were
previously allocated to discontinued operations but which remain in the continuing cost base of
the group. These expenses have therefore been reallocated to the continuing businesses and
comparative results of the prior year similarly restated. These expenses amounted to R21 million
in the prior period's first six months.
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
Assets and liabilities of disposal group classified as held for sale
Long term assets 49 32 24
Goodwill (including Purchase Price Allocation of AF
Acquisitions (Pty) Ltd) 238 670 110
Trade and other receivables 182 168 110
Cash and cash equivalents 80 471 44
Total assets 549 1 341 288
Long term liabilities 42 74 11
Insurance related payables 66 440 88
Trade and other payables 50 64 32
Total liabilities 158 578 131
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
Summary income statement from discontinued operations
Income from operations 202 483 841
Operating expenses (211) (410) (731)
Operating profit before non-trading and capital items (9) 73 110
Net finance costs - (44) (67)
Non-trading and capital items (63) (7) (4)
Share of profits from associates 4 1 4
Profit before tax (68) 23 43
Taxation (1) (4) (13)
Net profit for the period (69) 19 30
Profit / (Loss) on disposals 36 - (6)
(33) 19 24
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 ordinary share 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 3/2012 issued by the
South African Institute of Chartered Accountants.
6 months 6 months 12 months
30 Sep 30 Sep 31 Mar
2012 2011 2012
Rm Rm Rm
8.3 Calculation of headline loss per share
Loss attributable to equity holders (IAS 33 earnings) (89) (85) (129)
Adjusting items
- Impairment losses and other capital items 26 8 14
Headline attributable loss for the year (63) (77) (115)
Weighted average number of shares (millions) 377 377 377
Basic loss per share (cents) (24) (23) (34)
Headline loss per share (cents) (17) (20) (31)
9. Capital expenditure for the year 24 55 131
10. Operating lease commitments
Due within one year 208 167 218
Thereafter 1 974 1 659 2 061
Total operating lease commitments 2 182 1 826 2 279
Capital expenditure and commitments will be funded from internal cash resources.
Alexander Forbes Equity Holdings Proprietary Limited
Registration number: 2006/025226/07
(Incorporated in the Republic of South Africa)
Independent directors: M D Collier, D Konar, H P Meyer, B Petersen
Non-executive directors: R Govender, L Hall-Kimm (Ms), N C Kolbe (Ms), M C Ramaphosa,
A Roux, J A van Wyk, A C de Beer (Alternate), J C Douin (Alternate), J S Masondo (Alternate),
N Waithaka (Alternate)
Executive directors: M S Moloko (Chairman), E Chr Kieswetter (Group Chief Executive),
D M Viljoen (Group Chief Financial Officer)
Company secretary & Investor relations: J E Salvado (Ms)
Registered office: 115 West Street, Sandown, Sandton, 2196
Transfer secretaries: Computershare Investor Services Proprietary 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
Website: www.alexanderforbes.co.za
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