Wrap Text
Audited results for the year ended 31 March 2013
Alexander Forbes Preference Share Investments Limited
Registration number: 2006/031561/06
Share code: AFP
ISIN code: ZAE 000098067
Audited results for the year ended
31 March 2013
- Headline earnings per linked unit
increases by 22% from 139 cents per
unit to 169 cents per unit
- Headline loss per preference share
decreases from 10 cent per preference
share to zero cents per preference
share
- Investment income increases by 12%
to R411 million
- Equity accounted share of loss of
Alexander Forbes Equity Holdings
increases by 41% to R48 million
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 Group. 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 the 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 year
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 year ended 31 March 2013. In
summary, AFEH's revenue from continuing operations, net of direct product cost, increased by 13%
to R4.4 billion, and profit from continuing operations before non-trading items increased by 9% to
R1.1 billion. This growth in operating profit is after taking into account the negative impact of the
accounting treatment of long-term operating lease during the transition period which, if excluded,
results in a normalised growth in operating profit before non-trading items of 14%. Profit for the year
after non-trading items and taxation was R75 million compared to a loss of R80 million reported in
the previous financial year. These results are in respect of the continuing operations of AFEH
following the sale of its Risk Services businesses (corporate insurance broking) in the previous year
and Alexander Forbes Consultants and Actuaries business in the UK in the current year. In addition, a
number of smaller businesses were also discontinued during the year under review.
The loss attributable to AFEH equity holders (i.e. after amortisation of intangible assets, finance cost
related to the funding structure, tax and the result of discontinued operations) increased by 42% to
R183 million, from a loss of R129 million in the previous financial year.
This loss should be seen in the context of the accounting amortisation of intangible assets by AFEH
amounting to R166 million. AF Pref's share of this net loss amounts to R48 million, which is equity
accounted in the financial statements, and is the main contributor to the loss reported by AF Pref for
the year ended 31 March 2013 of R43 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 year of R411 million is 12% higher than the previous financial year. The corresponding
finance cost paid or payable to debenture holders (linked unit holders) amounts to R401 million,
14% up on the previous year.
Overall, earnings per linked unit increased by 10% from 137 cents per unit in the previous year to 151
cents per unit in the current year. Headline earnings per linked unit increased by 22% from 139 cents
per unit to 169 cents per unit.
Further detail of the results of AFEH and its subsidiaries for the year ended 31 March 2013 is
contained in the results announcement made available to AF Pref linked unit holders by AFEH.
Change in directorate
There has been one change to the board of directors since the publication of our interim results on 03
December 2012. We regret to announce that J Wandrag (Alternate director to JRP Doidge) resigned
on 18 February 2013.
On behalf of the board of directors:
JRP Doidge TJ Fearnhead
Director Director
Johannesburg Johannesburg
19 June 2013 19 June 2013
INCOME STATEMENT
for the year ended 31 March 2013
2013 2012
Notes Rm Rm
Investment income 2 411 367
Operating expenses (2) (2)
Finance cost 3 (401) (353)
Share of net loss of associate (net of income tax) (48) (34)
Loss before taxation (40) (22)
Income tax expense 4 (3) (6)
Loss for the year (43) (28)
Loss attributable to:
- Ordinary shareholders 5 - -
- Preference shareholders 5 (43) (28)
(43) (28)
Headline earnings / (loss) (cents)
- per ordinary share 6 - -
- per preference share 6 - (10)
- per debenture 6 169 149
- per linked unit 6 169 139
Basic earnings / (loss) (cents)
- per ordinary share 6 - -
- per preference share 6 (18) (12)
- per debenture 6 169 149
- per linked unit 6 151 137
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2013
2013 2012
Notes Rm Rm
Loss for the year (43) (28)
Share of other comprehensive income of associates 44 28
Other comprehensive income for the year (net of
income tax) 44 28
Total comprehensive income for the year 1 -
Total comprehensive income attributable to:
- Equity holders - -
- Preference shareholders 1 -
Total comprehensive income for the year 1 -
STATEMENT OF FINANCIAL POSITION
at 31 March 2013
2013 2012
Notes Rm Rm
ASSETS
Investment in associate 7 706 710
Financial assets 8 2 344 2 050
Other receivables 1 1
Cash and cash equivalents 5 6
Total assets 3 056 2 767
EQUITY AND LIABILITIES
Ordinary shareholders' equity - -
Preference shareholders' interest - component of linked
units 1 037 1 037
Non-distributable reserve (33) (77)
Accumulated loss (261) (218)
Total equity 743 742
Debentures - component of linked units 2 304 2 019
Deferred tax liability 9 6
Total liabilities 2 313 2 025
Total equity and liabilities 3 056 2 767
Total equity attributable to ordinary shareholders - -
Number of ordinary shares in issue (000s) 1 1
Net asset value per ordinary share (rand per share) - -
Total equity attributable to preference shareholders 743 742
Number of preference shares in issue (million) 237 237
Net asset value per preference share (rand per share) 3.14 3.13
Total equity attributable to linked unit holders 743 742
Value of debentures attributable to linked unit holders 2 304 2 019
Total asset value attributable to linked unit holders 3 047 2 761
Number of linked units in issue (million) 237 237
Net asset value per linked unit (rand per unit) 12.86 11.65
STATEMENT OF CASH FLOWS
for the year ended 31 March 2013
2013 2012
Rm Rm
Cash flow from operating activities
Cash utilised from operations (1) (1)
Payment of interest on debentures (116) (104)
Taxation paid - -
Investment income on high-yield term loan and relevant
assets 116 104
Net cash outflow from operating activities (1) (1)
Cash flows from investing activities
Repayment of loan from associate - -
Net cash inflow from investing activities - -
Cash flows from financing activities - -
Net cash outflow from financing activities - -
Net movement in cash and cash equivalents (1) (1)
Cash and cash equivalents at beginning of year 6 7
Cash and cash equivalents at end of year 5 6
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2013
Ordinary Preference Non-
shareholders' shareholders' distributable Accumulated
equity interest reserve loss Total equity
Rm Rm Rm Rm
At 31 March
2011 * - 1 037 (105) (195) 737
Loss for the
year - - - (28) (28)
Other
comprehensive
income - - 28 - 28
Other
movements in
minority interest
of associates - - - 5 5
Total
comprehensive
loss - - 28 (23) 5
At 31 March
2012 * - 1 037 (77) (218) 742
Loss for the
year - - - (43) (43)
Other
comprehensive
income - - 44 - 44
Total
comprehensive
income/(loss) - - 44 (43) 1
At 31 March
2013 * - 1 037 (33) (261) 743
* The issued ordinary share capital of the company at 31 March 2011, 31 March 2012 and 31 March
2013 was R 1 000
NOTES
for the year ended 31 March 2013
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 Companies Act of South Africa.
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 financial statements were compiled under the supervision of Deon Viljoen, CA (SA), 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.
The results have been audited by PricewaterhouseCoopers Inc. and a copy of their unqualified
audit opinion is available at the company's registered office.
2013 2012
Rm Rm
2. Investment income
Interest & investment income on held-to-maturity financial
assets:
- PIK Debentures 286 243
- High Yield term loan 107 106
- Put & call option agreement 15 15
- Amendment fee 2 2
Interest on cash balances 1 1
411 367
3. Finance costs
Interest cost on financial liability held at amortised cost
(debentures) (401) (353)
4. Income tax expense
South African income tax
Deferred tax
Current year (3) (4)
Prior year adjustment - (2)
(3) (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.
2013 2012
The standard South African income tax rate for companies
is reconciled to the company's actual tax rate as follows:
Income tax rate for companies 28.0% 28.0%
Adjusted for the effect of:
Share of net loss of associate (net of income tax) (34.2%) (41.6%)
Exempt income and disallowed expenditures 6.2% 13.6%
Future tax payable at Capital Gains Tax rate 7.3% 8.7%
Prior year adjustment - 17.5%
Effective tax rate 7.3% 26.2%
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 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 year.
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
year. Headline earnings are defined in Circular 3/2012 issued by the South African Institute of
Chartered Accountants.
6.3 Calculation of earnings per share and per linked unit
2013 2012
Loss for the year (R million) (a) (43) (28)
Earnings attributable to debenture holders (R million) (b) 401 353
Headline adjusting items:
Share of impairment charge and other capital items
of associate (c) 44 4
Weighted average number of preference shares in
issue (millions) (d) 237 237
Weighted average number of linked units and
debentures in issue (millions) (e) 237 237
Basic loss per preference share (cents) (a)/(d) (18) (12)
Headline loss per preference share (cents) (a+c)/(d) - (10)
Basic earnings per linked unit (cents) (a+b)/(e) 151 137
Headline earnings per linked unit (cents) (a+b+c)/(e) 169 139
7. Investment in associate
Cost 1 038 1 038
Share of cumulative post -acquisition movement in non-distributable
reserves of associate (33) (77)
Share of cumulative post -acquisition losses of associate (299) (251)
Carrying value in balance sheet 706 710
2013 2012
Rm Rm
8. Financial assets
Opening balance 2 050 1 787
Interest received (116) (104)
Interest accrued 395 352
Fair value adjustment 15 15
Closing balance 2 344 2 050
Analysed as follows:
High-yield term loan receivable 364 372
Put and call option asset 81 65
Investment in PIK debentures 1 899 1 613
2 344 2 050
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 held
may either service interest in cash or capitalise such interest from time to time.
The most recent scheduled interest payment date of the High Yield term loan, of which AF Pref
owns 26.5%, was 18 December 2012 and was serviced in full.
Linked unit holders were previously informed that agreement was reached with Senior
Preference Shareholders to allow proceeds from certain disposals to be applied to pay arrears
interest on the High Yield term loan. As a result, an additional special interest payment was
made on 25 June 2012 and 18 December 2012 in respect of the proceeds from subsequent
Risk Services disposals and the disposal of Alexander Forbes Consultants and Actuaries in the
UK.
The next scheduled interest payment date is 18 June 2013. A total interest payment of R110
million will be made (AF Pref's portion is R29.15 million.) A portion of the interest payment (total
of R35 million) will be deferred in order to fund further increases in regulatory capital
requirements of the long term and short term insurance entities as well as regulatory liquidity
requirements of various Financial Advisory and Intermediaries Services Act (FAIS) registered
entities. The payment also includes a special interest component relating to the subsequent
disposal of a Risk Services entity.
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
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: 19/06/2013 10:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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