Wrap Text
Audited results for the year ended 31 March 2013
Alexander Forbes Equity Holdings
Proprietary Limited
Registration number: 2006/025226/07
(Incorporated in the Republic of South Africa)
Audited results for the year ended
31 March 2013
- Income from continuing operations,
net of direct product costs, increases
by 13% to R4.4 billion
- Profit from continuing operations
before non-trading items increases by
9% to R1.1 billion
- Excluding the impact of accounting
treatment of long-term leases, profit
from continuing operations increases
by 14%
- Operating profit from continuing
operations after tax increases to R75
million compared to the loss of R80
million in the previous year
- Strong delivery on both financial and
non-financial objectives by all
continuing operations
- Strategic development of the Group
continues to gain momentum
Introduction
Alexander Forbes Equity Holdings Proprietary Limited ("AFEH") is the ultimate holding company of
the Alexander Forbes group of companies ("the Group"). AFEH's 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% interest in the issued ordinary shares of
AFEH and also holds various other financial instruments issued by the company and certain of its
subsidiaries.
Strategic intent
The Alexander Forbes Group is rooted in Africa, yet globally distinctive, creating wealth and protecting
our clients' assets in a way that impacts positively and sustainably on their lives.
The strategic intent of the Group for the next 36 months was recently reconfirmed by the AFEH board.
We remain committed to the path on which we embarked in April 2010 through the creation of an
ethical financial services company driven by our higher purpose. In rendering our services to clients,
we respond to this higher purpose by enhancing their quality of life and providing peace of mind.
We exist to deliver impactful service that benefits peoples' lives. Our impact on our stakeholders, the
people we serve, is driven by the need to:
- Secure the financial well-being of our clients through reliable financial advice and
administration services;
- Create a positive working environment for our employees;
- Contribute towards the development of our community and the environment;
- Create value for our shareholders.
Our growth path is anchored in our historic strength in the institutional employee benefit and
investment sectors and our core focus is to:
- Increase the size of our business by pursuing organic growth with our established
corporate client base, as well as focusing on three additional and specific target
markets: Retail (individual clients), Public Sector and Africa.
- Drive ongoing margin improvement: do more with less.
- Husband our financial resources and invest for growth: spend differently.
- Deleverage the business: service and reduce our debt.
- Increase the enterprise value: build a better business.
We frame our efforts and apply our resources to four key strategic themes:
- Increasing value for our clients
- Expanding our brand
- Investing and innovating for growth
- Extending our sales and service capacity
In line with our Strategic Intent, the Group undertook a review of its portfolio of companies with the
aim of strengthening its institutional capacity and strategic focus, which will allow it to maintain its
strong organic growth trajectory. The Group's focus is on building its employee benefits consulting
and solutions delivery businesses, with pensions, risk benefits & healthcare and investments at its
core. Individuals are, increasingly, requiring holistic financial advice and implementation and the
Group is expanding its capacity to deliver individual advice and solutions across wealth management,
retirement, healthcare and risk (life, disability and personal lines). The review has resulted in the
decision to dispose of certain businesses as highlighted in the Review of activities below.
The Group has received a number of expressions of interest to acquire certain of its businesses.
Whilst these businesses continue to contribute to the Group's growth, the Board has mandated the
Group executive to formally explore these approaches, as appropriate, before final decisions are
made.
Review of activities
In the previous financial year, the Group announced the disposal of its Risk Services businesses
(short-term insurance broking activities in Africa). Following the completion of the core transaction in
the previous financial year, the conclusion of the sales of remaining insurance broking operations in
parts of Africa were completed during the year under review. The only material property and casualty,
risk services broking entity remaining at balance sheet date was the business in Nigeria and its
disposal was concluded subsequent to year-end.
During the year under review, the Group also disposed of its Alexander Forbes Consultants and
Actuaries business in the United Kingdom (AFCA UK). The sale, as previously announced, was
concluded on 07 December 2012. In addition, the Board decided to dispose the Investment Solutions
UK business, the Media Insurance Services (Direct Marketing) businesses in the UK and other
smaller operations in Southern Africa. Whilst the disposal of these businesses had not been
implemented by year-end, they have for purposes of these financial statements, been treated as
discontinued operations in terms of International Financial Reporting Standards (IFRS). It is important
to note that these disposals do not affect the holdings in the consulting actuarial partnership of Lane
Clark & Peacock LLP (LCP) or Investment Solutions SA.
Review of results of continuing operations
Overall, the Group's results from its continuing operations for the financial year ended 31 March 2013
show solid growth. In particular, it has been encouraging to note the growth in top line revenue for the
period across all of the continuing operations. As reported at half-year, the strategic growth areas of
Retail (individual client), Public Sector and Africa also continue to deliver good revenue growth.
Equity markets in South Africa performed strongly during the year benefiting both the Financial
Services and the Investment Solutions businesses. The short term insurance industry in South Africa
experienced difficult underwriting conditions during the course of 2012, however, Alexander Forbes
Insurance's business model ensured that it was better protected against losses than a number of its
competitors. The UK and European economic environments remain challenging but our businesses
performed well in those regions and the translated results further benefited from the weakening Rand.
The Group's gross income from continuing operations, including gross insurance premiums earned,
totalled R11.6 billion which was 23% higher than the previous financial year, however this measure is
usually not recommended as a basis for financial analysis of our results. The better measure, being
operating income from continuing operations net of direct product costs, totalled R4.4 billion,
increasing by 12.5% from the previous financial year. Our strategic focus of growing the retail market
segments throughout the Group continues to show encouraging progress, with combined revenue in
that client segment also increasing by 12%.
Operating expenses (excluding non-trading items) of continuing operations of R3.2 billion increased
by 13.7% when compared to the previous year. We continue to balance disciplined cost management
in the established business areas with investment in the strategic growth areas, particularly to support
our expansion in the individual client market through brand building and marketing. As previously
indicated, the recent disposals of the Risk Services businesses resulted in some shared services
cost, previously absorbed by those businesses, having to be absorbed by the remainder of the Group.
These previously allocated costs are being rebased where possible and the remaining cost will
provide additional capacity for future growth but has negatively impacted the trading margins in the
short term.
The requirement to account for long term operating leases on a straight line basis, as required by
IFRS, had a significant negative impact on the current year's reported expenses given the relocation
of the Group's head-office during the year. The standard requires that the lease expense be
equalised for the period of the contractual lease irrespective of the fact that normal escalations
inherent in the lease agreement may be entirely market-related.
Profit from continuing operations, before non-trading items, increased by 9% to R1.15 billion
compared to the R1.05 billion for the previous financial year. Adjusting for the impact of the
accounting treatment for the long term operating leases explained above, the normalised growth rate
in trading profit would have been 14%. This impact has been isolated in the segmental analysis.
After non-trading items and finance charges, the Group's profit before taxation from continuing
operations of R303 million is 11% up from the R271 million in the previous financial year. As there is
no group taxation relief in SA, at a consolidated level, the effective tax rate typically appears high
resulting in an after tax profit of R75 million compared to a loss of R80 million in the previous year.
The absolute value of and growth in profit after tax should of course be viewed in the context of the
current funding structure of the Group as well as the fact that it includes the ongoing accounting
amortisation of the intangible assets which arose from the business combination (acquisition by the
current shareholders in 2007) amounting to R166 million for the year (refer note 5).
As at 31 March 2013, no further transaction earn-out proceeds have been recognised in the financial
statements relating to the previous year's sale of the Risk Services businesses as the first year
revenue threshold has not been met.
A brief commentary on the operating results for each of the main business segments, as detailed in
the segmental analysis, follows.
- SA Financial Services
Income from operations, net of direct product costs, increased by 8% to over R1.6 billion, compared
to the previous financial year and trading profit increased by 10% to R381 million. Strong new
business growth was achieved in all the major divisions and client retention has remained strong
despite a competitive operating environment.
Growth in members under administration in the retirement fund administration business grew by 5%
compared to the previous year to over 900 000 members and our retail (individual) client base grew
by 7% to over 43 000 clients.
Our flagship umbrella retirement fund, the Alexander Forbes Retirement Fund, is one of the largest
funds of its kind in the market with assets under management totalling R40.6 billion at 31 March 2013.
In addition, our continued focus on the retail market showed good results with strong net new
business flows written in the year to the retail administration platform with assets under management
on the platform increasing by 23%, now totaling R40 billion at 31 March 2013.
We continue to invest in operational efficiencies in our administration areas with a focus on improving
the client experience and level of automation and we continue to improve our IT platform, with positive
results. Customers now have access to an enhanced online interface with the business and further
development will take place into 2013.
Our continued focus on our public sector division showed good progress in building our brand within
the sector and strengthening strategic networks and relationships. This has resulted in strong new
business growth. Our healthcare consulting division also achieved positive new business flows and
our retirement fund consulting and actuarial division improved its contribution, increasing its trading
margin.
Alexander Forbes Compensation Technologies, previously reported under the risk services division,
experienced a positive year with the new business and management team achieving significant
traction in growing the business. Besides good revenue and trading profit growth, we recovered R365
million on behalf of our clients from the Road Accident Fund and Compensation for Occupational
Injuries and Diseases Fund.
- Investment Solutions South Africa
Closing assets under management and administration increased by 22% to R238 billion as at 31
March 2013 of which R216 billion are assets under management. Average assets under
management increased by 15% compared to the previous financial year. Income from operations
increased by 15% year-on-year to R635 million. Trading profit grew by 12% to R327 million, driven by
growth in equity markets and improved asset accumulation. The clients under administration utilising
the business's investment management platform is also growing strongly.
New business flows have been on an upward trend during the year, although the ongoing benefit
payments to fund members remain relatively high compared to ongoing contributions into funds,
reflecting the underlying cash negative trend in the South African retirement fund space. We
recorded R17 billion of gross new flows, mainly driven by the R11 billion of new flows from the
Platform business. We continue to focus on improving our wider asset accumulation strategies in line
with our long-term growth plan.
Most of our investment portfolios continue to perform very well against peers and are ahead of their
respective benchmarks over medium to long-term measurement periods. On a rolling three year
basis, 71% of our funds are in the upper half against single managers. During the period under
review, over 60% of our funds were ahead of their respective benchmarks.
We continuously focus on improving operational integrity and deepening expertise across the
business, so that we continue to serve our clients better and add value towards their retirement
savings and wealth creation while managing the risk of unusual and challenging economic
environments.
- Guardrisk
Income from operations increased by 12% to R348 million for the year and trading profit increased by
9% to R141 million. Strong new business growth was achieved in the Corporate Risk Services
division, coupled with good organic growth in the Life and the Volume and Affinity divisions. Overall,
the cell captive business has again experienced high levels of client retention. Specialised products
in the Guardrisk Allied Products and Services division continued to perform well with others negatively
impacted by lower business volumes. Underwriting results, comprising only 7% of trading profit for
the year, were negatively impacted by increased claims ratios.
The Guardrisk Life business experienced satisfying growth from its existing cell client base as well as
the niche investment product launched during the previous year. New business performed well in the
target areas and the underwriting result also showed good traction and stable growth on last year. In
Guardrisk Insurance, the Volume and Affinity division has been particularly successful in winning new
clients from competitors. The Corporate Risk Services division has experienced good growth in
revenue from its restructured mining rehabilitation insurance product and has achieved good savings
in reinsurance costs.
Increased resource and cost requirements to implement change as a result of the implementation of
various new regulatory initiatives continues to have an adverse impact on margins but will strengthen
the business offering and further enhance our technical capabilities in the long-term.
During the year under review, Guardrisk Insurance (the short-term insurer) has made good progress
with its preparation of the final application to the FSB for an own risk based capital model. In addition,
further progress was made with the strengthening of its governance structures in line with King III and
the FSB's new proposed requirements as part of the overall Solvency Assessment and Management
(SAM) initiative.
On 20 May 2013, the Group announced that it had received numerous expressions of interest from
various parties in acquiring the business and the Board agreed to formally explore these expressions
of interest. It is expected that this process will conclude in the second half of 2013.
- Alexander Forbes Insurance ("AF Insurance")
Alexander Forbes Insurance continued the trend of strong gross written premium growth in a market
segment where overall growth remains somewhat depressed during the year. Gross written premium
reached R1.1 billion, 15% higher than the previous year.
Premium written in Alexander Forbes Business Insurance, launched in April 2012, is gaining traction,
with annualised gross new business written reaching R18 million in the first year of its launch.
From an underwriting perspective, the insurance industry experienced some of the worst weather-
related claims in recent history. This, together with the devastating fires in St Francis Bay, impacted
heavily on underwriting results. However, AFI reinsures a significant portion of its risk and this
partially protected AFI's results.
Despite this negative impact on underwriting results, net operating income increased by 6% to R307
million.
Expenses increased 11%, driven in part by the investment in our start-up business, Alexander Forbes
Business Insurance.
Operating profit, including the negative underwriting results and investment in our start-up Business
Insurance, ended 2% below the previous year at R84 million.
- AfriNet (covering all operations in Africa outside of South Africa)
Revenue from continuing operations increased by 19% to R202 million for the year and trading profit
from continuing operations increased by 36% to R38 million. This very pleasing result was achieved
due to the initiatives focused on strengthening our existing operations through better market
positioning, deeper/multi product penetration, selective introduction of new products and stronger
governance and control measures.
The operating environment in the AfriNet operations remains challenging and highly competitive in
certain areas. Whilst cost efficiencies and scale have reduced in some countries, as a result of the
disposal of our Risk Services businesses in those countries, we believe that strong opportunities for
growth exist within our existing businesses.
The larger operations of Namibia and Botswana continue to deliver solid results and good growth has
been shown in our Kenya Financial Services operations. Our Nigerian and Zambian financial
services operations, although in start up phase, are showing exciting new market growth prospects.
As mentioned earlier, the disposals of the remaining smaller Risk Services businesses in Africa has
been completed. We have also disposed of the Kenya Healthcare business during the year following
changes in the regulatory environment in the country and are discontinuing certain smaller operations
in Southern Africa.
- International Financial Services
Following the disposals and discontinuances mentioned above, the continuing operations of the
International Financial Services business now largely comprise the consulting actuarial partnership,
LCP, and the independent pension trustee, Alexander Forbes Trustee Services.
Income from continuing operations increased by 4% to £93 million for the year and trading profit
increased by 27% to £14 million. Revenue growth across the United Kingdom and European
operations continued to be affected by the economic environment and pressure on charge-out rates
as clients manage their expenditures. Despite this, the businesses continued to win significant new
business and capitalise on the demand for trustee, consulting and investment advice as well as de-
risking solutions. The trading profit growth reflects a continued focus on productivity and cost
management.
Regulatory capital changes
The Group previously reported on the introduction of the revised capital adequacy requirements for
long-term insurers by the Financial Services Board (FSB) which took effect in June 2010 and short
term insurers which took effect in October 2011. These are interim measures in advance of the
implementation of the Solvency Assessment and Management framework (SAM). Following the
postponement of Solvency II in Europe, the implementation date of SAM in SA has been revised to 1
January 2016.
The impact of these interim measures for both long-term and short-term insurers combined with
liquidity requirements introduced for financial advisory and intermediary (FAIS) registered businesses
resulted in significant additional cash resources having to be retained by the Group which we reported
on extensively in previous reviews. Apart from a smaller final phase-in to be met in June 2013 and
normal growth requirements, these additional capital requirements have now all been provided for by
the Group. The various insurance entities in the Group have invested significant time and effort into
development of internal risk based capital models and in the Own Risk and Self Assessment
processes and procedures in order to be fully compliant with the requirements of SAM when they
finally become effective. However, it is unlikely that the Group will enjoy any relief of regulatory capital
requirements from these efforts until 2016 when SAM becomes applicable.
The implementation by the FSB of consolidated or group supervision, although postponed from the
original implementation date, will now take place on 1 January 2014. As previously reported, the
current capital structure of the Group is being reviewed to ensure that it best meets the long-term
regulatory and operational requirements of the Group. This review is likely to result in certain
components or features of the current capital structure and debt instruments being amended before
31 December 2013. Details in this regard will be communicated as soon as they are finally decided.
Dividends and interest payment
As per the original intention with the capital structure, no dividend on the ordinary shares in issue has
been declared or is payable.
Dividends payable in terms of the Senior Preference Shares issued by Alexander Forbes Acquisition
Proprietary Limited have all been paid in full in the year under review.
As noted in previous announcements, the Group made full payment of the interest on the High Yield
Term Loan issued by Alexander Forbes Funding Proprietary Limited for the six months ended 18
December 2012 and also made two additional interest payments on the High Yield Term Loan
resulting from the proceeds of the sale of AFCA UK and remaining Risk Services businesses. High
Yield Term Loan interest due on 18 June 2013, will be part paid to an amount of R110 million.
Prospects
The sustainable integrity of the Group has improved significantly due to the continuous balance
between long-term versus short-term objectives as well as the focus on financial and non-financial
aspects. We are benefitting from the resolute commitment we have made in a number of key
strategic initiatives that has strengthened the sustainability of our business and improved our financial
performance.
We continue to make solid progress in achieving our strategic goals. The results, both financial and
non-financial, confirm that our strategic choices are valid and with greater focus and execution will
deliver on promises made. Although we acknowledge the challenges that lie ahead, our bias for top
line growth whilst optimising operational efficiencies and sustainable organisational integrity remain
unchanged. Our focus will continue to be on growing our Retail, Public Sector and African offering
and footprint. We will also continue to encourage open and honest engagement with our employees
and various stakeholders so that we fully live the values of SERVE (our internal behavioural model)
with renewed vigour and embed client advocacy through the treating clients fairly initiative. Our key
focus areas over the next twelve to eighteen months will include continued efforts to:
- Strengthen our portfolio of companies
- Build on our growth
- Run our businesses with increasing institutional and reputational integrity
- Further strengthen our financial position
- Enhance the overall value of our business
Change 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 14 June 2012. Mr RN Waithaka was appointed
alternate director on 1 September 2012, and Mr R Govender was welcomed to the board, as a
director on 27 November 2012. Messrs D Ngobeni and R Govender resigned as directors with effect
from 27 November 2012 and 31 March 2013, respectively, and Ms MZ Mzimba as alternate director
with effect from 16 August 2012. Mr D Govender was welcomed to the board with effect from 28 May
2013. The board would like to thank the outgoing directors for their valuable contribution and welcome
the new appointees in their new roles.
On behalf of the board of directors:
M S Moloko E Chr Kieswetter
Chairman Group Chief Executive
Johannesburg
19 June 2013
SUMMARY CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2013
31 Mar 31 Mar
2013 2012
Notes Rm Rm
Continuing operations
Fee and commission income 3 4 649 4 125
Net income from insurance operations 4 426 385
Direct expenses attributable to fee and commission income (723) (642)
Operating income net of direct expenses 4 352 3 868
Operating expenses (3 204) (2 818)
Profit from operations before non-trading and capital items 1 148 1 050
Non-trading and capital items 5 (132) (132)
Operating profit 1 016 918
Investment income 137 168
Finance costs 6 (851) (816)
Share of net profit of associates (net of income tax) 1 1
Profit before taxation 303 271
Income tax expense (228) (351)
Profit/ (loss) for the year from continuing operations 75 (80)
(Loss) /profit on discontinued operations (net of income tax) 7 (175) 28
Loss for the year (100) (52)
Loss attributable to:
Equity holders (183) (129)
Non-controlling interest holders 83 77
(100) (52)
Basic loss per ordinary share continuing operations (cents) (1) (39)
Basic (loss)/ earnings per ordinary share discontinued operations (cents) (48) 5
Basic loss per ordinary share all operations (cents) 8 (49) (34)
Headline loss per ordinary share continuing operations (cents) (1) (39)
Headline (loss)/ earnings per ordinary share discontinuing operations
(cents) (3) 8
Headline loss per ordinary share all operations (cents) 8 (4) (31)
Weighted average number of shares in issue (million) 8 377 377
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2013
31 Mar 31 Mar
2013 2012
Notes Rm Rm
Loss for the year (100) (52)
Foreign currency translation differences of foreign operations 90 89
Foreign currency translation differences of foreign operations disposed 30 -
Changes in fair value of cash flow hedges (13) (39)
Portion of fair value hedge transferred to profit or loss 45 71
Other 3 -
Other comprehensive income for the year (net of income tax) 155 121
Total comprehensive income for the year 55 69
Total comprehensive (loss)/ income attributable to:
Equity holders (18) (21)
Non-controlling interest holders 73 90
Total comprehensive income for the year 55 69
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2013
31 Mar 31 Mar
2013 2012
Notes Rm Rm
ASSETS
Financial assets held under multi-manager investment contracts 222 790 209 994
Financial assets of cell captive insurance facilities 11 374 9 484
Property and equipment 239 165
Purchased and developed computer software 129 166
Goodwill 4 490 4 652
Intangible assets 1 211 1 437
Investments in associates 9 4 3
Deferred tax assets 164 110
Financial assets 2 064 1 209
Insurance receivables 1 073 896
Trade and other receivables 961 944
Cash and cash equivalents 3 624 3 053
Assets of disposal group classified as held for sale 7 29 938 288
Total assets 278 061 232 401
EQUITY AND LIABILITIES
Equity holders' funds 2 121 2 139
Non-controlling interest 194 185
Total equity 2 315 2 324
Financial liabilities held under multi-manager investment contracts 222 790 209 994
Liabilities of cell captive insurance facilities 11 374 9 484
Borrowings 5 409 5 448
Employee benefits 157 158
Deferred tax liabilities 450 491
Provisions 284 265
Finance lease liability 93 -
Operating lease liability 40 29
Deferred income 72 69
Insurance payables 3 985 2 693
Trade and other payables 1 350 1 315
Liabilities of disposal group classified as held for sale 7 29 742 131
Total liabilities 275 746 230 077
Total equity and liabilities 278 061 232 401
Total equity per above 2 315 2 324
Number of ordinary share in issue (millions) 377 377
Net asset value per ordinary share (cents) 614 616
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2013
31 Mar 31 Mar
2013 2012
Rm Rm
Cash flows from operating activities
Cash generated from operations 1 279 1 022
Interest received 137 169
Finance costs paid (593) (567)
Movement in working capital and insurance balances 300 728
Cash settlement of cash management claims - (3)
Cash settlement of retirement benefit obligations (7) (6)
Cash flows from policyholder investment contracts (2 482) (3 223)
Taxation paid (426) (242)
Cash flows from operating activities Discontinued operations 49 54
Net cash outflow from operating activities (1 743) (2 068)
Cash flows from investing activities
Net proceeds from sale of subsidiaries, associates and
businesses 279 (153)
Repayment of assumed debt by acquirer - 511
Investment in financial assets (617) (759)
Proceeds on disposal of financial assets 597 10
Movement in premium finance receivables - (37)
Capital expenditure incurred on property, equipment and
computer software (106) (119)
Capital expenditure incurred on goodwill - (12)
Proceeds from sale of property, equipment and intangibles 3 1
Cash flows from investing activities Discontinued operations (5) (2)
Net cash inflow/(outflow) from investing activities 151 (560)
Cash flows from financing activities
Repayment of borrowings (252) (642)
Payments made to non-controlling interests (74) (76)
Cash flows from financing activities Discontinued operations - 29
Net cash outflow from financing activities (326) (689)
Decrease in cash and cash equivalents (1 918) (3 317)
Cash and cash equivalents at beginning of year 18 831 22 066
Foreign subsidiaries exchange differences 60 82
Cash and cash equivalents at end of year 16 973 18 831
Analysed as follows:
Cash and cash equivalents of discontinued operations 97 44
Cash and cash equivalents of continuing operations 3 624 3 053
Cash held under multi-manager investment contracts 11 958 14 984
Cash held under cell-captive insurance facilities 1 294 750
16 973 18 831
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2013
Share Non- Total
capital distribut- equity Non-
and able Accum- holders' controlling Total
Rm premium reserves ulated loss funds interest equity
At 31 March 2011 3 261 (252) (867) 2 142 172 2 314
(Loss) / profit for the year - - (129) (129) 77 (52)
Other comprehensive income - 108 - 108 13 121
Total comprehensive income /
(loss) - 108 (129) (21) 90 69
Removal of contingency reserve
of short-term insurance
company - (29) 29 - - -
Other movements in non-
controlling interest * - - 18 18 (77) (59)
At 31 March 2012 3 261 (173) (949) 2 139 185 2 324
(Loss) / profit for the year - - (183) (183) 83 (100)
Other comprehensive income - 165 - 165 (10) 155
Total comprehensive income /
(loss) - 165 (183) (18) 73 55
Other movements in non-
controlling interest * - - - - (64) (64)
At 31 March 2013 3 261 (8) (1 132) 2 121 194 2 315
* This amount includes distributions made to non-controlling interest as well as changes due to acquisition or
disposal of equity held by non-controlling interest.
SEGMENTAL RESULTS
for the year ended 31 March 2013
Operating income net of Profit from operations before
direct expenses non-trading and capital items
31 Mar Var. 31 Mar 31 Mar Var. 31 Mar
2013 % 2012** 2013 % 2012**
Africa Continuing Operations (Rm)
SA Financial Services 1 603 8% 1 485 381 10% 347
Investment Solutions 635 15% 551 327 12% 292
Guardrisk 348 12% 312 141 9% 129
AF Insurance 307 6% 289 84 (2%) 86
Afrinet 202 19% 170 38 36% 28
Total Africa Continuing Operations
(Rm) 3 095 10% 2 807 971 10% 882
International (GBPm)
Financial Services 93 4% 89 14 27% 11
Total International (GBPm) 93 4% 89 14 27% 11
Total International (Rm) 1 257 18% 1 061 185 41% 131
Total continuing operations -
Excluding property lease 4 352 13% 3 868 1 156 14% 1 013
Accounting for property lease - - - (8) (122%) 37
Total continuing operations 4 352 13% 3 868 1 148 9% 1 050
SEGMENTAL RESULTS (continued)
for the year ended 31 March 2013
Depreciation & Amortisation Assets
31 Mar Var. 31 Mar 31 Mar Var. 31 Mar
2013 % 2012** 2013 % 2012
Africa (Rm)
SA Financial Services 14 18 49 540 30% 38 028
Investment Solutions 3 3 222 873 17% 190 920
Guardrisk 2 2 13 776 26% 10 948
AF Insurance 3 2 505 27% 397
Afrinet 3 3 2 706 26% 2 142
Total Africa (Rm) 25 (11%) 28 289 400 19% 242 435
International (GBPm)
Financial Services 2 2 79 (2%) 81
Investment Solutions - - - 1 591
Total International (GBPm) 2 2 79 (99%) 1 718
Total International (Rm) 23 10% 21 1 524 (93%) 21 166
Discontinued operations 13 20 29 938 288
Unallocated:
Corporate Services 47 39 526 392
Goodwill 4 490 4 652
Consolidation elimination* (47 817) (36 411)
Total Group (Rm) 108 - 108 278 061 20% 232 522
*This amount relates mainly to assets invested by group companies with Investment Solutions.
** The comparative figures in the table above have been restated following the disposal of AFCA UK
and the discontinuance of various other businesses during the year under review.
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, as amended.
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.
The results have been audited by PricewaterhouseCoopers Inc and a copy of their unqualified audit opinion
is available for inspection at the company's registered office.
31 Mar 31 Mar
2013 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 13.6 11.9
Closing R:GBP rate 13.9 12.3
31 Mar 31 Mar
2013 2012
Rm Rm
3. Fee and commission income
Brokerage fees and commission income 72 120
Fee income from consulting and administration services 3 249 2 818
Revenue from investment activities 1 268 1 135
Interest income from lending operations 16 14
Operational interest income 44 38
Fee and commission Income 4 649 4 125
4. Net income from insurance operations
Insurance premiums earned 6 828 5 204
Less: amounts ceded to reinsurers (5 061) (3 894)
Investment income from insurance operations 140 129
Less: insurance claims and withdrawals (4 093) (3 317)
Plus: insurance claims and benefits covered by reinsurance contracts 2 612 2 263
Net income from insurance operations 426 385
31 Mar 31 Mar
2013 2012
Rm Rm
5. Non-trading and other capital items
Non trading:
Professional indemnity insurance cell 24 37
Amortisation of intangible assets arising from business combination (166) (168)
Other non-trading items 10 -
Capital items:
Goodwill impairment losses - (1)
Total impairment losses and other capital items (132) (132)
31 Mar 31 Mar
2013 2012
Rm Rm
6. Finance costs
Finance costs derived from financial liabilities classified and carried at
amortised costs:
Interest on term debt issued (776) (742)
Amortisation of debt raising fees capitalised to borrowings (13) (13)
Other (4) (5)
(793) (760)
Finance cost derived from financial liabilities designated as fair value
through profit or loss:
Fair value adjustment on put and call options (58) (56)
Total finance costs (851) (816)
7. Discontinued operations
During the year under review and in the prior year, the Group disposed of certain businesses
including the AFCA UK and other businesses in the current year and Risk Services businesses
(corporate insurance broking business) in the previous 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 the end of the financial year, the sales transactions in
respect of certain of these discontinued operations are still in the process of finalisation. Assets and
liabilities held at year-end in respect of such discontinued operations have been reclassified as
assets and liabilities of disposal groups held for sale. The segmental results have been re-presented
to show the effects of discontinued operations. In addition, the operations of Alexander Forbes
Compensation Technologies are now included in the operational segment of SA Financial Services in
line with its revised management and control structure following the unbundling of the Risk and
Insurance Services segment in 2012.
31 Mar 31 Mar
2013 2012
Rm Rm
Assets and liabilities of disposal group classified as held for sale
Financial assets held under multi-manager investment contracts 29 645 -
Long term assets 28 24
Goodwill (Including Purchase Price Allocation of AF Acquisitions (Pty) Ltd) 46 110
Deferred tax asset 1 -
Financial assets 12 -
Trade and other receivables 108 106
Other current assets 1 4
Cash and cash equivalents 97 44
Total assets 29 938 288
Financial liabilities held under multi-manager investment contracts 29 645 -
Deferred income - 8
Provisions 3 3
Insurance related payables 59 88
Trade and other payables 35 32
Total liabilities 29 742 131
Summary income statement from discontinued operations
31 Mar 31 Mar
2013 2012
Rm Rm
Income from operations 379 940
Operating expenses (376) (808)
Operating profit before non-trading and capital items 3 132
Non-trading and capital items (61) (13)
Investment income 2 4
Finance costs (1) (70)
Share of profits from associates - 4
Profit before tax (57) 57
Taxation (6) (23)
Net profit for the year (63) 34
Loss on disposals (112) (6)
(175) 28
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.
31 Mar 31 Mar
2013 2012
Rm Rm
8.3 Calculation of headline loss per share
Loss attributable to equity holders (IAS 33 earnings) (183) (129)
Adjusting items
- Impairment losses and other capital items 167 14
Headline attributable loss for the year (16) (115)
Weighted average number of shares (millions) 377 377
Basic loss per share (cents) (49) (34)
Headline loss per share (cents) (4) (31)
31 Mar 31 Mar
2013 2012
Rm Rm
9. Investments in associates
Carrying value in balance sheet 4 3
10. Capital expenditure for the year 106 131
11. Operating lease commitments
Due within one year 189 218
Thereafter 2 335 2 061
Total operating lease commitments 2 524 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: D 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 Officer),
D M Viljoen (Group Chief Financial Officer)
Company secretary & Investor relations: J E Salvado (Ms)
Registered office: Alexander Forbes, 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
Date: 19/06/2013 10:26:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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