Wrap Text
Unaudited interim results for the six months ended 30 September 2013
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 2013
- Income from continuing
operations, net of direct product
costs, increases by 18% to R2.1
billion
- Profit from continuing operations
before non-trading items
increases by 11% to R475 million;
an increase of 22% when
normalised for the effect of lease
accounting
- Guardrisk group disposed, subject
to regulatory approval, for R1.6
billion
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 share capital of AFEH and also holds various other instruments issued
by AFEH and certain of its subsidiaries.
The group continues its stated strategy of focusing on and growing its core institutional
employee benefits and asset management businesses. In addition, the group continues to
leverage its strong position in the aforementioned institutional market in order to grow its
penetration into the retail market (individual client financial wellbeing through advice and
product) as well as the public sector space and further expansion of its core business into
the rest of Africa. Continuous review of the group's portfolio of businesses in support of this
strategic focus has resulted in various corporate actions over the past few years. On 4
November 2013, the group announced the disposal of the Guardrisk group of companies,
subject to regulatory approval, which is likely to be the final material disposal in the strategic
refocusing of the group.
The group remains committed to its "higher purpose" of positively impacting peoples' lives.
This is achieved through securing our client's long term financial wellbeing by assisting with
the creation and growth of wealth and by protecting them against risk of loss.
The group delivered a strong set of results for the 6 months ended 30 September 2013. It is
encouraging to see a continuation of the healthy growth in top line revenue which has been
a feature of the last number of reporting periods as delivery of our strategic intent gains
momentum.
Operating income from continuing operations, net of direct product cost, increased by 18%
and exceeded R2 billion for the six months ended 30 September 2013. Excluding the impact
of the weakening rand against the sterling compared to the first six months of the previous
financial year, this result was 13% higher. Success with our strategic focus on the retail
market is evidenced by the growth in revenue from the retail client sector of 15%.
Operating expenses from continuing operations (excluding non-trading items and accounting
for lease renewal) of R1.5 billion increased by 11% compared to the previous period. This
includes our continued investment in the strategic growth areas, particularly to support
expansion in the individual client market and significant increases in regulatory compliance
cost.
Profit from continuing operations, before non-trading items and excluding the impact of lease
accounting over the renewal period, increased by 22% to R499 million compared to R410
million for the first six months of the previous financial period. The Africa region delivered a
pleasing 15% growth in trading profit for the six months under review while the international
businesses delivered a 72% increase in trading profit (50% in sterling terms). Some of this
increase in the international result can be ascribed to a relatively depressed comparable
period due to lower demand for consulting services in the first half of the previous financial
year and is expected to normalise to an extent over the remainder of the financial year.
The current capital structure of the group significantly impacts the remainder of the income
statement and therefore trading profit remains the most appropriate level at which to
measure the performance of the group.
After non-trading items and finance charges, the group's profit before taxation from
continuing operations of R125 million is significantly higher than the R8 million reported in
the previous first half. 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 R72 million for
the six months (refer note 5). After taxation, the group reported a loss of R24 million
compared to the R89 million loss in the first six months of the previous financial year.
Certain comparative numbers were restated to take account of discontinued operations as
well as the adoption of new and revised accounting standards. Refer to note 11.
A commentary on the salient features of the operating results for each of the main business
segments follows:
- SA Financial Services
Operating income, net of direct product costs, for the six months to 30 September 2013
increased by 12% compared to the first six months of the previous year and trading profit
increased by 15% to R184 million, over the same period. Good 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 10% compared to the first six months of the previous year to over 970 000 members (8%
growth since the March 2013 year-end). We continued to invest in operational efficiencies in
our administration areas with a focus on improving the client experience and level of
automation. A key focus area over the past six months and continuing focus for the rest of
the year is improving our administration and IT platform for our retail LISP platform.
Our healthcare consulting division and retirement fund administration division both continued
to achieve strong new business flows. Our retirement fund consulting and actuarial division
maintained its strong overall contribution to the business. 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 R44.6 billion at 30 September 2013, a
growth of 29% since 30 September 2012 and a growth of 10% since the March 2013 year-
end.
Our growth initiative, focussing on the retail market showed good results with strong net new
business flows written in the period to the retail administration platform with assets under
management on the platform totaling R43.7 billion at 30 September 2013, a growth of 30%
since 30 September 2012 and a growth of 9% since the March 2013 year end. Our retail
membership continued to grow in line with our targets for the six months ended 30
September 2013.
Our public sector division made good progress in building our brand within this sector and
strengthening strategic networks and relationships. New business successes are already
evident from the strategic focus in this sector.
Alexander Forbes Compensation Technologies experienced satisfying revenue growth in the
six month period to 30 September 2013; however, there was some strain on the cost base.
New business wins, which are only effective in the second half of the year, will have a
positive impact on the trading profit in the next period.
- Investment Solutions South Africa
Consolidated closing assets under management and administration increased by 21% to
R262 billion as at 30 September 2013, of which R237 billion are assets under management.
Average assets under management for the six months increased by 18% compared to 30
September 2012. Net revenue from operations for the six months, i.e. after fees paid to
underlying asset managers, increased in 12% to R335 million. This lower than expected
growth in net revenue compared to the increase in average assets is largely a result of a
substantial change in underlying portfolio choices made by clients compared to the first
six months of the previous financial year. Trading profit grew by 15% to R167 million compared
to the first six months of the previous financial year, driven by growth in equity markets and
improved asset accumulation.
New business flows remained strong during the period under review although the ongoing
benefit payments to fund members remain high compared to ongoing contributions into
funds, reflecting the current underlying trends in the South African retirement fund space.
We recorded R7 billion of gross new flows for the six months. This was mainly driven by the
new flows from the institutional business as well as continuing growth of our platform
(administration) business. We continue to focus on improving our wider asset accumulation
strategies in line with our long term growth plan.
From an investment performance perspective, the first six months of the financial year was
characterised by unprecedented high levels of volatility in the equity markets. However, we
are pleased to report that most of our investment portfolios are performing well against peers
and are ahead of their respective benchmarks over medium to long term measurement
periods in a very tough operating environment.
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
savings and wealth creation while managing the risk of unusual and challenging economic
environments.
- Alexander Forbes Insurance ("AF Insurance")
Alexander Forbes Insurance grew gross premium from R514 million to R598 million during
the current period compared to the same period of the previous financial year. This
translated to 16% growth in gross written premium, in a market where overall growth
remained low mainly due to financial strain on consumers and the entrance of a number of
new competitors.
Premium written in Alexander Forbes Business Insurance, launched in April 2012, is gaining
some traction with gross written premium reaching R11 million by September 2013.
It has been widely reported that short-term insurers in South Africa are facing a tough
underwriting business cycle, with significantly higher loss ratios across the industry. In line
with this trend, we have seen a deterioration of 4% in our core personal lines loss ratio in the
current reporting period. This area continues to receive close attention including the
procurement strategies relating to claims.
Despite the negative impact on underwriting results, operating income, net of reinsurance
premiums paid, increased by 17% to R177 million.
In line with the group's strategic intent to expand our retail footprint, AFI continued to invest
in sales capacity. During the period, we increased the number of sales consultants by 30%.
Profit from operations, including the negative impact of underwriting and continued
investment in our sales capacity, increased by 12% to R46 million.
- AfriNet (covering all operations in Africa outside of South Africa)
Revenue from continuing operations for the six months to 30 September 2013 increased by
19% compared to the first six months of the previous financial year. Trading profit increased
by 14% to R16 million. This pleasing result was achieved due to the initiatives we have put in
place focusing on strengthening our existing operations through better market positioning,
multi product penetration, selective introduction of new products and stronger governance
and control measures. The number of members under administration in the retirement fund
administration business across the Afrinet entities, i.e. excluding SA, is now over 384 000
members, a growth of 8% since the March 2013 year-end.
The operating environment in the AfriNet operations remains challenging and highly
competitive in certain areas. However, we are of the opinion 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 continues to be generated 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.
- International Financial Services
During the current period, the group has disposed of its interests in the Media Insurance
Services businesses and Investment Solutions UK business (subject to regulatory approval).
The sale of LCP Libera (Switzerland) was concluded subsequent to the period end. These
businesses were already treated as discontinued in the previous financial year. Continuing
operations now mainly comprise the LCP group.
Income from continuing operations increased by 14% to £41 million for the period with
trading profits increasing by 50% to £6 million. Revenue growth across the United Kingdom
and European operations reflects an improved economic environment following slow growth
experienced in the comparable period of the previous financial year. Some of this increase
can also be ascribed to lower UK consulting demand in the first half of the previous financial
year and is expected to normalise to an extent over the remainder of the financial year. The
LCP businesses continued to win significant new business and capitalise on the demand for
consulting and investment advice as well as de-risking solutions. The trading profit growth
also reflects a continued focus on productivity and cost management.
- Discontinued operations
During the period under review, further disposals became unconditional, including the Risk
Services operations in Nigeria and Mozambique and MIS group in the UK. As mentioned
above, discontinued operations now also include the results of the Guardrisk group and LCP
Switzerland. This resulted in the restatement of prior period and year-end comparative
numbers in the financial statements, in line with the required accounting treatment of
discontinued operations.
Regulatory capital changes and capital structure
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 now only be
implemented in 2016. SAM allows for risk based internal capital models to be applied under
certain circumstances which is welcomed by the group given its limited insurance
underwriting activities.
In addition, the FSB indicated that the implementation of consolidated or group supervision
is likely take effect during 2014. 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 a result of the ongoing work being undertaken as part of this capital restructure, the
decision was made to extend, with the full support of the senior lenders, all compulsory
senior debt repayments due over the next 12 months. In addition the decision was also
taken to defer interest repayment on the high yield term loan in anticipation of the proposed
capital restructure. These actions provide maximum flexibility in determining the transition to
the group's target capital structure while the Guardrisk sale remains subject to regulatory
and competitions commission approvals. A comprehensive announcement regarding the
capital restructure will be made at or around the time regulatory approvals are
expected for the Guardrisk disposal.
Prospects
The strategic repositioning of the group has now largely been implemented and the benefits
of this focus and strategic clarity is evident in our results for the period. We continue to
operate in difficult trading environments in many areas and uncertainties in the global
economy but our core institutional businesses and the traction in our strategic growth areas
such as retail, public sector clients and the rest of Africa, are all performing well.
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 2013, on 19 June 2013. The board
wishes to advise of the resignation of Mr MC Ramaphosa with effect from 23 July 2013. We
thank him for his invaluable contribution to the group and we wish Mr Ramaphosa all the
very best in his significant new role. Mr D Ngobeni's return to the board as Mr Ramaphosa's
replacement is welcome.
On behalf of the board of directors:
M S Moloko E Chr Kieswetter
Chairman Group Chief Executive
Johannesburg
2 December 2013
SUMMARY CONSOLIDATED INCOME STATEMENT
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm Notes 2013 2012 2013
Restated Restated
Continuing operations
Fee and commission income 3 2 278 1 909 4 117
Net income from insurance operations 4 198 162 350
Direct expenses attributable to fee and commission income (391) (304) (651)
Operating income net of direct expenses 2 085 1 767 3 816
Operating expenses (1 610) (1 339) (2 878)
Profit from operations before non-trading and capital 475 428 938
items
Non-trading and capital items 5 (11) (30) (112)
Operating profit 464 398 826
Investment income 79 36 137
Finance costs 6 (419) (425) (851)
Share of profit of associates (net of income tax) 1 (1) 1
Profit before taxation 125 8 113
Income tax expense (149) (97) (196)
Loss for the period from continuing operations (24) (89) (83)
Discontinued operations
Profit/(loss) on discontinued operations (net of income tax) 7 41 31 (25)
Profit /(loss) for the period 17 (58) (108)
Attributable to:
Equity holders (34) (89) (191)
Non-controlling interest holders 51 31 83
17 (58) (108)
Basic loss per ordinary share – continuing operations (cents) (19) (32) (42)
Basic profit/(loss) per ordinary share – discontinued operations
(cents) 10 8 (9)
Basic loss per ordinary share – total operations (cents) 8 (9) (24) (51)
Headline loss per ordinary share – continuing operations
(cents) (19) (32) (42)
Headline profit per ordinary share – discontinued operations
(cents) 11 15 35
Headline loss per ordinary share – total operations (cents) 8 (8) (17) (6)
Weighted average number of shares in issue (million) 377 377 377
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
Restated Restated
Profit/(loss) for the period 17 (58) (108)
Foreign currency translation differences of foreign operations 118 67 90
Foreign currency translation reserve of disposed operations (2) - 30
Changes in fair value of cash flow hedges - (13) (13)
Portion of fair value hedge transferred to profit or loss 15 25 45
Other - - 3
Other comprehensive income for the period (net of income tax)
that will be reclassified to profit or loss 131 79 155
Actuarial loss on valuation of employee benefits - - (4)
Other comprehensive income for the period (net of income tax) - - (4)
that will not be reclassified to profit or loss
Total comprehensive income for the period 148 21 43
Total comprehensive income/(loss) attributable to:
Equity holders 90 (18) (30)
Non-controlling interest holders 58 39 73
Total comprehensive income for the period 148 21 43
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
Restated Restated
ASSETS
Financial assets held under multi-manager investment contracts 244 065 227 378 222 790
Financial assets of cell captive insurance facilities 73 10 413 11 374
Property and equipment 331 132 239
Purchased and developed computer software 123 137 129
Goodwill 3 974 4 518 4 490
Intangible assets 946 1 304 1 211
Investment in associates 5 - 4
Deferred tax assets 175 113 164
Financial assets 436 1 715 2 064
Insurance receivables 866 1 000 1 073
Trade and other receivables 944 896 935
Cash and cash equivalents 3 871 3 281 3 626
Assets of disposal groups classified as held for sale 56 644 549 29 938
Total assets 312 453 251 436 278 037
EQUITY AND LIABILITIES
Equity holders' funds 2 160 2 078 2 070
Non-controlling interest 166 143 194
Total equity 2 326 2 221 2 264
Financial liabilities held under multi-manager investment
contracts 244 065 227 378 222 790
Liabilities of cell captive insurance facilities 73 10 413 11 374
Borrowings 5 501 5 612 5 409
Employee benefits 182 118 181
Deferred tax liabilities 437 440 450
Provisions 267 292 284
Finance lease liability 92 - 93
Operating lease liabilities 64 11 40
Deferred income 28 76 72
Insurance payables 2 107 3 467 3 985
Trade and other payables 1 864 1 250 1 353
Liabilities of disposal groups classified as held for sale 55 447 158 29 742
Total liabilities 310 127 249 215 275 773
Total equity and liabilities 312 453 251 436 278 037
Total equity per above 2 334 2 221 2 264
Number of ordinary share in issue (millions) 377 377 377
Net asset value per ordinary share (cents) 619 589 605
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 636 612 1 109
Net finance costs paid (113) (110) (456)
Movement in working capital and insurance balances 645 498 293
Taxation paid (187) (173) (426)
Cash flows from policyholder investment contracts 726 (1 868) (2 482)
Cash flows from operating activities – Discontinued operations 76 80 219
Net cash inflow/(outflow) from operating activities 1 783 (961) (1 743)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of subsidiaries and businesses 37 30 279
Net movement in financial assets (122) (505) (20)
Capital expenditure for the period (146) (24) (106)
Proceeds on disposal of property and equipment 6 3
Cash flows from investing activities – Discontinued operations - (2) (5)
Net cash (outflow)/inflow from investing activities (231) (495) 151
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings repaid (135) (119) (252)
Payments to non-controlling interest (79) (61) (74)
Cash flows from financing activities – Discontinued operations - -
Net cash outflow from financing activities (214) (180) (326)
Net movement in cash and cash equivalents 1 338 (1 636) (1 918)
Cash and cash equivalents at beginning of period 16 973 18 831 18 831
Foreign subsidiaries translation adjustment 72 29 60
CASH AND CASH EQUIVALENTS AT END OF PERIOD 18 383 17 224 16 973
Analysed as follows:
Cash and cash equivalents of continuing operations 3 871 3 278 3 624
Cash held under multimanager investment contracts 12 671 12 722 11 958
Cash held under cell captive insurance facilities 6 1 144 1 294
Cash and cash equivalents of discontinued operations 534 80 97
Cash held under cell captive insurance facilities classified as
discontinued 1 301 - -
18 383 17 224 16 793
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Non- Total Non-
capital distribu- Accum- Equity controll-
and table ulated holders' ing Total
Rm premium reserves loss funds interest equity
At 31 March 2012 3 261 (173) (949) 2 139 185 2 324
Restatement for adoption revised IAS
19 Employee Benefits - - (12) (12) - (12)
Restatement for the adoption of IFRS
10 Consolidated Financial Statements (29) - (6) (35) (35)
At 31 March 2012 restated 3 232 (173) (967) 2 092 185 2 277
(Loss)/ profit for the period - - (89) (89) 31 (58)
Other comprehensive income - 71 71 8 79
Total comprehensive profit/(loss) - 71 (89) (18) 39 21
Movement in contributions relating to
treasury shares 4 - - 4 - 4
Movement in contingency reserve of
short-term insurance company - 1 (1) 4 4
Other movements in non-controlling
interest - - - - (81) (81)
At 30 September 2012 3 236 (101) (1 057) 2 078 143 2 221
(Loss)/profit for the period - - (102) (102) 52 (50)
Other comprehensive income - 90 90 (18) 72
Total comprehensive (loss)/profit - 90 (102) (12) 34 22
Movement in contributions relating to
treasury shares 4 - - 4 - 4
Other movements in non-controlling
interest - - - - 17 17
At 31 March 2013 3 240 (11) (1 159) 2 070 194 2 264
(Loss)/ profit for the period - - (34) (34) 51 17
Other comprehensive income - 124 124 7 131
Total comprehensive (loss)/profit - 124 (34) 90 58 148
Other movements in non-controlling
interest - - - - (86) (86)
At 30 September 2013 3 240 113 (1 193) 2 160 166 2 326
SEGMENTAL RESULTS
Operating income net of direct Profit from operations before
expenses non-trading and capital items
Continuing operations 30 Sep Var 30 Sep 30 Sep Var 30 Sep
Rm 2013 % 2012* 2013 % 2012*
Africa
SA Financial Services 842 12% 754 184 15% 160
Investment Solutions 335 12% 299 167 15% 145
AF Insurance 177 17% 151 46 12% 41
Afrinet 112 19% 94 16 14% 14
Total Africa 1 466 13% 1 298 413 15% 360
International – Financial Services
(GBPm) 41 14% 36 6 50% 4
International – Financial Services
(Rm) 619 32% 469 86 72% 50
Total continuing operations-
excluding property lease 2 085 18% 1 767 499 22% 410
Accounting for the property lease - - (24) >100% 18
Total continuing operations-
including property lease 2 085 18% 1 767 475 11% 428
Depreciation and amortisation Assets
30 Sep Var 30 Sep 30 Sep Var 30 Sep
Rm 2013 % 2012* 2013 % 2012
Africa
SA Financial Services 4 8 53 801 30% 41 460
Investment Solutions 1 1 244 665 20% 203 495
AF Insurance 1 1 493 20% 411
Afrinet 2 2 2 969 24% 2 388
Guardrisk - - - (100%) 12 500
Total Africa 8 (33%) 12 301 928 16% 260 254
International – Financial Services
(GBPm) 1 1 78 (96) 1 928
International – Financial Services
(ZAR) 12 20% 10 1 784 (93) 25 187
Unallocated
Corporate Services 21 0% 21 688 21% 568
Discontinued operations 5 11 56 635 >100% 549
Goodwill 3 974 (12%) 4 518
Consolidation elimination** (52 556) 33% (39 640)
Total Group 46 (15%) 54 312 453 24% 251 436
* The prior period comparative figures in the table above have been restated following the
discontinuation of Guardrisk.
** This amount relates mainly to assets invested by group companies with Investment Solutions.
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 2013,
except as outlined in note 11.
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 March
Rm 2013 2012 2013
2. Exchange rates
The income statements and balance sheets of foreign
subsidiaries have been translated to Rands as follows:
Weighted average R:GBP rate 15.2 13.0 13.6
Closing R:GBP rate 16.2 13.4 13.9
3. Fee and commission Income
Brokerage fees and commission income 34 30 69
Fee income from consulting and administration services 1 512 1 263 2 752
Revenue from investment activities 726 602 1 268
Interest income from lending operations 1 5 8
Operational interest income 5 9 20
Other income - - -
Fee and commission Income 2 278 1 909 4 117
4. Net income from insurance operations
Insurance premiums earned 879 763 1 583
Less: amounts ceded to reinsurers (534) (505) (1 034)
Investment income from insurance operations 5 4 9
Less: insurance claims and withdrawals (628) (526) (1 163)
Plus: insurance claims and benefits covered through
reinsurance contracts 476 426 955
Net income from insurance operations 198 162 350
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
5. Non-trading and other capital items
Professional indemnity insurance cell 44 28 25
Amortisation of intangible assets arising from business
combination (72) (73) (146)
Statutory lease compensation received-UK 22 - -
Other non-trading items (5) 15 9
Total non-trading and other capital items (11) (30) (112)
6. Finance costs
Finance costs derived from financial liabilities classified and
carried at amortised costs:
Interest on term debt issued 374 389 772
Amortisation of debt raising fees capitalised to borrowings 6 6 13
Other interest costs 9 1 8
389 396 793
Finance cost derived from financial liabilities designated as
fair value through profit or loss:
Fair value adjustment on put and call options 30 29 58
Total finance costs 419 425 851
7. Discontinued operations
In the prior year, the group discontinued various businesses including AFCA UK, Media Insurance
Services UK, Investment Solutions UK, and certain remaining Risk Services businesses. The Guardrisk group
of companies and LCP Switzerland were in the process of disposal at the end of this reporting period. These
businesses are classified as discontinued operations for the purposes of financial reporting. In line with
the requirements of IFRS 5, the comparative information has been represented to show the discontinued operations
separately from continuing operations.
The sales of AFCA UK, and certain Risk Services businesses were concluded in the prior year and the
disposals of Media Insurance Services, Investment Solutions UK, subject to regulatory approval and the
Risk Services businesses in Nigeria and Mozambique were concluded in the current period. Subsequent to
the reporting period the group also concluded the sales of Guardrisk group, subject to regulatory approval,
and LCP Switzerland.
In line with the requirements of the accounting standards, assets and liabilities held at the end of the
period in respect of discontinued operations, where the disposal process is ongoing, have been
reclassified as assets and liabilities of asset groups held for sale. The segmental results have been
represented to show the effects of discontinued operations.
In certain instances, shared service cost previously allocated to discontinued operations that will continue
subsequent to the disposal have been reallocated to the remaining continuing operations and comparative
numbers restated accordingly.
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
7. Discontinued operations
Assets and liabilities of disposal group classified as
held for sale
Financial assets held under multi-manager investment
contracts 40 713 - 29 645
Financial assets of cell-captive insurance facilities 12 361 - -
Long term assets 217 49 28
Goodwill (including Purchase Price Allocation of AF
Acquisitions (Pty) Ltd) 536 238 46
Deferred tax - - 1
Financial assets 1 750 - 12
Trade and other receivables 472 182 108
Work in progress 61 - 1
Cash and cash equivalents 534 80 97
Total assets 56 644 549 29 938
Long term liabilities
Financial liabilities under multi-manager investment
contracts 40 713 - 29 645
Liabilities of cell captive insurance facilities 12 361 -
Deferred income 107 9 -
Deferred tax 16 15 -
Provisions 6 18 3
Insurance related payables 2 069 66 59
Trade and other payables 175 50 35
Total liabilities 55 447 158 29 742
Summary income statement from discontinued
operations
Income from operations 316 496 915
Operating expenses (221) (409) (710)
Operating profit before non-trading and capital items 95 87 205
Net finance costs 1 - 1
Non-trading and capital items 11 (77) (81)
Share of profits from associates 2 4 -
Profit before tax 109 14 125
Taxation (43) (19) (38)
Net profit for the period 66 (5) 87
Profit / (loss) on disposals (25) 36 (112)
Profit/(loss) from discontinued operations 41 31 (25)
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 period attributable to equity holders by the
weighted average number of ordinary shares in issue during the period.
8.2 Headline loss per ordinary share
Headline loss per share is calculated by excluding applicable 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 period. Headline earnings/ loss is 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 March
Rm 2013 2012 2013
8.3 Calculation of headline loss per share
Loss attributable to equity holders (IAS 33 earnings) (34) (89) (191)
Adjusting items
- Impairment losses and other capital items 2 26 167
Headline attributable loss for the period (32) (63) (24)
Weighted average number of shares (millions) 377 377 377
Basic loss per share (cents) (9) (24) (51)
Headline loss per share (cents) (8) (17) (6)
9. Capital expenditure for the period 146 24 106
10. Operating lease commitments
Due within one year 208 208 189
Thereafter 2 405 1 974 2 335
Total operating lease commitments 2 613 2 182 2 524
Capital expenditure and commitments will be funded from
internal cash resources.
11. Restatement of comparative information for the impact of new and revised accounting standards
The following tables summarise the material impact on the Group's financial position and comprehensive
income resulting from the adoption of IFRS 10 Consolidated Financial Statements, and IAS 19 revised
Employee Benefits. The restatement arising on discontinuance of operations has not been set out below.
The adoption of IFRS 10 resulted in the consolidation of the management share trust due to the revised
definition of control.
The adoption of the revised IAS 19 resulted in actuarial gains/losses being recognised immediately in
other comprehensive income, rather than being deferred and recognised using the corridor approach over
the lives of eligible employees.
As the Group has taken advantage of the transitional provisions of Consolidated Financial Statements,
and Disclosure of interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and
IFRS 12), the following tables do not include the resultant change in accounting policies.
Impact on 30 September 2012 Statement of Financial Position
As Defined Consolidation of
previously benefit Management
Rm reported obligation Share trust Restated
Assets
Policyholder and cell captive assets 237 791 - - 237 791
Other assets 8 919 - - 8 919
Trade and other receivables 922 - (26) 896
Cash and cash equivalents 3 278 - 3 3 281
Assets and disposal groups classified as
held for sale 549 - - 549
Total assets 251 459 - (23) 251 436
Equity and liabilities
Equity holders' funds 2 121 (12) (31) 2 078
Non-controlling interest 143 - - 143
Total liabilities 2 264 (12) (31) 2 221
Policyholder and cell captive liabilities 237 791 - - 237 791
Other liabilities 9 891 - - 9 891
Employee benefits 106 12 - 118
Trade and other payables 1 249 - 8 1 257
Liabilities of disposal group classified as
held for sale 158 - - 158
Total liabilities 249 195 - 8 249 215
Total equity and liabilities 251 459 - (23) 251 436
The group only obtains actuarial valuations at year-end; consequently there is no recorded impact at
30 September 2012 on the statement of comprehensive income for the adoption of IAS19.
Impact on 31 March 2013 Statement of Financial Position
Consolidation
As Defined of
previously benefit Management
Rm reported obligation Share trust Restated
Assets
Policyholder and cell captive assets 234 164 - - 234 164
Other assets 9 374 - - 9 374
Trade and other receivables 961 - (26) 935
Cash and cash equivalents 3 624 - 2 3 626
Assets classified as held for sale 29 938 - - 29 938
Total assets 278 061 - (24) 278 037
Equity and liabilities
Equity holders' funds 2 121 (24) (27) 2 070
Non-controlling interest 194 - - 194
Total equity 2 315 (24) (27) 2 264
Policyholder and cell captive liabilities 234 164 - - 234 164
Other liabilities 10 333 - - 10 333
Employee benefits 157 24 - 181
Trade and other payables 1 350 - 3 1 353
Liabilities of disposal group classified as held
for sale 29 742 - - 29 742
Total liabilities 275 746 24 3 275 773
Total equity and liabilities 278 061 - (24) 278 037
Impact on 31 March 2013 Statement of Comprehensive income
Consolidation
As Defined of
previously benefit Management
Rm reported obligation Share trust Restated
Loss for the period (100) (8) - (108)
Foreign currency translation differences of
foreign operations 90 - - 90
Foreign currency translation reserve of
disposed operations 30 - - 30
Changes in fair value of cash flow hedges (13) - - (13)
Portion of fair value hedge transferred to
profit or loss 45 - - 45
Other 3 - - 3
Other comprehensive income for the period
(net of income tax) that will be reclassified to
profit or loss 55 (8) - 47
Actuarial gains/(losses) on valuation of
employee benefits - (4) (4)
Other comprehensive income for the
period (net of income tax) that will not be
reclassified to profit or loss - (4) (4)
Total comprehensive income for the
period 55 (12) - 43
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:
A C de Beer (Alternate), J C Douin (Alternate), D Govender, L Hall-Kimm (Ms), N C Kolbe (Ms), J S
Masondo (Alternate), D Ngobeni, A Roux, J A van Wyk , 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: 02/12/2013 01:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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