Wrap Text
Unaudited interim results for the six months ended 30 September 2013
Alexander Forbes Preference Share
Investments Limited
Registration number: 2006/031561/06
Share code: AFP
ISIN code: ZAE 000098067
Unaudited interim results for the six
months ended 30 September 2013
- Strong operational performance for
the first half of financial year by
associate Alexander Forbes Equity
Holdings
- Investment income increases by 13%
to R221 million
- Headline earnings per linked unit
increases by 16% to 88 cents per
linked unit for the six month period
REVIEW OF ACTIVITIES
Introduction
Alexander Forbes Preference Share Investments Limited ("AF Pref") was incorporated on
10 October 2006 following the bid by a private equity consortium to take private the then listed Alexander
Forbes 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 period
This announcement should be read in conjunction with the announcement made available by AFEH, which
provides an overview of the results of the AFEH group for the six month period ended 30 September 2013.
In summary, AFEH delivered a strong performance with revenue from continuing operations, net of direct
product cost, increasing by 18% to R2.1 billion for the first six months. Profit from continuing operations
before non-trading items increased by 11% to R475 million. 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 as explained in the previous financial year, results in a normalised growth in
operating profit before non-trading items of 22% compared to the first six months of the previous financial
year. After non-trading items, finance costs and taxation, the loss for the period from continuing operations
of R24 million is 73% lower than the R89 million loss reported in the first six months of the previous financial
year. These results are in respect of the continuing operations of AFEH following the disposals of its Risk
Services business, Alexander Forbes Consultants and Actuaries in the UK in previous financial years as well
the MIS group of companies and Investment Solutions UK, subject to regulatory approval concluded in the
current period under review. In addition, on 4 November 2013, the group announced the disposal of the
Guardrisk group of companies, subject to regulatory approvals and competition commission, while
the LCP Switzerland disposal became effective on 4 November 2013. Both these operations have been reclassified
as discontinued operations for accounting purposes in the period under review.
The loss attributable to AFEH equity holders, which includes the result from discontinued operations and net
of non-controlling interest, of R34 million is 62% lower than the attributable loss of R89 million in the first
half of the previous financial year.
This loss for the period should be seen in the context of the interest charge inherent in the funding structure
of R419 million as well as the accounting amortisation of intangible assets by AFEH amounting to R72 million for
the period. AF Pref's share of this net loss amounts to R9 million, which is equity accounted in the financial
statements, and is the main contributor to the loss reported by AF Pref for the period ended 30 September 2013
of R9 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 period of R221
million is 13% higher than the first six months of the previous financial year. The corresponding finance cost
paid or payable to debenture holders (linked unit holders) amounts to R218 million, 14% up on the first half
of the previous financial year.
Overall, earnings per linked unit increased by 22% from 72 cents per unit in the previous period to 88 cents
per unit in the current period. Headline earnings per linked unit increased by 16% from 76 cents to 88 cents
per unit.
Further detail of the results of AFEH and its subsidiaries for the period ended 30 September 2013 is
contained in the results announcement made available to AF Pref linked unit holders by AFEH.
Change in directorate
There has been no change to the board of directors since the publication of our results on 19 June 2013.
On behalf of the board of directors:
JRP Doidge TJ Fearnhead
Director Director
Johannesburg Johannesburg
2 December 2013 2 December 2013
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2013
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm Notes 2013 2012 2013
Restated Restated
Investment income 2 221 196 411
Operating expenses (1) (1) (2)
Finance costs 3 (218) (191) (401)
Share of net loss of associates (net of income tax) (9) (24) (50)
Loss before taxation (7) (20) (42)
Income tax expense 4 (2) (1) (3)
Loss for the period (9) (21) (45)
Attributable to:
Ordinary equity holders - - -
Preference shareholders (9) (21) (45)
(9) (21) (45)
Headline earnings/(loss) (cents) 6
- per ordinary share - - -
- per preference share (4) (5) -
- per debenture 92 81 168
- per linked unit 88 76 168
Basic earnings/(loss) (cents)
- per ordinary share - - -
- per preference share (4) (9) (18)
- per debenture 92 81 168
- per linked unit 88 72 150
STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 30 September 2013
Loss for the period (9) (21) (45)
Share of associate other comprehensive income for the period
(net of income tax) that will be reclassified to profit or loss 33 19 44
Share of associate other comprehensive income for the period
(net of income tax) that will not be reclassified to profit or loss - - (1)
Total comprehensive income/(loss) for the period 24 (2) (2)
Total comprehensive income/(loss) attributable to:
Ordinary equity holders - - -
Preference shareholders 24 (2) (2)
Total comprehensive income/(loss) for the period 24 (2) (2)
STATEMENT OF FINANCIAL POSITION
at 30 September 2013
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm Notes 2013 2012 2013
Restated Restated
ASSETS
Investment in associate 7 722 702 698
Financial assets 8 2 536 2 232 2 344
Other receivables - 1 1
Cash and cash equivalents 6 5 5
Total assets 3 264 2 940 3 048
EQUITY AND LIABILITIES
Ordinary shareholders' equity - - -
Preference shareholders' interest – component of linked units 1 037 1 037 1 037
Non-distributable reserve (1) (58) (34)
Accumulated loss (277) (244) (268)
Total equity 759 735 735
Debentures – component of linked units 2 494 2 198 2 304
Deferred tax 11 7 9
Total liabilities 2 505 2 205 2 313
Total equity and liabilities 3 264 2 940 3 048
Total equity attributable to ordinary shareholders - - -
Number of ordinary shares in issue (‘000) 1 1 1
Net asset value per ordinary share (Rand per share) - - -
Total equity attributable to preference shareholders 759 735 735
Number of preference shares in issue (million) 237 237 237
Net asset value per preference share (Rand per share) 3.20 3.10 3.10
Total equity attributable to linked unit holders 759 735 735
Value of debentures attributable to linked unit holders 2 494 2 198 2 304
Net asset value per linked units (Rand per unit) 3 253 2 933 3 039
Number of linked units in issue (million) 237 237 237
Net asset value per linked units (Rand per unit) 13.73 12.38 12.82
STATEMENT OF CHANGES IN EQUITY
Share Prefer- Non-
capital ence distribut- Accumu-
and share- able lated Total
Rm premium holders reserves loss equity
At 31 March 2012 - 1 037 (77) (218) 742
Share of associate restatement relating to the
adoption of IFRS 10 Consolidated Financial
Statements, and IAS 19 Revised Employee
Benefits - - - (5) (5)
At 31 March 2012 Restated - 1 037 (77) (223) 737
Loss for the period - - - (21) (21)
Other comprehensive income - - 19 - 19
Total comprehensive profit/(loss) - - 19 (21) (2)
At 30 September 2012 Restated - 1 037 (58) (244) 735
Loss for the period - - - (24) (24)
Other comprehensive income - - 24 - 24
Total comprehensive profit/(loss) - - 24 (24) -
At 31 March 2013 Restated - 1 037 (34) (268) 735
Loss for the period - - - (9) (9)
Other comprehensive income - - 33 - 33
Total comprehensive profit/(loss) - - 33 (9) 24
At 30 September 2013 - 1 037 (1) (277) 759
STATEMENT OF CASH FLOWS
6 months 6 months 12 months
30 Sep 30 Sep 31 March
Rm 2013 2012 2013
Cash flow from operating activities
Cash generated/(utilised) by operations for the period 1 (1) (1)
Payment of interest on debentures (29) - (116)
Investment income on high yield term loan and relevant assets 29 - 116
Net cash inflow/(outflow) from operating activities for period 1 (1) (1)
Cash flow from investing activities - - -
Cash flow from financing activities - - -
Net movement in cash and cash equivalents 1 (1) (1)
Cash and cash equivalents at beginning of period 5 6 6
Cash and cash equivalents at end of period 6 5 5
NOTES
1. Basis of preparation
These results have been prepared in accordance with, and comply with, International Financial Reporting
Standards ("IFRS"), and comply with IAS 34 Interim Financial Reporting, the listing requirements of the
JSE Limited and the South African Companies Act No 71 of 2008.
The accounting policies applied in the preparation of these summary consolidated financial statements are
consistent with those applied in the annual financial statements for the year ended 31 March 2013.
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. Investment income
Interest and investment income on held-to-maturity financial
assets:
- PIK Debentures 162 137 286
- High Yield term loan 50 50 107
- Put & call option agreement 8 8 15
- Amendment fee 1 1 2
Interest on cash balances - - 1
221 196 411
3. Finance costs
Interest cost on financial liability held at amortised cost
(debentures) (218) (191) (401)
4. Income tax expense
South African income tax
Deferred tax
- Current period (2) (1) (3)
(2) (1) (3)
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.
Loss attributable to equity holders and preference
5. 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 period attributable to equity holders by the
weighted average number of preference shares in issue during the period.
6.2 Headline loss per preference share
Headline loss per preference share is calculated by excluding all impairment charges and capital gains
and losses from the loss attributable to shareholders and dividing the resultant headline earnings by the
weighted average number of preference shares in issue during the period. Headline earnings are defined
in Circular 3/2009 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
Restated Restated
6. Earnings per share (continued)
Calculation of earnings per share and
6.3 per linked unit
Loss for the period (R million) (a) (9) (21) (45)
Earnings attributable to debenture holders
(R million) (b) 218 191 401
Headline adjusting items:
Share of impairment charge and other
capital items of associate (c) - 10 44
Weighted average number of preference
shares in issue (millions) (d) 237 237 237
Weighted average number of linked units in
issue (millions) (e) 237 237 237
Basic loss per preference share (cents) (a)/(d) (4) (9) (18)
Headline loss per preference share (cents) (a+c)/(d) (4) (5) -
Basic earnings per linked unit (cents) (a+b)/(e) 88 72 150
(a+b+c)
Headline earnings per linked unit (cents) /(e) 88 76 168
7. Investment in associate
Cost 1 038 1 038 1 038
Share of accumulated post-acquisition
movement in non-distributable reserves (1) (52) (34)
Share of cumulative post-acquisition losses (315) (284) (306)
Carrying value in balance sheet 722 702 698
6 months 6 months 12 months
30 Sep 30 Sep 31 March
2013 2012 2013
8. Financial assets
Opening balance 2 344 2 050 2 050
High-yield term loan repaid (29) - (116)
Interest accrued 212 191 395
Fair value adjustment 9 (9) 15
Closing balance 2 536 2 232 2 344
Analysed as follows:
High-yield term loan receivable 372 409 364
Put and call option asset 104 73 81
Investment in PIK debentures 2 060 1 750 1 899
2 536 2 232 2 344
9. Debenture interest
Interest on debentures issued by AF Pref 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. Typically interest is paid on debentures as soon as possible after any interest is received on
the underlying debt instruments owned by AF Pref.
The terms of the PIK debentures issued by a subsidiary of AFEH and 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 HYTL, of which AF Pref owns
26.5%, was 18 June 2013. On that date, R110 million of the total interest due for the period of
R135 million was paid by the issuer and AF Pref's portion was received and paid to debenture holders.
AFEH announced that as a result of the ongoing work being undertaken as part of the AFEH group's 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
payment on the high yield term loan due in December 2013 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 that regulatory approvals are
expected for the Guardrisk disposal.
10. Dividends
In line with the original expectations of the entity, no dividends are proposed for the foreseeable future.
11. Restatement of comparative information for the impact of new and revised accounting standards
on associate
During the current period, the company's associate, Alexander Forbes Equity Holdings (Pty) Ltd, restated
its comparative information for the adoption of IFRS 10 Consolidated Financial Statements, and IAS 19
revised Employee Benefits. As a result of this restatement, the company has restated its share of equity
accounted earnings from the associate.
The impact of these restatements on the statement of comprehensive income, statement of other
comprehensive income and the statement of financial position on the AF Pref comparative information is
set out in the tables below:
As Share of
previously associate
reported restatement Restated
IMPACT ON STATEMENT OF FINANCIAL
POSITION – SEPTEMBER 2012
ASSETS
Investment in associate 707 (5) 702
Financial assets 2 232 - 2 232
Other receivables 1 - 1
Cash and cash equivalents 5 - 5
Total assets 2 945 (5) 2 940
EQUITY AND LIABILITIES
Ordinary shareholders' equity - - -
Preference shareholders' interest – component of 1 037
linked units 1 037 -
Non-distributable reserve (58) - (58)
Accumulated loss (239) (5) (244)
Total equity 740 (5) 735
Debentures – component of linked units 2 304 - 2 198
Deferred tax 9 - 7
Total liabilities 2 313 - 2 205
Total equity and liabilities 2 945 - 2 940
There is no adjustment to the statement of comprehensive income or statement of other comprehensive
income at September 2012.
As Share of
previously associate
reported restatement Restated
IMPACT ON STATEMENT OF COMPREHENSIVE
INCOME – MARCH 2013
Investment income 411 411
Operating expenses (2) (2)
Finance costs (401) (401)
Share of net loss of associates (net of income tax) (48) (2) (50)
Loss before taxation (40) (2) (42)
Income tax expense (3) (3)
Loss for the period (43) (2) (45)
Attributable to:
Ordinary equity holders - -
Preference shareholders (43) (2) (45)
(43) (2) (45)
IMPACT ON STATEMENT OF OTHER
COMPREHENSIVE INCOME – MARCH 2013
Loss for the year (43) (2) (45)
Share of associate other comprehensive income for
the year (net of income tax) will be reclassified to
profit or loss 44 44
Share of associate other comprehensive income for
the year (net of income tax) will not be reclassified to
profit or loss - (1) (1)
Total comprehensive income/(loss) for the year 1 (3) (2)
Total comprehensive (loss)/ income attributable to:
Ordinary equity holders - - -
Preference shareholders 1 (3) (2)
Total comprehensive income/(loss) for the year 1 (3) (2)
As Share of
previously associate
reported restatement Restated
IMPACT ON STATEMENT OF FINANCIAL
POSITION – MARCH 2013
ASSETS
Investment in associate 706 (8) 698
Financial assets 2 344 - 2 344
Other receivables 1 - 1
Cash and cash equivalents 5 - 5
Total assets 3 056 (8) 3 048
EQUITY AND LIABILITIES
Ordinary shareholders' equity - - -
Preference shareholders' interest – component of 1 037
linked units 1 037 -
Non-distributable reserve (33) (1) (34)
Accumulated loss (261) (7) (268)
Total equity 743 (8) 735
Debentures – component of linked units 2 304 - 2 304
Deferred tax 9 - 9
Total liabilities 2 313 - 2 313
Total equity and liabilities 3 056 - 3 048
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 First Rand 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: 02/12/2013 01:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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