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Reviewed Condensed Consolidated Financial Results for the Six Month Period Ended 31 March 2018
AFRICAN PHOENIX INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1946/021193/06)
(Ordinary share code: AXL) (ISIN: ZAE000221370)
(Hybrid instrument share code: AXLP) (ISIN: ZAE000221388)
(“Phoenix” or “the group” or “the company”)
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTH PERIOD
ENDED 31 MARCH 2018
SALIENT FEATURES
Total equity of R1.85 billion (1H17: R1.70 billion; FY17: R1.83 billion)
Total cash and cash equivalents of R1.91 billion (1H17: R1.83 billion; FY17: R1.88 billion)
Earnings per share from continuing operations: 1.4 cents (1H17: 4.8 cents; FY17: 13.7 cents)
Headline earnings per share from continuing operations: 1.4 cents (1H17: 4.8 cents ; FY17: 13.7
cents)
Earnings per share: 1.4 cents (1H17: 4.1 cents; FY17: 13.0 cents)
Headline earnings per share: 1.4 cents (1H17: 4.1 cents; FY17: 13.0 cents)
Net asset value per ordinary share: 50.2 cents (1H17: 39.9 cents; FY17: 48.8 cents)
INTRODUCTION
References to “the company” or “the group” in these reviewed condensed consolidated financial
results for the period ended 31 March 2018 relate to African Phoenix Investments Limited
(“Phoenix”).
BACKGROUND
The company owns 100% of The Standard General Insurance Company Limited (“Stangen”) which is
the company’s only trading subsidiary.
Since the previous year end, there were no changes in the status of the company’s investment in
Residual Debt Services Limited (formerly African Bank Limited) (“RDS”), which is still under
curatorship. There was also no change in the status of the company’s investment in Ellerine Holdings
Limited (“EHL”), which is in business rescue. Both of these investments were impaired in full in
previous financial periods.
Dormant subsidiaries are in the process of being deregistered.
FINANCIAL PERFORMANCE
The group reported net profit after tax of R21 million for the six-month period ended 31 March 2018
(1H17: R59 million; FY17: R186 million). The 65% decrease in headline earnings was mainly due to
the lower amount of actuarial reserves released during the period (R6.3 million release in 1H18
compared to a R39.0 million release in 1H17) as well as an increase in operating costs (predominantly
as a result of new business acquisition costs and above-the-line marketing campaigns in Stangen and
an increase in legal costs and directors’ remuneration in Phoenix). Basic and headline earnings per
share was 1.4 cents for the period ended 31 March 2018 (1H17: 4.1 cents; FY17: 13.0 cents).
Total shareholders’ equity as at 31 March 2018 amounted to R1.85 billion (31 March 2017: R1.70
billion; 30 September 2017: R1.83 billion). The group remains both solvent and liquid with cash
reserves of R1.91 billion (31 March 2017: R1.83 billion; 30 September 2017: R1.88 billion).
INVESTMENT IN DIFFERENT LIFE PROPRIETARY LIMITED
During the prior financial year, Stangen acquired a 15% equity stake in Different Life Proprietary
Limited (“Different Life”) for a cash consideration of R20 million. A further issuance of shares by
Different Life in lieu of a convertible loan, envisaged at the time of investing, would have had the
effect of diluting Stangen’s holding to 13%. The loan has not yet been converted to equity.
For accounting and disclosure purposes, the investment in Different Life is categorised as available
for sale held at fair value through other comprehensive income (level 3 in terms of the fair value
hierarchy) and except for this financial asset, there were no transfers to or from level 3 in the current
or prior year.
The fair value of the investment has been determined by inputs that are not based on observable
market data. The budgeted future expected cash flows from the underlying entity have been
discounted at the company’s expected rate of return over a three year period, taking inflationary
growth into account. Other unobservable inputs noted in the calculation relate to lead costs, average
premium rates, non-taken-up (NTU) rates, collection success rates and various cost assumptions.
DISCONTINUED OPERATIONS (PRIOR PERIOD)
Stangen concluded an agreement and financial settlement with African Bank Limited and RDS in
respect of its run-down credit life portfolio, effective 1 April 2016. The agreement passed 100% of
the risk and benefit in that credit life book to Guardrisk Life Limited (“Guardrisk”) until such time as
the run-down credit life book was transferred to Guardrisk.
The transfer of the run-down credit life portfolio to Guardrisk, arising from the settlement with the
banking parties, was approved by the FSB on 8 June 2017, with an operative date of 30 June 2017.
Stangen therefore has no credit life exposure and has resolved all the legacy matters following the
termination of relationships with RDS and African Bank Limited.
UPDATE ON FY17 CONTINGENT LIABILITY
A number of Ellerine Furnishers Proprietary Limited (“EF”) employees claimed amounts due to them
from EF and EHL (both of which companies are in business rescue). The amounts claimed by the
employees amounted to R42.6 million and they also sought to recover this amount from Phoenix.
The parties, including Phoenix, had agreed to settlement via arbitration, which process concluded in
December 2017 with the arbitrator ruling in favour of the company (i.e. Phoenix is not liable for any
of the claims made).
GOING CONCERN
In performing the going concern assessment, the directors have considered available information
about the future, the possible outcomes of events and changes in conditions and the realistically
possible responses to such events and conditions that would be available to the directors.
The directors concluded that the preparation of the financial information on a going concern basis is
appropriate.
DIVIDENDS
No ordinary or preference dividends were declared in the current period (2017: Rnil).
DIRECTORATE
The following changes were made to the board of directors of Phoenix (“Board”) during and after
the period under review.
Dr Enos Banda resigned as a non-executive director of the Board with effect from 16 January 2018
to focus on other business responsibilities.
John Evans’ appointment as financial director of Phoenix ended on 28 February 2018, from which
date he is no longer a member of the Board. Shafiek Ahmed Rawoot was appointed financial director
of Phoenix with effect from 1 July 2018.
Siyabonga Nhlumayo was appointed as a board member and chief executive officer of the company
with effect from 1 March 2018.
Daniël Vlok resigned as a non-executive director of the Board on 18 June 2018.
SUBSEQUENT EVENTS
During May 2018, Stangen invested an additional R1.4 million in shares issued by Different Life in
order to maintain its equity stake at 15%. Pursuant to the subscription, the investment in Different
Life would amount to R21.4 million.
The following dormant subsidiaries were deregistered during May 2018:
- Theta Investments Proprietary Limited;
- Customer Protection Insurance Company Limited; and
- Creditsave Proprietary Limited.
The deregistration of these companies had no financial impact on the group.
STRATEGIC OUTLOOK
As a publicly listed investment holding company, Phoenix’s primary aim is to create and sustain long-
term value as measured by consistent growth in net asset value, before distributions to shareholders.
Accordingly, the Board has chosen to position Phoenix as an investment holding company, managed
primarily by black South Africans who have a proven track record of deploying capital in a manner
that generates long term economic value.
It is the Company’s intention to reach its long-term goal by owning meaningful equity interests in a
range of diverse businesses that have either a proven track record or a proven business concept.
These businesses should demonstrably generate or be able to generate cash and should earn
acceptable returns in relation to the initial capital invested.
While Phoenix is a listed company, it is able to benefit from the advantages of operating as a private
equity investor without the limitations of a typical private equity structure, which usually demands
an exit from investee companies within a defined period. Investments are selected with a long-term
view in mind and the intention is that they will be maintained for as long as they continue to meet
the Company’s investment criteria. Conversely, investments will be disposed of should they fall short
of these criteria.
The performance of deployed capital is actively assessed against the investment criteria on an
ongoing basis to make sure that Phoenix meets its long-term objective of growing the Company’s net
asset value by more than the cost of capital at portfolio level. Phoenix will continue to use its strong
balance sheet to take advantage of appropriate investment opportunities and to build shareholder
value.
At subsidiary level, Stangen will continue to strengthen its distribution network and to actively seek
out synergies that will enable it to secure its long-term sustainability.
On behalf of the Board
Morris Mthombeni Siyabonga Nhlumayo
Chairman Chief executive officer
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31
MARCH 2018
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Consolidated results
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
R000 31 Mar 18 31 Mar 17 30 Sep 17
Insurance income 32,906 31,927 63,838
Interest received 76,491 70,355 139,852
Other income 900 780 47,078
Income from operations 110,297 103,062 250,768
Net insurance claims (4,163) 27,114 38,241
Claims paid to policyholders (10 487) (11 945) (23 950)
Movement in insurance reserves 6 324 39 059 62 191
Operating costs (64,187) (32,764) (92,933)
(Impairment) / reversal of impairment of financial
instruments (8,290) - 46,115
Interest expense (142) - (96)
Profit before taxation 33,515 97,412 242,095
Direct taxation: Normal (12,930) (29,855) (47,410)
Profit for the period / year from continuing
operations 20,585 67,557 194,685
Loss for the period / year from discontinuing operations - (8,563) (8,563)
Profit for the period / year 20,585 58,994 186,122
Reconciliation between basic earnings and headline
earnings
Profit for the period / year from continuing operations 20,585 67,557 194,685
Loss for the period / year from discontinuing operations - (8,563) (8,563)
Profit for the period / year 20,585 58,994 186,122
Basic earnings attributable to ordinary
shareholders 20,585 58,994 186,122
Headline earnings 20,585 58,994 186,122
Earnings and headline earnings per share (cents)
Basic earnings per ordinary share - continued
operations 1.4 4.8 13.7
Basic earnings per ordinary share - discontinued
operations 0.0 (0.6) (0.6)
Basic earnings per ordinary share - total 1.4 4.1 13.0
Headline earnings per ordinary share - continued
operations 1.4 4.8 13.7
Headline earnings per ordinary share - discontinued
operations 0.0 (0.6) (0.6)
Headline earnings per ordinary share - total 1.4 4.1 13.0
Weighted number of shares in issue (thousand) 1,427,005 1,427,005 1,427,005
Number of shares in issue (thousand) 1,427,005 1,427,005 1,427,005
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Consolidated results
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
R000 31 Mar 18 31 Mar 17 30 Sep 17
Profit for the period / year 20,585 58,994 186,122
Other comprehensive income - - -
Total comprehensive profit for the period / year 20,585 58,994 186,122
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Consolidated results
Reviewed Reviewed Audited
as at as at as at
R000 31 Mar 18 31 Mar 17 30 Sep 17
Assets
Cash and cash equivalents 1,907,683 1,833,114 1,881,333
Other assets 91,765 53,612 100,856
Financial assets 20,000 20,000 20,000
Equipment 997 1,355 1,147
Intangible assets 11,011 8,085 12,585
Taxation 468 - 1,230
Deferred tax asset 169 - 1,170
Disposal group - 143,206 -
Total assets 2,032,093 2,059,372 2,018,321
Liabilities and equity
Taxation 2,267 9,717 3,046
Deferred taxation - 25 -
Policyholder liabilities under insurance contracts 121,858 151,314 128,182
Borrowings 23,377 23,377 23,377
Other liabilities 37,757 32,612 37,467
Disposal group - 143,206 -
Total liabilities 185,259 360,251 192,072
Ordinary shareholders' equity 717,031 569,318 696,446
Preference shareholders' equity 1,129,803 1,129,803 1,129,803
Total equity (capital and reserves) 1,846,834 1,699,121 1,826,249
Total liabilities and equity 2,032,093 2,059,372 2,018,321
Tangible net asset value per ordinary share (cents) 49.5 39.3 47.9
Net asset value per ordinary share (cents) 50.2 39.9 48.8
Number of shares in issue (thousand) 1,427,005 1,427,005 1,427,005
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Consolidated results
Ordinary shares Ordinary Preference
Share sharehol share
capital and Distributable ders' capital and
R000 premium reserves equity premium Total
Balance at 30 September 2016 14,649,929 (14,139,605) 510,324 1,129,803 1,640,127
Total comprehensive income for
the period - 58,994 58,994 - 58,994
Balance at 31 March 2017 14,649,929 (14,080,611) 569,318 1,129,803 1,699,121
Total comprehensive income for
the period - 127,128 127,128 - 127,128
Balance at 30 September 2017 14,649,929 (13,953,483) 696,446 1,129,803 1,826,249
Total comprehensive income for
the period - 20,585 20,585 - 20,585
Balance at 31 March 2018 14,649,929 (13,932,898) 717,031 1,129,803 1,846,834
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated results
Reviewed Reviewed six Audited 12
six months months months
ended ended ended
R000 31 Mar 18 31 Mar 17 30 Sep 17
Cash generated from operations 38,609 57,468 131,438
Cash receipts 110,297 109,488 250,768
Cash paid (71,688) (52,020) (119,330)
Direct taxation paid (11,945) (17,129) (43,532)
Cash inflow from continuing operations 26,664 40,339 87,906
Cash outflow from discontinuing operations - (11,893) (11,893)
Net cash inflow from operations 26,664 28,446 76,013
Cash outflow from investing in continued operations (314) (28,257) (27,605)
Acquisition of property and equipment (115) (185) (240)
Acquisition of intangible assets (199) (8,072) (13,791)
Investment - (20,000) (20,000)
Decrease in other assets - - 6,426
Increase in cash and cash equivalents 26,350 189 48,408
Cash and cash equivalents at the beginning of the
year 1,881,333 1,832,925 1,832,925
Cash and cash equivalents at the end of the period /
year 1,907,683 1,833,114 1,881,333
NOTES TO THE FINANCIAL STATEMENTS
NET ASSET VALUE AND TANGIBLE NET ASSET VALUE PER SHARE
Reviewed Reviewed Audited
as at as at as at
Net asset value 31 Mar 18 31 Mar 17 30 Sep 17
Total equity 1,846,834 1,699,121 1,826,249
Less: Preference shareholders' equity (1,129,803) (1,129,803) (1,129,803)
Equity attributable to ordinary shareholders' 717,031 569,318 696,446
Total number of ordinary shares in issue (thousand) 1,427,005 1,427,005 1,427,005
NAV per ordinary share (cents) 50.2 39.9 48.8
Tangible net asset value per ordinary share
Total equity 1,846,834 1,699,121 1,826,249
Less: Intangible assets (11,011) (8,085) (12,585)
Less: Preference shareholders' equity (1,129,803) (1,129,803) (1,129,803)
Tangible equity attributable to ordinary shareholders' 706,020 561,233 683,861
Total number of shares in issue (thousand) 1,427,005 1,427,005 1,427,005
Tangible NAV per ordinary share (cents) 49.5 39.3 47.9
CONSOLIDATED SEGMENTAL REVENUE AND RESULTS
Consolidated results
31 March 2018
R000 Insurance Corporate Total
Income (continuing operations) 88,925 21,372 110,297
EBITDA (continuing operations) (16,128) (24,810) (40,938)
Interest received 55,119 21,372 76,491
Impairment of financial instruments - (8,290) (8,290)
Profit before taxation from continuing operations 36,954 (3,439) 33,515
Total assets 1,567,506 464,587 2,032,093
Total liabilities 132,680 52,579 185,259
31 March 2017
R000 Insurance Corporate Total
Income (continuing operations) 92,393 10,669 103,062
EBITDA (continuing operations) 36,836 (9,214) 27,622
EBITDA (discontinuing operations) (11,893) - (11,893)
Interest received (continuing operations) 59,686 10,669 70,355
Profit before taxation from discontinuing operations (11,893) - (11,893)
Profit before taxation from continuing operations 95,956 1,456 97,412
Total assets (including discontinued operations) 1,678,639 380,733 2,059,372
Total liabilities (including discontinued operations) 309,766 50,485 360,251
AUDITORS' REPORT
These interim condensed consolidated financial statements for the period ended 31 March 2018
have been reviewed by the group’s external auditors, Grant Thornton (Johannesburg Partnership),
who expressed an unmodified review conclusion.
The auditors’ review report does not necessarily conclude on all of the information contained in
these financial results. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditors’ engagement they should obtain a copy of the auditors’
review report together with the accompanying financial information from the issuer’s registered
office.
A copy of the auditor’s review report is available for inspection at the company’s registered office
together with the financial statements identified in the auditor’s review report.
BASIS OF PREPARATION
The preparation of this financial information was supervised by J Muller Strauss CA(SA).
The condensed financial information contained herein has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of the International
Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board
(IASB), Interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC) of the IASB, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, the requirements of the Companies Act of South Africa (Act
71 of 2008), as amended, as well as the Listings Requirements of the JSE Limited.
All accounting policies and their application are consistent with those used for the group’s 2017
annual financial statements.
The directors take full responsibility for the preparation of these financial results and information.
Johannesburg
27 June 2018
SPONSOR
Merchantec Capital
BOARD OF DIRECTORS
Independent non-executive: M Mthombeni (Chairman); ABA Conrad; CL Le Grange;
O Mabandla; N Siyotula
Non-executive: S Sithole
Executive: S Nhlumayo (CEO)
AFRICAN PHOENIX INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1946/021193/06)
(Ordinary share code: AXL) (ISIN: ZAE000221370)
(Hybrid instrument code: AXLP) (ISIN: ZAE000221388)
REGISTERED OFFICE
52 Corlett Drive, Wanderers Office Park, Illovo, South Africa, 2196
Private Bag X31, Northlands, South Africa, 2116
COMPANY SECRETARY
Acorim Proprietary Limited
SHARE TRANSFER SECRETARIES
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
PO Box 4844, Johannesburg, 2000
Telephone: +27 11 713 0800
Telefax: +27 86 674 4381
WEBSITE
www.phoenixinvestments.co.za
Date: 27/06/2018 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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