Wrap Text
Preliminary results for the year ended 30 June 2019
Clientèle Limited
(Registration number 2007/023806/06)
Share code: CLI
ISIN: ZAE000117438
Preliminary results
For the year ended 30 June 2019
Dividends declared increased by 5% to 131 cents per share
Net insurance premiums increased by 3% to R2.1 billion
Diluted headline earnings per share decreased by 18% to 119.85 cents
Return on average shareholders' interest of 38%
Value of New Business of R300.5 million
Recurring Embedded Value Earnings of R491.9 million
Recurring Return on Embedded Value of 8.3%
Diluted Embedded Value per share of 1 976.65 cents
Commentary
Introduction
The high unemployment rate and dire state of the economy has had a negative effect on our clients. Unsurprisingly, this has
resulted in a disappointing set of results for the Clientèle Group ("Clientèle").
New business production volumes, although marginally higher than last year, are below expectation for the traditional Telesales and
Independent Field Advertisers ("IFAs") channels. Fortunately, this was partially offset by good production from the newer Agency
and Mass Market Broker distribution channels, which are both producing volumes ahead of the original business plan.
These new channels attract up-front acquisition costs and this is the major contributing factor to the increase in expenses for the
year.
A positive aspect has been the growth in single premium investment business. Over the past two years Clientèle has underwritten
co-branded single premium investment products with Old Mutual and Absa, which have been well supported by clients. This
once-off co-branded single premium business accounts for most of the R4.5 billion increase in financial assets during the year.
Investment returns for the year were poor and produced a 5.2% (2018: 13.2%) return. The JSE ALSI achieved a 4.4% return for
the year.
A major contributor to the disappointing results is adverse withdrawals, which have been worse than management's expectations
and has affected insurance premium revenue, the Value of New Business ("VNB") and Recurring Embedded Value Earnings
("REVE"). The negative withdrawal and unpaid premium experience variance for the year amounts to R225.6 million
(2018: R81.6 million). In addition, withdrawal assumptions were reviewed and the negative impact on existing business of
R281.6 million (2018: R43.9 million) is included in the "Changes in non-economic assumptions and modelling" item, as disclosed in
the Embedded Value Earnings Analysis. Withdrawals are the subject of intense focus by management in order to improve this
aspect of the business.
Clientèle launched an exciting loyalty program during the financial year, Clientèle Rewards. The Rewards Program provides tangible
monthly benefits to loyal Clientèle policyholders which include discounts at Shoprite, Checkers, Checkers Hyper, Dischem, Edgars,
Jet, CNA, Greyhound and Citiliner.
In the next half of the calendar year the Rewards Program will continue to be enhanced. The loyalty program is delivered by
Clientèle Benefits Company (Pty) Ltd, a wholly owned subsidiary of Clientèle Limited. The relationship with the loyalty benefit
providers is managed by Direct Rewards (Pty) Ltd. The Rewards program is of strategic importance to Clientèle and Clientèle has
secured the option to buy a 25% stake in Direct Rewards (Pty) Ltd, at Clientèle's election, in the 2020 financial year.
The Clientèle Application ("the App") was also recently launched and has been keenly adopted by our clients, employees and
intermediaries. The App opens up many exciting avenues for better fulfilling Clientèle's various stakeholder needs in future and
enables a more interactive relationship with clients.
Outlook
The economic environment has been challenging over the year and remains so. The board is concerned by the current state of the
economy and is not expecting any improvement in the economic environment for next year.
Management have introduced new initiatives aimed at improving the quality of new business and will continue to focus on
increasing production levels, particularly in our traditional Telesales and IFA distribution channels. Tight control will be kept to
maintain and improve business efficiencies.
The Agency and Mass Market Broker distribution channels are expected to create meaningful value for the Group in future.
Clientèle launched a project with the Landile Shembe Foundation ("LSF") through which it will provide Clientèle products to the
Shembe community. This initiative has commenced and will be nurtured during its early years.
Clientèle Rewards and the Clientèle App are important ingredients in offering our clients improved value, convenience and service
which we believe will further enhance and differentiate the Clientèle business model in future.
Clientèle remains committed to providing products and services that are relevant and meet our clients' needs and will continue to
improve on the delivery of them to the market conveniently and efficiently.
The Board is disappointed by the results for the year, however it is encouraged by the new initiatives and their prospects for
growth and value creation over time.
Dividend Declared
Notice is hereby given that the directors have declared a final gross dividend of 131.00 cents (2018: 125.00 cents) per share on
21 August 2019 for the year ended 30 June 2019.
The Board of Clientèle Limited confirms that the Group will satisfy the solvency and liquidity tests immediately after completion of
the dividend distribution. The dividend will be subject to dividends tax. In accordance with the JSE Listings Requirements, the
following additional information is disclosed:
- The dividend has been declared out of income reserves;
- The local dividends tax rate is 20% (twenty percent) (2018: twenty percent);
- The gross local dividend amount is 131.00 cents (2018: 125.00 cents) per ordinary share for shareholders exempt from
the dividends tax;
- The net local dividend amount is 104.80 cents (2018: 100.00 cents) per ordinary share for shareholders liable to pay
the dividends tax;
- The local dividends tax amount is 26.20 cents (2018: 25.00 cents) per ordinary share for shareholders liable to pay the dividend
withholding tax;
- Clientèle Limited currently has 335,309,778 (2018: 334,707,747) ordinary shares in issue;
Clientèle Limited's income tax reference number is 9465071166.
In compliance with the requirements of STRATE Limited, the electronic settlement and custody system used by the JSE Limited,
the following salient dates for the payment of the dividend are applicable:
Last day to trade Tuesday, 17 September 2019
Shares commence trading "ex" dividend Wednesday, 18 September 2019
Record date Friday, 20 September 2019
Payment date Monday, 23 September 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 18 September 2019 and Friday, 20 September
2019, both days inclusive.
By order of the Board
GQ Routledge BW Reekie
Chairman Managing Director
Johannesburg
26 August 2019
Year Year
ended ended
30 June % 30 June
2019 change 2018
Net profit for the year (R'000) 400,937 (18) 490,323
Headline earnings per share (cents) 120.00 (18) 147.22
Earnings per share (cents) 119.65 (18) 146.62
Embedded Value at the end of the year (R'000) 6,636,329 5 6,321,588
Recurring Return on Embedded Value (%) 8.3 18.0
Value of New Business for the year (R'000) 300,522 (33) 447,981
Recurring EV Earnings for the year (R'000) 491,897 (50) 979,019
Short-form announcement dated 26 August 2019
This short-form announcement is the responsibility of the Directors and is only a summary of the information in the full
announcement and does not contain the full or complete details. The full announcement can be found through this link
(https://senspdf.jse.co.za/documents/2019/jse/isse/CLI/CLI2019.pdf) and on the Company’s website. Copies of the full
announcement are available for inspection at the Company's registered office, at no charge, during office hours and may also be
requested from Wilna van Zyl on 011 320 3284 or wvanzyl@clientele.co.za. Any investment decisions should be based on
consideration of the full announcement. Comprehensive commentary including regulatory requirements is contained in the full
announcement.
Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited
Registered office: Clientèle Office Park, Cnr Rivonia and Alon Roads, Morningside, Johannesburg 2196, South Africa
PO Box 1316, Rivonia 2128, South Africa
Transfer secretaries: Computershare Investor Services Proprietary Limited, First floor, Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2106, South Africa PO Box 61051, Marshalltown 2107, South Africa
Directors:
GQ Routledge BA LLB (Chairman); BW Reekie BSc (Hons), FASSA* (Managing Director);
ADT Enthoven BA, PhD (Political Science); B du Toit BCom*; PR Gwangwa BProc LLB, LLM; IB Hume CA(SA), ACMA*;
BY Mkhondo BCom, MBA; PG Nkadimeng BSC Statistics and Economics; BA Stott CA(SA); RD Williams BSc (Hons), FASSA,
(*Executive Director)
Company secretary: W van Zyl CA(SA)
Date: 26/08/2019 05:00:00
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