Alexander Forbes interim results / cautionary
JSE-listed financial services company Alexander Forbes today released its interim results for the six months to September 2006, a period Group Chief Executive Peter Moyo described as unprecedented in the groups history.
"I am pleased to report that the trading results of our operations are in line with the comparative financial period. This was achieved through tremendous attention to client requirements, while the board, senior management and independent experts addressed historic corporate governance issues at a group level.
"The assessment of business practices is complete. We can now move forward with clients and staff with confidence, and knowing that our group operates under sound business practices," Moyo said.
Key items for the six-month period included:
* Trading results of operations at R409 million are in line with the comparative financial period. Excluding International Risk Services, the trading result was up 5% on the comparative period.
* Overall growth in trading results from continuing operations (excluding International Risk Services) (+5%).
* Significant growth in profits (+19%) and assets of Investment Solutions, with global assets under management totaling R135 billion.
* The Africa Risk & Insurance Services business delivered a trading result of R123 million, which is 3% up on the comparative financial period. Excluding the reduced contribution from Personal Lines insurance, Risk & Insurance Services delivered profit growth of 11%.
* The Africa Financial Services business showed modest revenue growth with trading results from operations down 9% to R94 million for the six months. This part of the business has clearly been most impacted by the issues arising from the non-disclosure of income earned from bulking of client current accounts and the subsequent intensive review of all business practices across the group.
* The International Risk Services business recorded a further reduction in earnings, delivering a trading result of 0.4 million for the half year. The sale of this business to Lockton Inc. was completed on 9 November 2006 with all of the conditions precedent having been fulfilled. Alexander Forbes will continue to work closely with Lockton in servicing our African clients with international operations.
* The International Financial Services businesses achieved revenue growth of 10%, delivering a trading result of 2.7 million down 11% on the comparative financial period.
Headline earnings
There were a number of non-trading items and related financial effects, which impacted the groups headline earnings for the current and prior reporting periods. The result was a 23% reduction in pre-tax headline profits to R324 million. After accounting for tax and minority interests, this translates into a 26% decline in headline earnings per share.
Core earnings per share
Consistent with previous years, an adjusted measure of headline earnings per share, namely core earnings per share, has been presented in order to facilitate a more meaningful assessment of the group's trading performance. This adjusted measure is based on headline earnings but:
* excludes the financial effects caused by the mismatch resulting from accounting for policyholder investments as treasury shares under IFRS;
* excludes exceptional gains and losses; and
* excludes the anticipated reduced profit contribution from the UK direct marketing entity in run-off.
While trading results from operations are in line with those reported in the comparative financial period, core earnings per share decreased by 13% to 55 cents per share.
Developments and prospects
Moyo said Alexander Forbes is now firmly focused on extracting growth and shareholder value from its core businesses in South Africa and internationally, following the conclusion of the independent review of historical business practices across our South African operations and the sale of our International Risk Services business.
This goal can only be achieved by providing unparalleled levels of customer service and appropriate solutions across all our divisions, Moyo said.
Cautionary announcements
Alexander Forbes referred shareholders to the relevant cautionary announcements, the last of which was published on 17 November 2006, in terms of which shareholders were advised that a consortium of private equity firms ("the consortium") has submitted a proposal to acquire the entire issued share capital of Alexander Forbes. The consortium has advised the company that upon fulfillment of the one remaining pre-condition, it will deliver a notice of firm intention to make an offer to the Alexander Forbes board. Details pertaining to the revised proposal submitted by the consortium are provided in the cautionary announcement of 17 November 2006. Shareholders are advised to continue to exercise caution in dealing in Alexander Forbes securities until a further announcement is made.
