Alexander Forbes Group Holdings Limited · JSE:AFH
Alexander Forbes — H1 2006 Earnings Presentation
30 slides from Alexander Forbes's earnings presentation, Sep 30, 2005
Slide 1: Results presentation
Results presentation For the six months ended 30 September 2005
Slide 2: Highlights
Highlights Income from operations up 8% to R2,6 billion Headline earnings increase 19% to R321 million Investment Solutions global assets grow to R107 billion
Slide 3: Highlights (continued)
Highlights (continued) Strong trading results from most businesses – Africa Financial Services +28% – International Financial Services +50% – Africa Investment Solutions +42% Continued difficult trading conditions in International Risk Services Appointment of Peter Moyo as Africa MD – Significant pr
Slide 4: Regional split of total income
Regional split of total income International 49% Africa 51% International R 1 263m Africa R 1 328m Africa (R 1 328m) International (R 1 263m)
Slide 5: Trading result reconciliation
Trading result reconciliation Rm 500 37 -68 450 11 24 404 408 400 350 300 Trading result – Africa Financial International Africa Investment International Risk Trading result – Sept 2004 Services Financial Services Solutions Services Sept 2005
Slide 6: Africa Risk & Insurance Services
Africa Risk & Insurance Services Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 Rm % Rm Rm % Rm 442 (1%) 445 119 – 119 Good result in difficult trading environment Tight control of expenses Negative impact of weaker underwriting results New business gains Recruitment of key pers
Slide 7: Africa Financial Services
Africa Financial Services Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 Rm % Rm Rm % Rm 523 15% 454 110 28% 86 Strong performance from retirement funds admin and consulting businesses – Additional work from legislative changes Financial planning business capitalises on strong m
Slide 8: International Risk Services
International Risk Services Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 £m % £m £m % £m 63,6 (7%) 68,6 2,2 (71%) 7,7 Continued difficult trading conditions Decreased profit from Professional Indemnity business – Softening rates – Team restructuring Investment in key recruitme
Slide 9: International Financial Services
International Financial Services Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 £m % £m £m % £m 40,6 23% 33,0 3,0 50% 2,0 International Financial Services consolidated under single management structure – Now includes: AFFS, LCP, Direct Marketing and DC Admin Legislative change c
Slide 10: Investment Solutions Global Assets Under Management
Investment Solutions Global Assets Under Management Rbn 140 107 120 87,7 100 76,3 80 66,8 54,4 60 40 20 0 Sep 03 Mar 04 Sep 04 Mar 05 Sep 05 Africa International
Slide 11: Investment Solutions Global Asset Allocation
Investment Solutions Global Asset Allocation SA Asset Allocation UK Asset Allocation 7% 0% 10% 26% 1% 1% 16% 1% 53% 55% 17% 13% Equities Bonds Equities Bonds Money Market/Cash Property Money Market/Cash Property International/Global Other International/Global Other
Slide 12: Africa Investment Solutions
Africa Investment Solutions Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 Rm % Rm Rm % Rm 363 25% 290 125 42% 88 Assets Under Management (AUM) Closing AUM 99,0 36% 72,7 Average AUM 90,4 32% 68,6 Strong revenue and profit growth – Benefits of operational gearing coming through G
Slide 13: UK Investment Solutions
UK Investment Solutions Total income Trading result Sept Sept Sept Sept 2005 2004 2005 2004 £m % £m £m % £m 2,3 77% 1,3 (0,3) – (0,3) Assets under management reach £681m (R7,8bn) – Net inflows of £173m (R2bn) – Market contribution to assets of £63m (R0,7bn) Successful launch of partnership with Poli
Slide 14: Empowerment
Empowerment Significant value >R200m created for Empowerment Shareholders – Valued at 5,8 times EBIT – less net debt and vendor finance Transformation progress recognised by improved “A” rating from Empowerdex Broadened participation in the South African empowerment shareholding – Introduction for a
Slide 15: Alexander Forbes South Africa Revised Group Structure
Alexander Forbes South Africa Revised Group Structure New NewStaff Staff Shanduka Shanduka AF AFCommunity Community Share Trust Share Trust Group Group Trust Trust 53,3% 16,7% 30% Alexander AlexanderForbes Forbes Empowerment Alexander AlexanderForbes ForbesLtd Ltd Empowerment Holdings Holdings(Pty)
Slide 16: Key Terms of the Staff Scheme
Key Terms of the Staff Scheme Participation by all staff in South Africa Allocation principles: – Majority of allocated shares to black management and staff No cost or dilution to shareholders
Slide 17: Financial review
Alexander Forbes Financial review
Slide 18: Adoption of IFRS
Adoption of IFRS Adopted for the first time Comparative financial information restated Detailed reconciliations provided of financial effects Profit Equity Period Rm Rm Six months to Sept 2004 (10) Year ended March 2005 +5 Opening balance sheet at 1 April 2004 (430)
Slide 19: IFRS – Main Impacts
IFRS – Main Impacts Change in format of income statement and balance sheet – More technical basis of presentation – Impairment charges and other headline adjusting items now included as operating expenses within operating profit (previously shown on a separate line below operating profit) – Presenta
Slide 20: IFRS – Main Impacts (continued)
IFRS – Main Impacts (continued) Consolidation of cell captive insurance arrangement – Increased potential for greater volatility in reported earnings dependent on provisions raised for claims and potential claims Employee benefits – Actuarial deficits recognised in full in the balance sheet under IF
Slide 21: Analysis of operating profit
Analysis of operating profit Sept Sept 2005 % 2004 Rm Rm Total income from operations 2 591 8% 2 397 Trading results of operations before International Risk Services 382 22% 314 International Risk Services (IRS) 26 90 Trading results of operations after IRS 408 1% 404 Profit from direct marketing en
Slide 22: Attributable profit
Attributable profit Sept Sept 2005 2004 Rm % Rm Operating profit 464 7% 434 Investment income 27 31 Finance costs (32) (78) Share of profits of associates 7 2 Profit before tax 466 20% 389 Taxation (128) (111) Profit for the period 338 22% 278 Minority interest (24) 20% (20) Profit attributable to o
Slide 23: Adjusted headline earnings
Adjusted headline earnings Sept Sept 2005 2004 Rm % Rm Profit attributable to ordinary shareholders 314 22% 258 Add: impairment charges and other capital items 7 11 Less: exceptional profits (22) (5) Add: interest effects on repurchased bonds – – 38 Tax effects thereon 7 – (11) Adjusted headline ear
Slide 24: Profits matched by cash flows
Profits matched by cash flows Sept 2005 Rm Cash flows from operating activities 506 Profit before tax per income statement 466 Main non cash items: – Depreciation 64 – Exceptional items (22) – Impairment charges 7 – Equity accounted profits (7) Adjusted profit before tax 508
Slide 25: Cash position
Cash position Sept Sept Mar 2005 2004 2005 Rm Rm Rm Cash and cash equivalents 2 506 2 135 2 583 Utilisation Insurer balances (1 153) (1 178) (931) Other net current liabilities and solvency requirements (1 358) (991) (1 375) Free cash resources (5) (34) 277 Committed undrawn borrowing facilities 339
Slide 26: Gearing and interest cover
Gearing and interest cover Sept Sept Mar 2005 2004 2005 Rm Rm Rm Interest-bearing debt 782 706 760 Short term 39 196 358 Long term 743 510 402 Total equity 2 206 2 045 2 267 Gearing ratio 35% 35% 34% Operating profit per income statement 464 434 734 Net finance costs 5 47 63 Interest cover 93 9 12
Slide 27: Capital structure
Capital structure Annual dividend policy – 2 times dividend cover (based on headline EPS) – Any increase to be supplemented by share buy-backs Growth in absolute level of dividends Gearing – net debt of up to 1,5 times EBITDA – Substantial additional borrowing capacity
Slide 28: Outlook
Alexander Forbes Outlook
Slide 29: Strategy centered on delivery to Stakeholders, through growth in core businesses
Strategy centered on delivery to Stakeholders, through growth in core businesses Shareholders – Value enhancement Customers – Do great things, in a way that we are proud of Staff – Rewarding and challenging environment, team work and individuals matter Wider community – Conscious of our responsibili
Slide 30: Conclusion
Conclusion Recent successes – Good growth in most businesses – Strengthened management team – Stronger balance sheet – Empowerment value created – Transformation in SA business Group in a stronger position Business well placed to capitalise on opportunities
Alexander Forbes Group Holdings — H1 2006 Earnings Presentation on 6ix