Alexander Forbes Group Holdings Limited · JSE:AFH
Alexander Forbes — FY2006 Earnings Presentation
38 slides from Alexander Forbes's earnings presentation, May 2006
Slide 1: Results presentation for the year ended 31 March 2006
Results presentation for the year ended 31 March 2006
Slide 2: Group overview
Group overview • Revenue growth +11% – Income from operations exceed R5 billion • Continued strong operating results across South African and African businesses – Africa Investment Solutions +29% – Africa Risk & Insurance Services -3% (+11% excluding reduced contribution from operational interest in
Slide 3: Group overview (continued)
Group overview (continued) • Core earnings per share +3%, despite difficult trading conditions in International Risk Services – Considering structural options to support growth in this business – Possible new investor and reduction in shareholding • Distribution to shareholders of 59 cents per share
Slide 4: International review
Alexander Forbes Limited For more Information and full detalls of the SENS accouncement, please visit our website: www.alexforbes.co.za International review Alexander Forbes
Slide 5: International Investment Solutions
International Investment Solutions Income from operations Trading result March March March March 2006 2005 2006 2005 £m % £m £m % £m 5,6 +60% 3,5 (0,7) (250%) (0,2) Assets Under Multi-management (AUM) Closing AUM 890 +99% 448 Average AUM 667 +108% 320 • Launched to market in September 2003; continue
Slide 6: International Risk Services
International Risk Services Income from operations Trading result March March March March 2006 2005 2006 2005 £m % £m £m % £m 129,6 (1%) 131,5 1,6 (81%) 8,5 • Holding revenue in difficult trading conditions – Rate reductions in a number of insurance classes, particularly Professional Indemnity – Cer
Slide 7: International Financial Services
International Financial Services Income from operations Trading result March March March March 2006 2005 2006 2005 £m % £m £m % £m 95,5 +24% 76,8 10,3 +39% 7,4 • Lane Clark & Peacock (UK, Belgium and Switzerland) – Exceptional growth; increased demand for services in UK and Swiss markets resulting f
Slide 8: International Financial Services (continued)
International Financial Services (continued) • DC Link Administration (acquired 2002) – Trading loss continues to receive attention – 40% growth in members under administration to 57,000 • Direct marketing (continuing operation) – Scaled down; continues direct marketing of accidental death benefit p
Slide 9: International contribution
International contribution Income from operations Trading result 14% 20% 2% 52% 0% 27% 84% 1% Africa region International Investment Solutions International Risk Services International Financial Services
Slide 10: Africa review
Alexander Forbes Limited For more information and full details of the SENS accouncement, please visit our website: www.alexforbes.co.za Africa review Alexander Forbes
Slide 11: Africa overview
Africa overview Trading results of operations 700 +24 -6 670 +60 650 592 600 550 500 450 400 350 300 Trading result – Africa Investment Africa Financial Africa Risk & Trading result – March 2005 Solutions Services Insurance Services March 2006
Slide 12: Africa overview: review of historical business practices
Africa overview Review of historical business practices • Bulking of retirement funds’ current bank accounts – Practice of aggregating on a notional basis the total value of all current accounts to negotiate better interest rates for benefit of clients – Historical practice of receiving income from
Slide 13: Review of historical business practices (continued)
Africa overview Review of historical business practices (continued) • Wider review of SA businesses – Engagement of lawyers and independent auditors – Appointment of board sub-committee comprising non-executive directors – Comprehensive review of all income streams – Review nearing completion: ident
Slide 14: Africa Investment Solutions
Africa Investment Solutions Income from operations Trading result March March March March 2006 2005 2006 2005 Rm % Rm Rm % Rm 761 +23% 617 264 +29% 204 Assets Under Multi-management (AUM) Closing AUM R114 billion +37% R83 billion Average AUM R97 billion +33% R73 billion • Strong revenue and profit g
Slide 15: Africa Investment Solutions (continued)
Africa Investment Solutions (continued) • Further growth in Stanlib Multi-manager and success with larger funds • 5-year management agreement replaces share swap arrangement with Stanlib • Competitive relative investment performance continues – Most portfolios ahead or in line with benchmarks
Slide 16: Africa Investment Solutions: asset allocation
Africa Investment Solutions Asset allocation 6% 9% 17% 55% 13% Equities Bonds Money Market/Cash International/Global Other
Slide 17: Investment Solutions: global assets under multi-management
Investment Solutions Global assets under multi-management Rbn 140 124 120 107 100 88 76 80 67 60 40 20 0 Mar 04 Sep 04 Mar 05 Sep 05 Mar 05 Africa International
Slide 18: Africa Risk & Insurance Services
Africa Risk & Insurance Services Income from operations Trading result March March March March 2006 2005 2006 2005 Rm % Rm Rm % Rm 875 +4% 842 187 (3%) 193 • Main contributors – Core Corporate Broking business – Guardrisk (cell captive insurance) – Afrinet network (10 African countries outside South
Slide 19: Africa Risk & Insurance Services (continued)
Africa Risk & Insurance Services (continued) • Good new business gains by the core Corporate Broking business – R25 million booked in current year • Success in attracting additional key client facing personnel • Niche/specialist aviation broker acquired
Slide 20: Africa Financial Services
Africa Financial Services Income from operations Trading result March March March March 2006 2005 2006 2005 Rm % Rm Rm % Rm 1,125 +16% 972 219 +12% 195 • Strong performance from core Actuarial Consulting business – Increased revenue from special projects, including those relating to legislative chan
Slide 21: Africa Financial Services (continued)
Africa Financial Services (continued) • Other main contributors – Financial Planning Consultants, benefiting from new business and strong equity markets – Homeplan: – Pensions-backed lending book increases by R550m to R2.1 billion – R750 million securitisation funding raised; balance of funding prov
Slide 22: Financial review
Alexander Forbes Limited For more information and full details of the SENS accouncement, please visit our website: www.alexforbes.co.za Financial review Alexander Forbes
Slide 23: Financial review: Adoption of IFRS
Financial review Adoption of IFRS • Financial information presented in full compliance with IFRS • Comparative financial information restated – Details of financial effects provided in Interim Results announcement – Additional IFRS adjustment for treasury shares (refer SENS statement issued on 3 Apr
Slide 24: Analysis of operating profit
Financial review Analysis of operating profit March March 2006 % 2005 Rm Rm Total income from operations 5 369 +11% 4 858 Trading results of operations, before International Risk 774 +15% 675 Services International Risk Services (IRS) 17 97 Trading results of operations, after IRS 791 +2% 772 Profit
Slide 25: Exceptional gains and losses
Financial review Exceptional gains and losses March March 2006 2005 Rm Rm Non-recurring restructuring costs (International Risk Services) - (111) - 2005 financial year 14 - - current year: net release of provisions Non-trading currency gain - 5 Proposed client settlements in respect of historical bu
Slide 26: Profit before taxation
Financial review Profit before taxation March March 2006 2005 Rm % Rm Operating profit 346 (53%) 736 Net interest and investment income (5) (63) Finance costs - exchangeable bonds - (40) Finance costs - bank borrowings (52) (57) Other net interest and investment income 47 34 Net fair value gain (off
Slide 27: Profit attributable to ordinary shareholders
Financial review Profit attributable to ordinary shareholders March March 2006 2005 Rm % Rm Profit before taxation 295 (55%) 657 Taxation Taxation expense* (220) (190) Tax attributable to policyholders’ funds (offset by fair value gain) (18) (9) Profit after taxation 57 (88%) 458 Minority interests
Slide 28: Analysis of effective tax rate
Financial review Analysis of effective tax rate March March 2006 2005 Rm % Rm Profit before taxation 295 (55%) 657 Adjustment for items with no tax effects: Impairment and other capital items 19 21 Reported loss arising from accounting for policyholder 81 30 investments as treasury shares Provisions
Slide 29: Analysis of core earnings
Financial review Analysis of core earnings March March 2006 2005 Rm % Rm Profit attributable to ordinary shareholders 12 (97%) 413 Adjustments: Impairment and other capital items 19 21 Share of headline adjusting items of associates (14) 2 Profit from direct marketing entity in run-off (41) (68) Exc
Slide 30: Core earnings per share
Financial review Core earnings per share March March 2006 2005 Rm % Rm Core earnings attributable to ordinary shareholders 536 +3% 519 Weighted average number of shares (millions) 443 394 Adjustments: Policyholder investments accounted for as treasury shares and deducted from equity under IFRS 19 15
Slide 31: Profits matched by cash flows
Financial review Profits matched by cash flows March March 2006 2005 Rm % Rm Cash from trading operations (a) 958 +3% 931 Trading results of operations (per income statement) 791 +2% 772 Cash items not included in trading results: Consolidation of group cell captive insurance arrangement (1) 23 Divi
Slide 32: Cash position
Financial review Cash position March March 2006 2005 Rm Rm Cash and cash equivalents 2 803 2 628 Add: Available current financial assets 80 21 Less: Net current payables (2 152) (1 531) Net cash and cash equivalents 731 1 118 Capital adequacy and solvency requirements (489) (567) Restricted cash, mi
Slide 33: Gearing and interest cover
Financial review Gearing and interest cover March March 2006 2005 Rm Rm Total bank borrowings (a) 678 760 Total equity 1 613 2 097 Adjustment for policyholder investments accounted for as treasury shares and deducted from equity under IFRS 184 161 Adjusted total equity (b) 1 797 2 258 38% 34% Gearin
Slide 34: Outlook
Alexander Forbes Limited For more information and full details of the SENS accouncement, please visit our website: www.alexforbes.co.za Outlook Alexander Forbes
Slide 35: Strategy centered on delivery to Stakeholders: Shareholders
Strategy centered on delivery to Stakeholders, through growth in core businesses • Shareholders – Annual distribution to shareholders: – 59 cents per share – Two times covered by core earnings – Value enhancement through: – Strategic repositioning underway for International Risk Services – Further o
Slide 36: Strategy: Customers, Staff, Wider community
Strategy centered on delivery to Stakeholders, (continued) • Customers – Historical issues have been dealt with; focused on restoring client confidence – Determined to demonstrate uncompromising governance and ethical standards – Do great things and deliver value, in a way that we are proud of • Sta
Slide 37: Conclusion
Conclusion • Build on successes – Good growth in most businesses – Strengthened management team – Transformation in SA business: – Real transformation achieved – Creates opportunities for future growth • Group in a strong position and well placed to capitalise on opportunities
Slide 38: Thank You
Alexander Forbes Limited For more information and full details of the SENS accouncement, please visit our website: www.alexforbes.co.za Thank You Alexander Forbes
Alexander Forbes Group Holdings — FY2006 Earnings Presentation on 6ix