Alexander Forbes Group Holdings Limited · JSE:AFH

Alexander Forbes — H1 2003 Earnings Presentation

37 slides from Alexander Forbes's earnings presentation, Sep 30, 2003

  1. Slide 1: Interim Results to 30 September 2003

    Interim Results to 30 September 2003

  2. Slide 2: Key features

    Key features Revenue of R2,2 billion Trading profit of R508 million  Africa +7%  International –2% (in £) Group trading profit up 3% (at constant exchange rates) Core EPS of 80,4 cents (-17%)  25% decrease in Rand exchange rate  Reduced contribution from Associates

  3. Slide 3: Alexander Forbes Group structure

    Alexander Forbes Group structure Africa Africa Africa Investment Risk Financial Solutions Services Services UK International UK Risk Financial UK Services Services Direct Marketing

  4. Slide 4: Regional overview

    Regional overview Revenue Trading Profit Sept Sept Sept Sept 2003 % 2002 2003 % 2002 International (£’m) 95,5 2% 93,7 17,2 (2%) 17,5 International (R’m) 1 165 (21%) 1 481 204 (27%) 278 Africa (R’m) 1 037 9% 955 304 7% 284 Total 2 202 (10%) 2 436 508 (10%)* 562 * Group trading profit up 3% (at consta

  5. Slide 5: Alexander Forbes - International

    Alexander Forbes - International Africa Africa Africa Risk Financial Services Services Investment Solutions UK UK International UK Risk Financial UK Services Services Direct Marketing

  6. Slide 6: International - Operational review

    International - Operational review Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Risk Services 61,6 6% 58,3 11,1 (1%) 11,2 Financial Services 26,2 22% 21,5 2,5 56% 1,6 Investment Solutions 1,8 - (0,6) - Direct Marketing 5,9 (58%) 13,9 4,2 (11%) 4,7 Total 95,5 2% 93,7

  7. Slide 7: International - Operational review

    International - Operational review Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Risk Services 61,66% 58,311,1(1%) 11,2 - UK & Europe 53,311% 48,210,4 5%9,9 - Latin America 5,1(23%) 6,6– –0,2 - Asia 3,2(9%) 3,50,7(36%) 1,1 §UK & Europe §Strong growth in Professions w

  8. Slide 8: International - Operational review

    International - Operational review Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Risk Services 61,6 6% 58,3 11,1 (1%) 11,2 - UK & Europe 53,3 11% 48,2 10,4 5% 9,9 - Latin America 5,1 (23%) 6,6 – – 0,2 - Asia 3,2 (9%) 3,5 0,7 (36%) 1,1 §Latin America and Asia §Lower c

  9. Slide 9: International - Operational review

    International - Operational review Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Financial Services 26,2 22% 21,5 2,5 56% 1,6 - LCP 14,5 81% 8,0 1,8 100% 0,9 - IFA 11,7 (13%) 13,5 0,7 - 0,7 §LCP § Full 6 month contribution (vs 4 months) § Growth in profits § Profile

  10. Slide 10: UK - Investment Solutions

    UK - Investment Solutions Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Investment Solutions 1,8 - (0,6) - §Initial regulatory delays impact short-term performance §All regulatory approvals and UK launch now complete (Oct 03) §Portfolios being actively marketed to DC

  11. Slide 11: UK - Direct Marketing

    UK - Direct Marketing Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 £m % £m £m % £m Direct Marketing 5,9 (58%) 13,9 4,2 (11%) 4,7 Reduced profits as anticipated Actively marketing other products Smaller scale

  12. Slide 12: Alexander Forbes - Africa

    Alexander Forbes - Africa Africa Africa Africa Risk Financial Investment Services Services Solutions UK International UK Risk Financial UK Services Services Direct Marketing

  13. Slide 13: Africa - Operational review

    Africa - Operational review Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 Rm % Rm Rm % Rm Risk Services 385 8% 357 138 23% 112 Financial Services 415 11% 374 87 (7%) 94 Investment Solutions 237 6% 224 79 1% 78 Total 1 037 9% 955 304 7% 284

  14. Slide 14: Africa - Risk Services

    Africa - Risk Services Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 Rm % Rm Rm % Rm Risk Services 385 8% 357 138 23% 112  Benefits of hard insurance market  Good revenue gains and profit growth in Broking  Continued benefits from Personal Services restructure with strong profit

  15. Slide 15: Africa - Financial Services

    Africa - Financial Services Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 Rm % Rm Rm % Rm Financial Services 415 11% 374 87 (7%) 94 Difficult market conditions for Financial Planning business (particularly currency impact) AF Life - claims impact profit share Asset Consulting res

  16. Slide 16: Africa - Investment Solutions

    Africa - Investment Solutions Revenue Trading Profit Sept Sept Sept Sept 2003 2002 2003 2002 Rm % Rm Rm % Rm Investment Solutions 237 6% 224 79 1% 78 §Assets under management exceed R54bn §Some successes with larger funds §Stanlib Multi-Manager - assets reach R2,5bn §Average Assets up 13% §Revenue a

  17. Slide 17: Associates

    Associates  Reduced contribution from associates  Small trading losses in National Britannia and Medscheme  No contribution from Thebe Risk & Benefits (sold on 31 March 2003)

  18. Slide 18: Analysis of financial results

    Analysis of financial results Mike Ilsley

  19. Slide 19: Revenue & trading profit

    Revenue & trading profit Sept Sept 2003 2002 Rm % Rm Total revenue 2 216 (9%) 2 438 Operating expenses (1 761) (9%) (1 935) Operating profit 455 (10%) 503 Operational interest income 53 59 Trading profit 508 (10%) 562 Trading profit ratio 23% 23% Operating profit ratio 21% 21%

  20. Slide 20: Attributable core earnings

    Attributable core earnings Sept Sept 2003 2002 Rm % Rm Trading profit 508 (10%) 562 Net finance costs (92) (38) Profit before associates 416 (21%) 524 Associates 3 21 Profit 419 (23%) 545 Tax* (121) (166) Minority interests (20) (42) Core earnings 278 (17%) 337 (*excludes taxation on non-trading ite

  21. Slide 21: Segmental profit before tax

    Segmental profit before tax Africa International Sept Sept Sept Sept 2003 2002 2003 2002 Rm Rm £m £m Trading profit 304 284 17,2 17,5 Net finance costs (19) 22 (6,1) (3,8) Profit before associates 285 306 11,1 13,7 Associates 1 13 – 0,5 Core profit before tax 286 319 11,1 14,2

  22. Slide 22: Regional split of results

    Regional split of results Sept 2003 Sept 2002 Inter- Inter- Africa national Africa national % % % % Revenue 47% 53% 39% 61% Trading profit 60% 40% 51% 49% Core profit before tax 68% 32% 59% 41%

  23. Slide 23: Effective tax rate

    Effective tax rate Sept Sept 2003 2002 Rm Rm Effective tax rate on headline earnings 28,8% 30,4% - Tax per income statement 113 168 - Tax on unrealised currency loss / (gain) 8 (2) Tax on core earnings 121 166 Effective tax rate on core earnings 28,9% 30,5%

  24. Slide 24: Earnings per share

    Earnings per share Sept Sept 2003 2002 cents %cents EPS 53,5(36%) 83,9 Headline adjusting items 21,414,9 Headline EPS 74,9(24%) 98,8 Unrealised currency loss / (gain) 7,8(2,3) - Tax thereon (2,3)0,6 Core EPS 80,4(17%) 97,1

  25. Slide 25: Headline adjusting items per share

    Headline adjusting items per share Sept Sept 2003 2002 cents cents Goodwill amortisation (18,7) (15,8) National Britannia accelerated amortisation (3,6) - Other 0,9 0,9 Total headline adjustments per share (21,4) (14,9)

  26. Slide 26: Cash flow

    Cash flow Sept Sept 2003 2002 Rm Rm Cash from operations 467343 Tax and dividends paid (329)(395) Cash from fiduciary activities - Change in insurer balances 285416 - Refund of vendor loan notes (42)(298) Cash invested - Subsidiaries and associates (19) (244) - Fixed assets (127)(60) - Other 15(121)

  27. Slide 27: Cash position

    Cash position Inter- Africa national Total Rm Rm Rm Cash per balance sheet 399 1 971 2 370 Utilisation: •Insurer balances (278) (1 007) (1 285) •Loan note deposits - (20) (20) •Other net current liabilities and solvency requirements (203) (644) (847) Cash immediately available (82) 300 218 Refinanci

  28. Slide 28: Net interest-bearing debt

    Net interest-bearing debt Inter- Africa national Total Rm Rm Rm Interest-bearing liabilities 493 2 038 2 531 - short-term 81 85 166 - long-term 412 1 953 2 365 Less - matching deposits (490) (20) (510) - cash immediately available 82 (300) (218) Net interest-bearing debt 85 1 718 1 803

  29. Slide 29: Gearing & interest cover

    Gearing & interest cover Inter- Africa national Total Rm Rm Rm Net interest-bearing debt (a) 85 1 718 1 803 Equity before goodwill effects (b) 1 841 982 2 823 Gearing (a) / (b) 5% 175% 64% Trading profit (c) 304 204 508 Net finance costs (d) (19) (73) (92) Interest cover (times) (c) / (d) 16 3 6

  30. Slide 30: Return on equity & capital (annualised)

    Return on equity & capital (annualised) Inter- Africa national Total Core earnings after tax - annualised 382174 556 Shareholders funds (before goodwill effects) - average 1 874939 2 813 Return on equity 20,4% 18,5% 19,8% Core earnings after tax before interest costs - annualised 437325 762 Total fu

  31. Slide 31: Shareholders and strategy

    Shareholders and strategy Rael Gordon

  32. Slide 32: Shareholding at 30 September 2003

    Shareholding at 30 September 2003 16% 8% Other - Non SA 18% Other - SA 8% Gene sis 12% Sanla m 5% Share Trusts 17% Stanlib 6% RMB 11% Old Mutual 15% Coronation

  33. Slide 33: Africa - Developments

    Africa - Developments  Ed Fagan - responding as appropriate  Management restructure  Empowering of businesses  New structures to focus on BEE advancement  MCI playing an integral role  Risk Services premises move synergies and savings

  34. Slide 34: Africa - Empowerment update

    Africa - Empowerment update  MCI adding value  Financial Services Charter  Independent Empowerdex rating - “BB”  Some senior BEE appointments and board restructures (will enhance Empowerdex rating)

  35. Slide 35: International - Developments

    International - Developments  Acquisitions now driven by divisional management  Still looking for synergistic acquisitions  Acquisition opportunities to be reviewed in light of debt levels  Refinancing of UK debt receiving early attention  Discussions with Venfin and other current debt provider

  36. Slide 36: Prospects & conclusion

    Prospects & conclusion  Business remains significantly profitable and cash generative  Margins maintained  Growth rate significantly affected by currency  Significant successes offset by challenging conditions in other areas  Remaining 6 months still challenging but aiming for improved 2 nd hal

  37. Slide 37: Thank you

    ys Alexander Forbes Thank you

Alexander Forbes Group Holdings — H1 2003 Earnings Presentation on 6ix