Title: Results presentation
1Results presentation
- For the year ended 31 March 2004
2Agenda
- Overview and review of results Rael Gordon
- Financials in detail Mike Ilsley
- Strategic review and outlook Rael Gordon
3Highlights
- Trading profit of R930 million
- Headline earnings per share of R1.51 (-7)
- Attributable earnings per share of R1.02 (-15)
- Core operations profitable
- Strong cash flow generation
- Dividend maintained at 67 cents per share
- Strengthening of International balance sheet
- Over R600 million of UK debt repaid
- SARB approval to transfer an additional R370
million - Strong asset growth in Investment Solutions
4Alexander Forbes Group
Africa
Africa
Africa
Risk Services
Financial Services
InvestmentSolutions
International
UK
Risk Services
Financial Services
UK
5Regional overview
Group trading profit down 4 (at constant
exchange rates)
6Trading profit reconciliation
Rm
1 054
-84
-57
44
930
-18
-9
Group Trading Profit 31 March 04
Group Trading Profit 31 March 03
Other Trading Profit growth
Effect of averageR/ exchange rate
International Risk Services
UK Investment Solutions
UK Direct Marketing
7International Risk Services
- Interim Results Statement
- Expect an improved result from UK Risk Services
business in the 2nd half - Actual trading profit down 19 in Sterling
- Mainly Global Broking Services
- Reason for trading statement
8Enhanced governance
- Board changes
- Paul Heinamann (Chairman) and John Robins (Deputy
Chairman) - New independent non-executive (UK based) Mark
Nicholls - Now seven non-executives and three executives
- Non-executive participation on subsidiary boards
(Africa and International) - Board committees
- Majority of members are independent directors
- Other developments
- Appointment of joint sponsor
- Accounting for share option costs
- No minority interests held by group executives
9Other developments
- Management and subsidiary boards restructured
- Empowerment
- Empowerdex BBB rating
- Rated fourth in our sector Financial Mail
- MCI playing integral role
- Progress on transformation
- Premises moves completed
- UK Risk Services to Bevis Marks
- SA Risk Services to Sandton
10Alexander Forbes International
International
International
International
Risk Services
Financial Services
Investment Solutions
11Review of international operations
- Professional Indemnity
- Positive market conditions
- Strong growth in broking business
- Launch of new consulting arm
- Corporate Risk Solutions
- Growth in profit
- Global Broking Services
- Reduced reinsurance buying
- Revenue down from Weak US
- -1.4 million net of hedging
- Impact of team losses
- New team hires to benefit future results
- Reduced business volumes
Some cost pressures (premises, pension deficit,
compliance and insurance)
12Review of International operations
- Varying trading results across territories
- Remain important source of referral income
- Contribute to group network and profile
- Closure of Argentina office
13Review of International operations
- IFA
- Recovery in profitability
- IFA, Healthcare and Trustee Services
- Recognised leader in insured DB/DC conversions
- 2nd largest IFA in the UK
- Annuity Bureaux providing complementary products
- Important distribution for Investment Solutions
products
- LCP
- First full year included
- Solid results in tough environment
- Increasing their profile
14Review of International operations
- Multi-manager industry growing strongly
- Assets under management reach 230 million at 30
April - Assets under administration reach 6.9 billion at
30 April - DC admin business client gains (including
Merrill Lynch) - Strong new business prospects
15Review of International operations
- Reduced profits as anticipated
- Decline in advertising costs and revenue
- Operating on a smaller scale
- Further reduction in profits anticipated
16Review of International operations
17Intra-group profit elimination
- Distribution of Investment Solutions products
through IFA business - IFA business account for income as if placed
with a 3rd party - Investment Solutions (UK) recognise cost as if
placed through a 3rd party. - On consolidation, intra-group profit is
eliminated - 0.4 million profit reversal in current year
- Equates to approximately 1.3 of assets
- Unwinds in future years
- Future impact dependant on new business from IFA
18Alexander Forbes Africa
Africa
Africa
Africa
Risk Services
Financial Services
Investment Solutions
19Review of Africa operations
- Revenue and profit growth in corporate broking
business - Building on strong prior years results
- Rollout of new products (CRE8)
- Lower interest rates affect operational interest
income - Another good performance from Guardrisk
- Strong profit growth from Personal Services
- Benefits from restructure
- Improved underwriting results
20Review of Africa operations
- Continuation of factors reported at half year
- Difficult market conditions for Financial
Planning business (particularly currency impact) - AF Life profit share impacted by claims
experience - Margin pressure
- Moderate revenue gains
- Some cost pressures
- Disappointing 2nd half performance from
Healthcare - Lower results in Kenya and Namibia
21Review of Africa operations
- Revenue and profit growth
- Good new business successes
- Net inflows of R5,7 billion
- Successes achieved with large funds
- Stanlib Multi-manager assets increase to R3,4
billion - Excellent client retention
- Over 1 350 corporate clients
- Over 42 000 individual clients
- Continued strong investment performance
22Review of Africa operationsInvestment Solutions
23Review of Africa operations
24Financials in detail
25Accounting changes
- Changes adopted in current year
- AC133 on financial instruments
- Consolidation of share trusts
- No material effect on results
- Intra-group profit elimination
- Disclosure and early adoption of share option
accounting
26Share option accounting
- New accounting standard will require share option
costs to be charged to the income statement - Disclosure made of financial effects on SENS
- Early adoption of share option accounting in
March 2005 accounts - Proposed restructure of share option scheme to
facilitate share option accounting and allocation
of costs to operating entities Circular to be
sent to shareholders
27Share option expenses
Rm
Source LCP share option valuation model
28Headline profit before tax
29Headline earnings
Total headline earnings growth of 0 (at
constant exchange rates)
30Regional split of results
Revenue
Headline earnings
Trading profit
31Earnings per share
32Cash flow
33Cash position
34Net interest-bearing debt
Pro forma after adjusting for repayment of
the remaining balance of the Merrill Lynch loan
subsequent to year-end
35Gearing and interest cover
Pro forma after adjusting for repayment of
the remaining balance of the Merrill Lynch loan
subsequent to year-end
36Strategic review and outlook
37Africa business (development)
- Strive to be market leader in
- Risk Services, Financial Services, Multi-manager
- Achieved through
- Building on strong underlying customer
relationships - Largely organic growth
- Existing services to new customers
- New services to existing customers
- Efficient management of margins
- Innovative new products and services
- Action on empowerment issues
- Limited strategic acquisitions
38International business (development)
- Rationale for International expansion
- Looking to replicate successes of Africa model
- UK strategic and logistic synergies
- Create value for shareholders
- Ensure room for growth beyond South Africa
- Diversify risks (currency, regions and markets)
- Enhance South African business
- Acquisitions used to accelerate platform for new
markets - Organic growth too slow to create required scale
- Customer base and scale is important
39International business (assessment)
- Successful outcomes
- Created an international profile with desired
architecture - Stuck to businesses we know relatively well
- Integrated acquisitions reasonably quickly
- Built a significant customer base and platform
for expansion - Transformed the group profile
- Not at the expense of our SA business and clients
- Retaining a focus on delivering results
- Rationale for International expansion remains
unchanged - Recognise further value to be unlocked
40International business (current focus)
- Organic growth and efficient management
- Focus on new business and client retention
- Expense management
- Specific action plans in underperforming areas
- Acquisitions
- Limited activity over last 18 months
- Strategic acquisitions remain part of
international strategy over time - International debt level and structure
- Discussions underway with VenFin and other
potential financiers - Improved governance and board structures
41Summary
- Earnings decline is disappointing
- We aim higher
- Impacted by many external factors (currency)
- Masks many notable successes and developments in
the business - Notable successes in many areas
- Divisional performance
- SA Risk Services, UK Financial Services,
Investment Solutions - Significant progress on key issues
- International debt, Empowerment, Governance
- Strategic direction remains unchanged
- Targeting growth in International and Africa
earnings
42Looking forward to growing Alexander Forbes in
Africa and Internationally