Liberty reports good progress on growth path

Liberty Group CEO Bruce Hemphill says the wealth-management group is far better positioned for growth and a return to a longer-term trend of increasing earnings than it was six months ago.

Presenting his group’s interim results in Johannesburg on Wednesday, Hemphill said that Liberty is making good progress towards its long-term strategic vision of becoming the leading broad-based wealth manager in Africa and other select emerging markets.

At the same time, Hemphill said that in the short term, Liberty is not immune to the current South African economic downturn, nor to the volatility that has been a feature of local and global investment markets so far in 2008.

“Our performance does largely correlate to market conditions and interest rates,” said Hemphill, emphasising that Liberty views current conditions as a relatively short-term trough in the economic cycle.

Compared with the half-year to June 2007, Liberty’s BEE-normalised headline earnings per share — before accounting for investment gains and losses — were 10,3% lower, at 431,5 cents per share.

After taking account of investment gains and losses however, BEE-normalised earnings were 44,8% lower than at the halfway stage last year, at 321,8 cents per share.

Despite difficult market conditions, Hemphill said he is satisfied with the strategic progress Liberty made during the period.

“The business is far better positioned for growth and a return to a longer-term trend of increasing earnings than it was six months ago,” he said.

Hemphill said that a major achievement of the first half of 2008 was the green-fields establishment of an enterprise value and risk management (EVRM) framework. EVRM seeks to apply investment banking and actuarial skills to unlock additional value for shareholders, through the active management of Liberty’s balance sheet.

During the first half of 2008, Liberty also invested in identified growth areas of its broader wealth business. These included:

  • diversifying Liberty Properties’ strategy and operations, creating development and asset-management opportunities, both in the republic and in the rest of Africa;
  • through Liberty Africa, extending the group’s financial services interests into Southern, West and East Africa;
  • embedding Liberty’s new technology-enabled health strategy, opening the way to providing efficient front- and back-office administration; and
  • a good contribution to earnings from market-leading asset manager Stanlib, whose pre-tax profit before financing rose by 18% to R309-million.

Hemphill said that Liberty’s embedded value held up well in a tough operating period for the traditional life business, advancing 4,9% to R94,08 compared with June 2007.

He added that the group’s core return-on-embedded-value performance remained in line with Liberty’s stated medium-term target of 14,5% to 15,5%.

He concluded by saying that notwithstanding the short-term earnings effects of prevailing economic conditions, Liberty’s strategic course has been substantially redirected over the past two years, to building and growing a broader and more sustainable business.

He also suggested that Standard Bank’s second-quarter offer to buy out minorities in Liberty Holdings was a substantial vote of confidence, both in Liberty’s long-term strategy and in the group’s executive management team.

Hemphill also told investors that Liberty expects to be able to finance its growth strategy from its own resources.

While Liberty expects the current tough conditions for both markets and consumers to continue at least to the year-end, Hemphill said that the group’s executives are upbeat about longer-term prospects and energised by the opportunities they see for both shareholders and customers. — I-Net Bridge

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