Johannesburg - JSE-listed wealth management group Liberty Holdings remains focused on its balance sheet and capital management during turbulent times.
This is according to group deputy chief financial officer Stewart Rider, who spoke to Fin24.com on Friday morning after a trading update from the company.
Rider said: "The key issue for us is the ability of the business to navigate the global financial crisis, maintain a rock-solid balance sheet and deliver on our strategy."
He pointed to the trading statement which indicated that capital levels within Liberty remained high, with the capital adequacy ratio "marginally ahead of the 2.5 times cover reported in the overview of trading published on November 20 2008."
Over the last year, analysts have regularly pointed to the steps taken by Rider and CEO Bruce Hemphill to strengthen and optimise the company's balance sheet following the unwinding of a complicated and unpopular listing structure in 2008.
The company delisted its separate life and group operations and bundled them under the new Liberty Holdings structure, along with its asset management business Stanlib.
Rider said: "Investors should see the benefits of the investment in skills in this area when we report our 2008 numbers."
According to the trading statement, the first reporting period since the restructuring of the listing, the "basic and headline earnings per share of Liberty Holdings Limited is expected to be between 25% and 35% lower than that reported in 2007".
Analysts polled for an earnings forecast for the company expected (BEE normalised) earnings to be 30.5% lower than in 2007, but anticipated a 5.7% increase in the dividend.
The eight analysts who provided their forecasts are from BJM, Citigroup, Credit Suisse Standard Securities, Deloitte, JPM Chase, Ketola Research, Merrill Lynch Investec and UBS.
The company said in its trading update that these results "include the impact of negative returns on shareholder participation portfolios" and that it expected its insurance and asset management operating earnings to be in line with 2007 results.
Disposable income
One of the aspects Liberty investors will be watching closely is guidance on future levels of disposable consumer income.
With tougher economic conditions facing the country, consumers will need to manage their spending carefully.
Rider said: "The consumer is definitely under pressure and if I draw a comparison between us and the problems facing the banks at the moment, they will more likely let their premiums lapse instead of their mortgage repayment."
In late 2008, Liberty indicated it had taken a number of hedges to protect itself from exposure to the interest rate and bond markets.
High volatility levels play havoc with life and wealth management businesses which are expected to meet policy payments as they mature.
Companies will reduce their hedging exposure as they expect markets to settle down.
Rider said: "They [the hedges] are still in place."
Liberty has previously indicated to the market that it sees its African operations as a good way to grow their earnings base and have been pursuing opportunities here.
Rider told Fin24.com that their African team saw a "good" 2008, but they remained very cautious about asset prices on the continent in the light of the financial crisis.
Liberty Holdings traded down 0.3% (23c) to 6&nsbp;802c on 12&nsbp;700 shares on Friday morning.
- Fin24.com