Liberty CEO Thabo Dloti talks results

Liberty Holdings released its interim results today, reporting a 10% increase in BEE normalised headline earnings per share, a 19.9% return on BEE normalised equity, and a 9% increase in its interim dividend. Liberty has a current market cap of R37.8 billion and a price to earnings ratio of 8.46. Its share price is up 13.5% over the last year, but is trading nearly 2% down on the day. Alec Hogg is joined by Thabo Dloti, CEO of Liberty to chat about the results, the fundamentals and Liberty’s overall performance for shareholders. – LF 

ALEC HOGG:  Anyway, the Pan African Financial Services Company, Liberty released interim results today, sighting a ten-percent increase in its new business. The Chief Executive, Thabo Dloti.  He’s a very busy man.  He couldn’t make it to the studio but he is, indeed on the line today.  Thabo, a big number is the embedded value.  How did that perform in the six-month period?

THABO DLOTI:  Thanks very much.  Yes we were concerned about this – the tough operating environment…

ALEC HOGG:  Thabo, I asked you the embedded value.  What happened to the embedded value in this period?

THABO DLOTI:  It went up.

ALEC HOGG:  By?

THABO DLOTI:  The return on the embedded value went up by; sorry I’m trying to get an exact number to you.

ALEC HOGG:  Okay, we’ll get to that later.  You’re the man who came from Old Mutual.  I heard earlier in the program, but I’m sure you were busy on other things, but Brigid Taylor saying “Old Mutual is outperforming Liberty.”  I’m sure you’re going to turn that around or make her eat her words, at the end of the year.  Are there any plans you’ve got in place to achieve that?

THABO DLOTI:  Well, I think there are plans to grow and achieve our targets but I’m not so sure, whether it’s about Old Mutual, but certainly from our point of view, we want to give the ROEs that we promised shareholders, which are over 19 percent, and that is what we are aiming for.

ALEC HOGG:  What’s it been like going to a new company, the culture, is it much different?

THABO DLOTI:  It is different because organisations are wired differently. For example, Liberty is more of a retail business that focuses mainly on the mass affluent and affluent market.  It is very different to a business like Old Mutual.

ALEC HOGG:  Do you have any exposure to Abil?  That’s the big question of the moment.  They’ve got lots of bonds out there.

THABO DLOTI:  Yes, obviously given the various businesses, we do from SECs income to all that, yes, we would have some exposure to Abil, although it is a small exposure but we’ll have exposure in Abil.

ALEC HOGG:  Can you define it for us?

THABO DLOTI:  When you say ‘define it’, what do you mean?

ALEC HOGG:  Well, how big is it?

THABO DLOTI:  Yes, we’ve got an equity exposure, which is small in that it is below the benchmark holding that we had because, obviously, we were below benchmark in our holding of Abil.  From our bond equally, we were below benchmark, so it is less than a benchmark holding that Abil enjoyed before what currently happened to the organisation.

ALEC HOGG:  But you still have Abil bonds out there, I guess you certainly aren’t the only one.  Last time we spoke to them, it was something like 50 billion Rand worth of bonds and that’s where the question of systemic risk does exist.  The big story for you, though and Bruce Hemphill, your predecessor, is the Africa drive.  Have you made much progress in the past six months?

THABO DLOTI:  Yes, I think we have made progress in a sense, that we are continuing to  enter the West African market as a base, from a growth point of view, and we hope that in this quarter we’ll be announcing some of the developments in that.  We’ve been growing the business in Kenya, from an insurance point of view, and that has continued positively.  We have been cleaning up our health business to make sure that we actually gear it up for the growth that has been happening, so yes, on a number of fronts, the asset management business is continuing to gain strides.  So, yes, we are trying to grow.  It is still small.  Clearly we want to build that into scale.

ALEC HOGG:  You got that growth in embedded value for us yet.

THABO DLOTI:  Yes, so the way we look at the growth in equity value has grown by 13 percent.

ALEC HOGG:  That’s the number, I was, told by the investment analysis that you’ve got to look at, and it shows steady, strong progress at Liberty.

THABO DLOTI:  Absolutely.

ALEC HOGG:  Thabo Dloti is the Chief Executive of Liberty Holdings.  He is also one of the good guys.  Well, we are heading into a short break.