Alexforbes has attributed the “positive outcomes” of its interim results released earlier this week to the “successful execution” of its strategic plan.
An extract from the interim results for the six months ending 30 September showed a 13% increase to R1 911 million in the group’s operating income. Profit from operations (before non-trading and capital items) was up 11% to R394 million – this despite a persistently challenging operating environment.
Commenting on the robust results, Alexforbes chief executive officer Dawie de Villiers said the group would continue to invest in its core strengths of consulting, administration and investments “to gain further scale, efficiencies and operating advantages”.
“We have continued to implement our strategy and are experiencing the results of disciplined execution as we focus increasingly on engaging with our members. Alexforbes is attracting new business alongside high retention rates and competitive investment returns, affirming the appeal of our value proposition to the market,” said De Villiers.
Listing the financial highlights, Alexforbes stated that cash generated from continuing operations remained strong at R446 million. Profit for the period from continuing operations improved 66% to R339 million.
According to the group, this was owing to:
- the trading performance of the continuing operations;
- the increase in other income earned on interim support services provided to businesses disposed;
- lower amortisation of intangible assets; and
- an improved result from its professional indemnity insurance cell – an increase in investment income.
The increase in profit for the period from total operations was also attributed to the base effects from the comparable period in the prior year, influenced by the performance of discontinued operations.
“In the prior comparable period, the financial performance of the discontinued operations included losses incurred by Alexander Forbes Life due to reserving requirements,” the extract read.
Acquisitions and expenses
Operating expenses of R1 559 million increased 15%. Alexforbes said this reflected the result of corporate activity within the group over the past 18 months.
In June, the group acquired a majority interest in TSA Administration, an independent provider of institutional group risk insurance administration services. Complementing Alexforbes’ existing binder business, TSA Administration is said to add scale, systems and additional experienced people to the business.
“This acquisition aligns with our strategic intent and will enable the group to expand its service offerings to intermediaries alongside our existing umbrella fund and investments value proposition,” the extract read.
Last month, the group entered into a binding agreement with OUTsurance Holdings Limited to purchase 100% of the shares in OUTvest Proprietary Limited. The digital wealth platform launched in 2017, was built to enable the distribution of a range of high-quality, simple and low-cost wealth products.
According to Alexforbes, the platform unlocks the ability to provide goals-based advice and servicing journeys at scale across its entire client base. The integration of the OUTvest digital wealth management capability is aimed at accelerating efficiencies for its financial advisers and retail clients.
The transaction will take effect once all conditions precedent had been fulfilled, including regulatory approvals.
“We expect completion by March 2024 with integration of the platform and people into our environment following thereafter,” the group said.
As part of the group’s diversification into the independent financial adviser (IFA) market, it will launch a discretionary fund management (DFM) capability in the latter half of the financial year.
“Our DFM is built from the group’s existing investment management platform. This represents an opportunity to participate in the growth of the DFM market off a stable existing base at marginal additional cost,” the extract stated.
Prospects: two-pot system preparation and impact
Looking ahead, Alexforbes said the implementation of the two-pot system was anticipated to have a positive net impact on group revenue over the long term “due to compulsory preservation of the retirement pot, increasing the pool of assets within our base”.
The National Assembly’s Standing Committee on Finance (Scof) earlier this week accepted a proposal by the Minister of Finance, Enoch Godongwana, that the two-pot retirement system be implemented on 1 September next year.
Read: Two pots: proposed implementation date is neither 1 March 2024 nor 1 March 2025
Once implemented, the group said greater engagement would be required to counsel members on their decisions, “creating further opportunities to retain assets”.
“Significant development has been delivered over the prior period to accelerate digital engagement and modernise our retail advice to serve more retirement fund members across a range of investment needs,” the extract read.
According to Alexforbes, 82% of retirement fund stakeholders surveyed indicated that the individualisation of the member’s experience of retirement funding is the biggest opportunity to make an impact on people’s lives by educating, informing and engaging them to make better financial choices.
“Our business is quickly adapting to the needs of our clients by embracing technological transformation to improve our client experience and by introducing further efficiencies into our environment,” said De Villiers.
Sharing is caring
According to the extract, the group’s headline earnings per share from continuing operations was up 68% to 27 cents per share while headline earnings per share from total operations was up 96% to 27.7 cents per share.
“The group balance sheet remains robust, supported by the strong cash flow generated from continuing operations, with a sound capital surplus above the regulatory capital requirement of R1 774 million and available cash of R863 million.”
Alexforbes stated that its regulatory capital was now measured in line with its single active linked investment life licence, commonly known as the solo-plus methodology.
An interim dividend of 20 cents per share was declared, up 33% year on year (2022: 15 cents per share).
A dividend withholding tax of 20% will apply to all shareholders who are not exempt from the dividend withholding tax, or who are entitled to a reduced rate in terms of the applicable double taxation agreement.
The payment date for the final dividend will be Monday 8 January.
