Alexforbes this week reported “robust” financial results for the six months to the end of September, reflecting resilient performance across its consulting, investment, and retirement offerings.
The financial services group achieved growth in operating income, profitability, and assets under management, supported by strategic acquisitions, strong client retention, and the implementation of the two-pot retirement system.
Headline earnings per share improved modestly by 3% to 28.4 cents per share, while the interim cash dividend increased by 10% year-on-year to 22 cents per share.
Operating income rose 12% to R2.14 billion, bolstered by the consolidation of acquisitions from prior years, market-driven increases in average assets under management, and higher two-pot claim volumes. Profit from operations increased by 13% to R447 million despite an 11% rise in operating expenses to R1.72bn.
Alexforbes said the higher operating expenses were a result of the impact of acquisitions and higher personnel and technology costs, as well as higher two-pot related expenditure. Organic growth in expenses was 8%.
Personnel costs, which contributed 63% to total operating expenses, increased by 12% year-on-year because of the need to bolster client servicing teams to support existing clients and administer the increased claims resulting from the implementation of the two-pot system.
Technology costs increased by 13% year on year because of costs related to implementing the two-pot system, software, and licensing costs, as well as an increase in outsourced services.
Individual consulting: client engagement fuels retention
Alexforbes’ retail-focused individual consulting division reported a 9% increase in operating income to R228m. The company attributed this to higher advised new business asset inflows and positive market performance.
Closing assets under advisement surpassed R100bn, up 14% year-on-year to R104bn.
“Our advisers have been placing clients into guaranteed annuities to a greater degree than historically due to attractive pricing dynamics that result in higher income levels to clients. Consequently, there is reduced asset flow to Alexforbes from these placements. We anticipate that future interest rate cuts may dampen this trend into the future by reducing the attractiveness of guaranteed annuity pricing,” Alexforbes said.
New business assets increased by 18% to R11.7bn, underpinned by asset retention from increased engagement with members of employer funds during their life stages. Total retained assets, included in new business flows, increased by 25% year-on-year to R4.5bn.
New business was up by 58% compared to the same period two years ago.
“A key determinant of success has been increased employer fund member engagement during their life stages to improve member financial outcomes. Digital communication solutions, increased frequency of retirement seminars, and two-pot webinars have led to a threefold increase in the number of members engaged. The internal shift towards operating as a member-oriented financial services provider has strengthened our relationship with employer funds,” Alexforbes said.
The number of advisers increased by 10 since 31 March 2024, taking the total number of advisers to 260.
Investments: assets under management up 25%
The investments segment reported an 11% increase in operating income to R886m, underpinned by higher average assets under management that benefited from new institutional inflows and positive market performance.
New institutional business flows for the year amounted to R13.9bn (including R8.6bn in platform assets). Total closing assets under management and administration increased by 25% year-on-year to R568bn.
The flagship Performer portfolio saw assets under management increase by 23% year-on-year to R258bn, with positive net cash flows of R4.7bn and positive return growth of 9.5%.
The institutional business reported a significant improvement in the net position from controllable cash flows underpinned by new business. “Client terminations were low, albeit higher than the comparable period in the prior year, largely due to the termination of one large platform client. We continue to see inflows into our umbrella fund both from new business and client conversions from our standalone administration,” Alexforbes said.
Ongoing inflows from active members of retirement funds grew 20% year-on-year because of inflows from new clients and wage increases of members from existing clients.
Withdrawals by members of institutional clients increased year-on-year because of a higher fund credit value being withdrawn resulting from the positive market growth over the past 12 months and the implementation of the two-pot system.
Retirement consulting: organic and acquisitive growth
The retirement consulting segment posted a 19% increase in operating income to R660m. This growth was driven by a combination of organic expansion, payroll increases within client bases, and the integration of key acquisitions, and higher-than-expected two-pot withdrawal claims volumes.
Alexforbes said it continued to see demand for umbrella fund solutions, as well as the conversion of standalone clients into umbrella funds.
Its institutional umbrella fund offering, which includes the Alexander Forbes Retirement Fund and Alexander Forbes Access, reported a 36% increase in assets under management to R159bn because of positive market returns and positive net cash flows.
The active membership base remained relatively stable at 1.1 million members.
Future outlook
Looking ahead, Alexforbes believes it is well positioned to navigate evolving market dynamics. The two-pot system has created opportunities for engagement and growth. Continued investments in technology and strategic partnerships, alongside its diversified portfolio, were expected to support sustained performance.
Chief executive Dawie de Villiers commented: “We are pleased to deliver another set of results that demonstrate our continued growth and ability to create value. Our total return to shareholders over the past four years is 46.9% per annum, which is due to the successful implementation of our strategy by a disciplined team despite a challenging operating environment. Our results are structurally geared towards economic tailwinds, market appreciation, and member engagement.”
