Alexander Forbes Rockets Ahead: Record Profits, Strategic Acquisitions, and Tech-Driven Future Propel Financial Giant’s Success

  • Operating income surged 13% to R1,911 million, driven by acquisitions, client retention, and increased average asset balances.
  • Profit from continuing operations increased by an impressive 66%, reaching R339 million.
  • An interim dividend of 20 cents per share, a 33% YoY increase, underscores financial strength.
By Lethabo Ntsoane

In a challenging economic environment, Alexander Forbes Group Holdings Limited has announced robust financial results for the six months ended 30 September 2023. The company’s deliberate implementation of its strategic plan has resulted in a 13% increase in operating income, reaching R1,911 million. Notably, acquisitive growth contributed 4% to the top-line growth, emphasizing high levels of client retention and increased average asset balances.

Financial Strength and Performance

Operating Income Soars

Operating income witnessed a significant boost, climbing to R1,911 million, reflecting the success of the strategic initiatives. Acquisitions, client retention efforts, and elevated average asset balances played pivotal roles in this remarkable 13% surge.

Managing Expenses Amid Growth

While operating income saw substantial growth, operating expenses also increased by 15%, reaching R1,559 million. This rise is attributed to corporate activity over the past 18 months, including fully consolidated acquisitions. Excluding the impact of stranded costs and lease adjustments, organic growth in operating expenses stood at 8% year on year.

Profit Surge

Profit for the period from continuing operations saw an impressive 66% improvement, reaching R339 million. Factors contributing to this surge include trading performance, increased income from interim support services for disposed businesses, lower amortization of intangible assets, improved results from professional indemnity insurance, and enhanced investment income.

Dividends on the Rise

Shareholders will be pleased to note a 33% year-on-year increase in the interim cash dividend, now standing at 20 cents per share compared to 15 cents in 2022.

Strategic Moves and Acquisitions

TSA Administration Acquisition

On June 1, 2023, Alexander Forbes acquired a majority interest in TSA Administration, an independent provider of institutional group risk insurance administration services. This move aligns with the company’s strategic intent to expand service offerings to intermediaries, complementing existing business lines.

OUTvest Acquisition

Further reinforcing its strategic position, the group entered into a binding agreement with OUTsurance Holdings Limited on November 8, 2023, to purchase 100% of the shares in OUTvest Proprietary Limited. OUTvest, an award-winning digital wealth platform, is set to be integrated into Alexander Forbes’ environment, enhancing the company’s digital capabilities.

Financial Highlights and Outlook

Strong Financial Metrics

Key financial metrics underscore the company’s robust performance, including a regulatory surplus of R1,774 million, a cover ratio comfortably above the target solvency cover ratio, and available cash of R863 million.

Two-Pot System and Digital Transformation

Alexander Forbes anticipates a positive net impact from the implementation of the two-component (two-pot) system, fostering greater engagement and opportunities for asset retention. The integration of OUTvest’s digital wealth management capability is expected to bring significant efficiencies to the company’s financial advisers and retail clients.

Diversification and Automation

To diversify revenue streams, the company is launching a discretionary fund management (DFM) capability in the latter half of the financial year. Automation and technological transformation, particularly in core administration processes, are being implemented to enhance competitiveness and client service.

Positive Market Position

With a strong new business pipeline and a focus on consolidating into its umbrella fund, Alexander Forbes is well-positioned to compete aggressively for market share. The company’s unique advice-led umbrella fund proposition, emphasizing objectivity, simplicity, and performance, has been well-received in the market.

Interim Dividend Declaration

Dividend Policy Adherence

In line with its dividend policy, Alexander Forbes declared an interim gross cash dividend of 20 cents per ordinary share (16 cents net of dividend withholding tax) for the six months ended September 30, 2023.

Salient Dates for Dividend

Shareholders should take note of the salient dates for the final dividend, including the last day of trade to receive the dividend on January 2, 2024, and the payment date on January 8, 2024.

Future Prospects

Reconfigured Core Business

With a reconfigured and focused core business, Alexander Forbes is well-positioned for new business growth and acquisitions, supported by a solid foundation.

Technological Advancements

The company is embracing technological transformation, with a focus on automation and efficiency. Robotic process automation has already proven successful in enhancing competitiveness and client service.

Stakeholder Engagement

The implementation of the two-pot system presents opportunities for greater engagement with members, and the company is actively exploring ways to connect with and serve its clients better.

Sustainability Initiatives

Alexander Forbes is committed to acting as a force for good, consulting with retirement funds and employers on sustainability matters. Meaningful strides have been made in designing the retirement fund of the future and formalizing climate policies.

Conclusion

Alexander Forbes’ interim results for the six months ended September 30, 2023, reflect a strategic approach to navigating challenges, delivering strong financial performance, and making key acquisitions. With a focus on technology, diversification, and sustainability, the company is well-positioned for future growth and success.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo