Newly appointed Alexander Forbes CEO Andrew Darfoor plans to offload certain offshore businesses and partner with majority shareholder Mercer and empowerment partner African Rainbow Capital (ARC) to "start delivering growth".
The JSE’s rules barred Darfoor from discussing the group’s cautionary announcement about the disposal in detail, but he did say on Monday that the businesses outside Africa, about which it is in talks to offload, did not consist solely of actuaries Lane Clark & Peacock (LCP). "Outside of LCP, there is a small business in the UK," he said.
The group’s normalised earnings rose 11% to R464m in the half year to September, speeding up on the previous comparable period’s 6% growth as retail clients boosted profit.
The group’s retail cluster, headed by Sugendhree Reddy, was the best performer during the period, raising profit by 12%.
The international segment, which includes LCP, reversed last year’s stellar performance, delivering a 3% growth to R131m in profit. "I think disposing of the non-African businesses, which is essentially the … LCP consulting business in the UK and Europe, is a good idea as this business has been run as a stand-alone business, with no synergies or integration benefits back into the African operations," said Richard Hasson, a fund manager at Electus Fund Managers.
"LCP is a good business which is well positioned for consulting work related to Brexit, and I would expect them [Alexander Forbes] to achieve a good price should they manage to dispose of it."
To hasten growth, the group plans to partner with majority shareholder Mercer — which offers services ranging from healthcare benefits, wealth and investments to human resources solutions. Mercer Africa, a subsidiary of the New York-headquartered conglomerate, owns 33% of the shares in Alexander Forbes.
Darfoor said Mercer had a competitive advantage in healthcare consulting, a business in which Alexander Forbes aimed to build critical mass. Alexander Forbes is also joining forces with ARC, which bought 10% of the group’s African operations in September.
ARC has recently launched healthcare-management company ARC Health.
"We have a healthcare consulting business which serves both public sector clients as well as private sector clients. [It comprises] 20% of our institutional business," Darfoor said.
"[Mercer has] this research capability that we don’t have. There are many opportunities to build that into our business."
With the two partners, Alexander Forbes would get the best of international and local expertise, helping it meet its 8% yearly sales growth target for the healthcare-consulting business.
Hasson welcomed the Mercer partnership. "The Mercer relationship has until now been disappointing as there have been very low levels of collaboration between them," he said. "If Alexander Forbes can access some of the intellectual property that Mercer has developed and work closer with them in areas such as offshore products, this can be a positive driver for Alexander Forbes."