Alexander Forbes boosts margin
Headline earnings come in as expected but CEO is disappointed
Although Alexander Forbes has delivered headline earnings well within the guidance given in its trading statement in May, CEO Andrew Darfoor is disappointed with the 8.1% decline it reported for the year to March.
"Headline earnings are down compared with the eight months [immediately before] the year-end," he said after the release of results on Monday.
"This only accounts for eight months of Lane Clark & Peacock earnings, which is not on a consistent basis."
Total earnings, of R683m, were dragged down in the last four months of its year, reflecting the group’s sale of its interest in UK actuaries Lane Clark & Peacock — excluded from its books for the period.
The financial services group has sold its offshore interests to focus on Africa.
Darfoor said that margins had improved for the first time since the group listed on the JSE, and cash generated from its continuing operations was up. Adrian Cloete, portfolio manager at PSG Wealth, said the group’s normalised operating profit and cash generated from continuing operations "represent a better reflection of the underlying earnings of the group during the period".
Alexander Forbes’s trading margin — operating profit as a percentage of operating income — has improved to 27.2%, the same number the group reported in its maiden full-year results after listing on the JSE in 2014.
Darfoor said R600m was being paid to shareholders. The dividend comprises 23c in ordinary dividends and another 23c in special dividends.
Cloete said the dividend was "welcome as this adds additional return to shareholders on top of the already attractive overall dividend yield".
Alexander Forbes is also buying back some of its shares. Shareholders approved the move in March, and the group says it will be implemented as soon as possible.
Shortly after announcing its results, Alexander Forbes — which had earlier said it was eyeing businesses in Ghana, Morocco and Nigeria — said it had bought a "significant stake" in Zimbabwe’s African Actuarial Consultants. "[This] is a small, bolt-on acquisition [and] part of building the consulting business," said Darfoor.
Key partnerships are gaining traction. One, with African Rainbow Capital, is aimed at disrupting the healthcare sector, where Alexander Forbes has 200,000 customers.
African Rainbow Capital previously said it had identified inefficiencies in the domestic healthcare market, founding a new venture called ARC Health with former AfroCentric Investment Corporation CEO Dewald Dempers to tackle the issue.
"We started engaging with them," said Darfoor. "It will serve mainly [our] public sector clients. I can’t give you a time and date for when it will happen, but would be disappointed if we don’t have news in 18 months."