Andrew Darfoor. Picture: FINANCIAL MAIL
Andrew Darfoor. Picture: FINANCIAL MAIL

Alexander Forbes CEO Andrew Darfoor says the financial services company is back in the game and making progress on its turnaround strategy, even as its share price slumped during the six months to September.

Cash generated from its operations was a robust 103% of operating profit at the end of September, which enabled the group to pay out a dividend 6% higher at 18c per share.

“[The cash flow plus growth investment thesis] is about the delivery of more cash, which in turns drives a higher dividend payout,” Darfoor said after the release of the results on Monday. “We are delivering on the cashflow part of the thesis. On growth, it is fair to say there remain sceptics who don’t believe we can deliver growth.

“Our response is we delivered double-digit revenue growth in key areas aligned to our strategy and improved profits, which were up 5%.”

Sceptics don’t believe we can deliver growth. Our response is we stabilised profit streams – normalised profit is up 1%.
Andrew Darfoor
Alexander Forbes CEO 

Revenue in Alexander Forbes’ retirement segment rose 16% compared with the previous period. While the group also delivered strong top line growth in other areas including group-risk products and short-term insurance, which grew 31% and 11%, respectively.

“We are also improving expense and operational efficiency as well as the delivery of ongoing positive leverage,” Darfoor said. “Clearly, we are making progress.”

The CEO’s comments came as the group’s share price plunged 19.9% between the end of December 2016 and Monday. “The share price is not reflecting the progress we have made.”

Rahima Cassim, portfolio manager at Ashburton Investments, said the market had been burned badly by the old management team. “It will take time for trust to be rebuilt,” she said.

The interim results are Darfoor’s third set of financials after his September 2016 appointment following predecessor Edward Kieswetter’s departure in February. When Kieswetter left, former chairman Sello Moloko said the board was worried about the group’s deteriorating results, pointing to the market’s concerns about its negative operating leverage.

In the six months to September 2015, Alexander Forbes’s operating margin had declined to 21.5%, from 23.1% before. This has improved to 25.3% in the period under review.

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