Alexander Forbes’s Andrew Darfoor is unapologetic about the sweeping management changes he has made at the country’s largest pension fund administrator since becoming CEO in September 2016.
"What I inherited was a lethargic juggernaut that was growing substantially below the market and was not delivering on total shareholder return. So some change was needed," the Ghanaian-born and UK-raised Darfoor told Business Day on Monday. It was "inconceivable" that a new strategy, dubbed Ambition 2022, could be executed with "the same team that was the source of the underperformance for three years".
Darfoor has brought in a number of foreign nationals to execute specific turnaround strategies. This is unusual in a sector facing political pressure to transform, but Darfoor said Alexander Forbes had instituted programmes to fast-track the development of black talent.
Alexander Forbes’s full-year results to March reflect that Darfoor — a relative outsider in SA’s cloistered financial services sector — is on the right track.
The group posted double-digit growth in operating profit in its institutional business and increased the number of institutional clients with at least one retail product from 3% to 8.7%.
Still, the stock, which has fallen 21% since the company was brought back to the JSE by private equity owners in July 2014, slid 5.76% on Monday, indicating a loss of confidence by the market.
The "retail opportunity was always there", with Alexander Forbes having a "captive market" in its institutional business. But the previous management team did not gain any traction, said Warwick Bam, an analyst at Avior Capital Markets.
The group spent R32m over the year on retention packages to lock in high performers for two years. Darfoor would not disclose how many individuals received these packages but said it had kept 90% of people who scored a 3-5 on performance measures.
Alexander Forbes was targeting an attrition rate of 50% from the current 13% among underperformers — those scoring 1-3, said Darfoor.
"It’s a huge change process … What you’re seeing in the market is a lot of noise from the underperformers where we’ve accelerated attrition."
Alexander Forbes "needed a shake-up," said Bam. The management team had failed to execute on strategy and there was not enough innovation.
The last time the group, which will invest R1bn into technology, updated its systems was more than 15 years ago, Darfoor pointed out.
"So we don’t have a single view of customer or applications that are cloud-based, therefore we can’t transact with customers the way they want."
It was also upgrading its pensions administration system, which was more than 20 years old, he said.
There was concern in the market that "Forbes has had its day", with rivals, such as Allan Gray and Sygnia stealing market share, said Bam. But results had exceeded his expectations.