Failed IT upgrade drags Alexander Forbes into a loss
The pension fund manager and insurance group is working on a turnaround plan under new CEO Dawie de Villiers
The reason why Alexander Forbes fired CEO Andrew Darfoor abruptly on September 25 became clearer on Tuesday morning when it released its interim results for the six months to end-September.
The pension fund manager and insurance group reported it fell into a net loss of R47m in the first half of its 2019 financial year from a profit of R324m in the matching period.
It nevertheless maintained its interim dividend at 18c “reflecting the group’s optimism with regards to the sustainability of cash flows”.
Headline earnings per share (HEPS) for the six months to end-September declined 23% to 16.7c.
As the group warned in a trading statement, a R287m impairment of a software development project, along with a R52m contract termination cost, translated into a 4c basic loss per share from 22c earnings per share in the matching period.
“The impairment of the software development assets follows the group’s review of the IT programme and includes the impairment of all development associated with the primary implementation partner.
Alexander Forbes grew its top line 6% to R3.4bn during the period under review. Fee and income revenue contributed 61% of the group’s total, insurance revenue 38% and interest revenue 1%,” the results statement said.
Darfoor was replaced by former Sanlam executive Dawie de Villiers, who started in his position as the group’s new CEO on November 1.
Under its new leader, “the group is reviewing its market positioning and business model to unlock the inherent value potential within the group”, Tuesday's results statement said.
“The review will focus on strengthening our competitive position in the employee benefits, savings and retirement markets and position the business appropriately for profitable growth together with commensurate returns on capital invested.”