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Alexander Forbes not living up to potential - CEO

Nov 28 2016 14:12
Lameez Omarjee

Johannesburg – On his 80th day of the job, Alexander Forbes CEO Andrew Darfoor said the financial services group has not lived up to its potential, especially in terms of its share price. 

Darfoor was speaking at the group's interim financial results announcement in Sandton on Monday where the group said it posted a profit of R416m for the six months ended 30 September 2016.

During his address Darfoor highlighted the group's performance in the markets.

“That is clearly not satisfactory. How does an iconic business under-perform with upside potential?” Darfoor said.

He added that the group, which has an 81-year history, will undertake a transformation strategy to deliver on this potential. 

Deon Viljoen, Alexander Forbes' group Chief Financial Officer (CFO), delivered the interim financial results and explained that macro-economic dynamics have an impact on the business.

“A number of those macro drivers impact what we do,” he said.

This includes job creation and wage inflation, he explained.

“None of the macro [factors] are assisting business. We are re-positioning the business to take recognition of that. We must re-position the business to be resilient in those times.”

Operating profit at R574m was up 4% compared to the previous period. Headline earnings per share were up 4% to 27 per share. An interim dividend of 17c was declared, up 13% from the six months ended in September 2015.

The dividend was declared despite demand for additional capital investment in modernising technology. The group affirmed that the funding would be generated from earnings.

The group has also appointed a Chief Digitisation Officer in a bid to boost the digital capabilities of the business, added Darfoor. 

The group's earnings were affected by equity and bond markets, the all share index growth was 0.9% and the shareholder weighted index only grew by 1.6%.

“The volatility in the equity market has increased uncertainty and there is consensus that the current low growth environment will persist for the medium term.”

About 30% of the group’s Africa revenue is asset based and the fluctuation of markets impacts these revenues.

The group’s results were positively impacted by South Africa's wage inflation of 7%, this resulted in increased contributions to pensions.

The country's unemployment rate, which grew to 27.1% in the third quarter, impacted savings withdrawals from pension, the group explained. This also impacted the number of members belonging to retirement funds administered by Alexander Forbes.

The group’s earnings were further impacted by the low GDP growth of 0.5% and the exchange rate. 

Alexander Forbes is currently in negotiations regarding the disposal of “non-core” operations outside Africa, the group stated. 

Darfoor said he would not be able to comment on this further. But shareholders have been advised to “exercise caution” when dealing with the company’s shares as the decision may have a “material effect” on the prices. 

The group's share price was at R6 at 12pm. 

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