Johannesburg - Alexander Forbes yesterday issued a cautionary statement indicating that it was involved in negotiations regarding the potential disposal of certain non-core operations outside Africa.
While the specialised financial services group did not disclose the assets it was planning to offload, market analysts said the operations could probably be the UK-based businesses.
Richard Hasson, a fund manager at Electus Fund Managers, said: “I believe this relates to their Lane Clark & Peacock UK consulting business and is a move we support, as this business operated as a standalone business and had never been integrated into the Alexander Forbes African offerings.”
The possible disposal comes as the group reported that its profits had gone up by 4 percent to R416 million for the six months to end September. Alexander Forbes said the period was characterised by equity market volatility, rising unemployment and weak gross domestic product growth. It said its earnings were affected by the external factors like the equity and bond markets.
“Growth of the all share index was 0.9 percent and the Bond Exchange of South Africa index increased 8 percent for the same period. 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,” the group said.
Alexander Forbes increased the fee and commission income 5 percent to R2.93 billion, up from R2.79bn while headline earnings per share grew to 27 cents per share for the period, up from 26c reported in 2015. The group raised its interim dividend by 13 percent to 17c per share, up from 14.45c per share declared a year before.
Alexander Forbes is the leader in South Africa’s umbrella funds market with R66.8bn assets under management during the period – 11 percent higher than the previous year.
Policy sales grew 20 percent in Namibia and assets under management by 14 percent. Nigeria continued to be a very challenging environment with a systemic shortage of foreign currency hampering business progress. Hasson said the 13 percent increase in normalised earnings was a good result where there had been no tailwinds in terms of employment growth or performance from asset markets such as the JSE.
“They managed to show very good client retention levels and managed to grow the customer base in their umbrella funds. Expense growth of only 3 percent was very good considering 62 percent of their costs are employee costs and they achieved this by taking R75m out of the cost base in the period with cost reductions of R250m to R300m targeted by 2020. Net client cash flows were negative in the period which was disappointing,” said Hasson.
The group has also appointed a chief digitisation officer in a bid to boost the digital capabilities of the business. Alexander Forbes share price rose 2.92 percent on the JSE yesterday to close at R6 per share.