Alexforbes reports financial results for the six months ended 30 September 2024

Alexforbes has announced robust financial results for the six months ended 30 September 2024.

Financial results
Chief Executive Officer, Dawie de Villiers noted, ’We are pleased to deliver another set of results that demonstrate our continued growth and ability to create value. Our total return to shareholders over the past four years is 46.9% per annum, which is due to the successful implementation of our strategy by a disciplined team despite a challenging operating environment. Our results are structurally geared towards economic tailwinds, market appreciation and member engagement. I am therefore proud of our track record over this period and believe that we can benefit from positive signals across these dimensions into the future.’

Alexforbes reported that operating income increased 12% to R2 140 million due to the consolidation of acquisitions completed in previous financial years, higher average assets under management that benefitted from positive market performance, inflationary increases from within the retirements and healthcare consulting client base, higher than expected two-pot claims volumes and high client retention. Operating expenses of R1 724 million increased 11% and reflect the impact of operating expenses from acquisitions that have been fully consolidated, higher personnel and technology costs, as well as higher two-pot-related expenditure. Profit from operations (before non-trading and capital items) increased 13% year on year to R447 million.

A gross interim cash dividend of 22 cents per share has been declared, which amounts to 88% of the normalised headline earning per share. The interim dividend is up 10% year on year.

Making a real-world impact
Alexforbes is also proud to announce significant strides made through the Alexforbes Investments Transformation Policy, which aims to promote diversity and broad-based representation in the asset management industry. This policy is a key enabler of Alexforbes’ long-term competitive advantage, allowing us to partner with diverse talent and achieve better investment outcomes for clients.

Since launching the policy, Alexforbes has engaged in over 200 formal and informal interactions with more than 70 asset managers. The results have been encouraging, reflecting positive changes in the diversity of investment teams, management teams and B-BBEE levels across the asset management industry.

Alexforbes is pleased to report that circa 70% of traditional managers have met all four of the requirements of the transformation policy and almost 92% have met most of these requirements. The journey of transformation continues and Alexforbes is committed to making a real-world impact through its engagement with asset managers.

Two-pot insights
The two-pot retirement system represents the most significant change in the history of South Africa’s retirement funding landscape, with ripple effects now and into the future. It immediately provides limited access to emergency savings and is projected to improve long-term retirement outcomes by up to 2.5 times current levels resulting from the impact of compulsory preservation.

Alexforbes is pleased to share insights from its experience of administering the two-pot system and the results of a survey of 8 224 members.

Within the Alexforbes environment since 1 September:

• 350 000 members (approximately 32% of our entire membership base) have submitted claims to the value of circa R6.5 billion pre-tax.
• The average claim size of approximately R19 000 pre-tax consequences.
• 340 000 claims have been paid to the value of circa R4.6 billion after tax consequences.
• The volume of claims processed in two months is more than two years of normal claims volume.
• 99% of claims have been paid within service level arrangements of 20 business days.
• Over 4 million logins to the AF Connect member portal to date.
• Over 550 000 visits to the MyMoneyMatters financial literacy site.

Of surveyed members who claimed their savings pots in this period:

• 86% are happy with their decision to withdraw.
• 96% were aware that their long -term retirement outcome would be impacted.
• 96% were aware that they would pay taxes on their withdrawal.
• 50% used their emergency savings pot claim to offset debt.
• 30% used their emergency savings pot claim to pay for essential living expenses.
• 13% used the emergency savings pot claim to make major household purchases.
• 63% plan to claim again.
• 37% do not plan to claim again.

Alexforbes anticipates a marginal impact on GDP growth resulting from two-pot spending ranging from 0.1% to 0.3% in 2024 and 0.2% to 0.7% in 2025. The company expects that the inflationary impact of such spend will be negligible but that the impact on the fiscus will be more meaningful. Better tax receipts could improve the debt-to-GDP ratio by 0.5% to 1.1% of GDP in the 2024/2025 tax year and 0.8% to 2.3% in 2025/2026 tax year.

An under-appreciated impact of the two-pot retirement system is that members will now have to make an active decision regarding the compulsory preservation of their retirement pot upon changing employers, whereas most would have previously elected to withdraw their entire fund value in cash. The implication is that members will have to be more engaged with their retirement funds and their options at exit. Alexforbes expects that the increase in engagement necessitated by the preservation of the retirement pot will amplify preservation levels of vested and savings pots resulting from improved access to retirement benefits counselling, digital platforms and financial advice.

De Villiers, commented, ‘Alexforbes has played a leading role in advocating for and shaping the two-pot system, which will transform the future of retirement outcomes for all members for the better. It has been the focal point of our organisation over this period as we built up to 1 September by gearing up operations, member engagement and our digital infrastructure. There have been lessons for us on this journey and we continue to scale up our technological capabilities to serve our 1.1 million members. We are uniquely placed at the intersection of three trends - regulatory shift, employee benefits consolidation and the retailisation of retirement funds. This is an incredible opportunity to make an impact on people’s lives!’