Alexander Forbes trims dividend as Covid-19 puts pressure on clients

Alexander Forbes, whose services range from asset management and health-care insurance, to consulting for multinational corporations, has trimmed its interim dividend by more than a quarter, warning it expects the economic fallout from Covid-19 to keep weighing on its business for at least another year.

The group said it is confident it has the skill and expertise to help clients navigate the pandemic, though a fall-off in retirement contributions put pressure on cash flows during the group’s six months ended September.

Alexander Forbes cut its interim dividend 27.8 percent to 13c, a R182m payout, with headline earnings per share falling 41 percent to 14.5c to end-September. Assets under administration increased 3 percent year on year to R353m, with the group reporting new business assets of R8.7bn flowing in, which helped offset the effects of client losses. Overall, the group reported a net cash flow of R200m to end-September, from outflows of R4.4bn previously. The biggest effect came from general economic pressure, which resulted in a R3bn drop in contributions from active members of retirement funds, mainly from contribution holidays, while retrenchments picked up towards the end of the period. The Covid-19 pandemic led to significant pressure on clients, Alexander Forbes said, some of whom were hit by temporary salary reductions.

The group said its healthcare client base has been less susceptible to business closures and retrenchments in the period, with membership reducing by 1.5 percent to 214,143 members from the end of March.

“Despite the tough trading conditions that the business has faced over the past six months, the core business remains stable,” said CEO Dawie de Villiers.

“Alexander Forbes proactively responded to clients’ needs particularly during the Covid-19 pandemic by intensifying our engagement and ensuring that we continued to provide outstanding service and solutions, through our advice-led approach,” he said.

“We remain confident in our advice-led strategy and believe that continued delivery against our objectives will reflect positively in the performance of the business over the medium term.”

In morning trade, the group’s share was up 0.76 percent to R4, having fallen 27.93 percent so far in 2020. Over the same period, the JSE’s financial index has lost a similar amount.