Taking a big hit in a tough year
It was known that there would be write-offs, but for a R4.5bn market cap company, the numbers were huge
We will probably never know the precise circumstances around Andrew Darfoor’s dismissal as Alexander Forbes CEO in September.
But the results for the six months to September gave some hints. It was widely known that there would be write-offs, as the board had decided to discontinue the R1bn IT project in which Sapiens was the lead contractor.
But for a R4.5bn market cap company, the numbers were huge. There was a R52m cancellation fee paid out in cash to Sapiens, which was taken through the income statement, as well as a R287m software impairment on the balance sheet.
Wallie van der Walt, a portfolio manager at Abax Investments, questions the quality of due diligence carried out before Forbes embarked on the project, especially as it doesn’t have the resources to spend on IT in the quantities that the large banks do.
David Talpert, an analyst at Avior Capital Markets, says his contacts at Alexander Forbes now say that the existing systems are more than adequate after all, especially in the core institutional business.
Dawie de Villiers, former head of Sanlam Employee Benefits, took over as CEO in November. On Tuesday he announced the resignation of three members of the committee: CEO of Alexander Forbes Investments Leon Greyling; chief risk officer Vishnu Naicker; and head of human resources Christian Schaub. More heads are expected to roll.
De Villiers is committed to simplifying the group and leveraging its core strengths. He says the health-care consulting, for example, which increased income by 8%, is much stronger than its counterpart at Sanlam.
Louis Chetty, financials analyst at Stanlib, says that in spite of its strong brand and high suite to independent financial advisers.
“We are an advice-led business, so the priority should be on getting our financial planning business right. Why does it have a smaller footprint than our institutional business?
“I am not sure that there would be the right alignment between ourselves and an independent.”
De Villiers says he does not intend to set up an agency force in the Sanlam mould, but it has scope to offer more retail products to its 1.2-million members. Its Income Solution in-fund preservation fund and living annuity has gathered R1.4bn since its launch in February.
Talpert calls the operating result “decent”: up 9% before nontrading items and head office costs. Alexander Forbes Investments, the old Investment Solutions, continued to be the best performer, with operating profit up 17% to R217m, even though assets under management were up just 3% to R315bn. Its main fund, Performer, is still a popular option, growing 15% to R118bn. The unit has been able to cut costs and waste less management time by subcontracting its international asset management to