Alexforbes ups full-year dividend 45%

‘For the individuals who save through funds and through the unit trusts and so forth, the savings industry, there is risk in the equity market’: CEO Dawie de Villiers.

FIFI PETERS: Alexforbes shares had a really good day on a lukewarm day for the market, shooting up almost 5% today with the JSE finishing just over 0.2% higher. The company released its annual results today. It showed that it hiked its full-year a dividend by almost half, as operating profit rose 7% to about R3.2 billion, driven by an increase in new business.

We’ve got Alexforbes CEO Dawie de Villiers on the line for more on the numbers. Dawie, thanks so much for your time. Good to speak with you again. It does look like it has been a relatively good year for the group. I don’t know if you’d agree with that statement, but can you talk to us about the state of your sector right now, and where this new business for you is coming from?

DAWIE DE VILLIERS: Hi Fifi, thanks for having me. It’s a good day for Alexforbes and we are quite excited about the results. As you say, the environment is not easy. The biggest driver for us is the market; that’s been a positive contributor to the underlying returns.

Then the second biggest [driver] is employment, which we’ve talked about numerous times. We know the employment number in South Africa, we know the large number of retrenchments, so we were with our backs to the wall in this year with regard to our starting value and the number of members that are actually in the fund from whom we earn revenue and whom we service. So we had to find other areas, and basically enhance our market share.

So in a very mature market, a declining market actually, we had to gain market share. That’s why we’re quite pleased with the results, firstly, and secondly the way we got them with new business.

The environment is tough, but certainly, if you treat the clients well and you service them well, it looks like there’s good upside in new business.

FIFI PETERS: But how tough [was it], and just specifically in terms of retrenchments, because what we did see throughout the pandemic is companies having to make all kinds of difficult decisions pertaining to costs. We saw this feeding into the decisions that they made about their staff and their head count, and we did see retrenchments.

But more recently we saw a slight turnaround in our unemployment figures, with unemployment [down] just a little in the first quarter. I’m just wondering if you can talk to us about the state of SA Incorporated – those guys who are your clients, whose funds you manage on behalf of their employees. Are things looking a little bit better than they were at the onset of the pandemic or is it, as you say, still pretty tough?

DAWIE DE VILLIERS: Certainly we’re seeing an easing of the environment for corporates across the sectors. It’s obviously different for retailers and miners and so forth. There are different drivers. But in general we’ve seen an improvement. Let’s start with retrenchments. With regard to retrenchments, last year they were 57% down on the previous year on our book. So that’s probably a good indication for corporate South Africa. That is great news, and that means that it’s better for our book, but also for the economy.

What we haven’t seen yet is an increase in employment.

We’ve seen a decrease in retrenchments, but we haven’t really seen an increase in employment.

So things are stabilising, which is a great sign, but corporates have become used to this lean, mean way of doing business. We will have to see business pick up supply/demand operations. We will have to see GDP growth in the country in order for people to employ more – or corporates to employ more people.

So we do think that’s around the corner, and we see corporates much more upbeat about their forecasts and their opportunities. Hopefully [that’s] just around the corner.

FIFI PETERS: In terms of the market returns that provided a nice tailwind for your business, I’m interested in what the picture’s looking like right now because since your March year-end there’s a whole lot of stuff that has happened. Russia went to war with the Ukraine. We saw the consequences of that in terms of inflation and concerns around growth and the pull-back in markets. We also had the floods somewhere in the mix in KZN that have, by a few forecasts from economists, just chipped off the initial forecast for South Africa’s economic prospects. So what are market returns? How confident are you about the momentum in market returns following through in the year ahead, as it did in this previous year under review?

DAWIE DE VILLIERS: You can add inflation fears to that list of risks that you’ve mentioned, and then it’s quite compelling. I think you’re a hundred percent right. The inflation is obviously also driven by the war in the Ukraine and food inflation – and we’ve seen fuel inflation and so forth. So [there are] lots of risks in the market which do pose a risk to our earnings into the future.

The great thing for us is that the starting value of our assets is 8%, 9% higher than the previous year, which means that we are starting off with a higher revenue number. But certainly, if we look at the numbers, and for your listeners and for the individuals who save through funds and through the unit trusts and so forth, the savings industry, there is risk in the equity market.

The South African market, though, is well-priced. I think relative to the first worlds, the Americas and Europe, I think the corporates in South Africa are well priced and do have a good outlook for returns and for growth. Whether the macro in the economic environment will put pressure on that is yet to be seen, but certainly the South African market [has a] better forecast than the Americas and Europe of the world.

FIFI PETERS: All right. Well, good for your business then, I suppose. Dawie, we’ll leave it there for now. Thanks so much for your time. Dawie de Villiers is the CEO of Alexforbes.

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