31 MARCH 2015ALEXANDER FORBES GROUP HOLDINGS LIMITEDINTEGRATED ANNUAL REPORT

OUR PERFORMANCE

2010 – 2015 WHAT DID WE ACHIEVE?

The 2014/15 financial year marked the end of a historic five-year stage in Alexander Forbes’s journey as a Private Equity controlled entity. As we embark with confidence on our new five-year period as a publicly listed company, we look back – and measure – how we performed against our six stated strategic objectives from 2010 to 2015.

 

  • Between 2010 and 2015 we: Achieved double-digit growth
    Between 2010/11 and 2014/15 we grew group net operating income from continuing operations by 13.1% CAGR
  • Implemented clearly defined revenue growth initiatives
    We explain how we performed on our strategy to grow three underexplored market segments shown here
    retail, the public sector and Africa outside of South Africa.
  • Realised ongoing margin improvement
    During the Private Equity control period of seven years we disposed of 35% of our revenue-earning assets – mainly lower-margin businesses which were non-core to our business activities – while continuing to grow income and maintain margins.
  • Husbanding our financial resources
    In the period between 2010 and 2015 we focused sharply on historical expenditure at a group and business level. In the process we directed resources towards those elements of our business that were best equipped to create enhanced, sustainable value for clients, investors and employees.
  • Effectively deleverage
    Since 2010, we have deleveraged our balance sheet by recapitalising, reconfiguring and reorganising the business. By substantially reducing our debt, we have created capacity for investment in innovation and growth and positioned the group well for the future regulatory capital requirements.
  • Maximised enterprise value
    Until our JSE listing in July 2014, the performance of the Alexander Forbes preference share could be used to approximate the value of the business. Since listing, shareholder value has increased based on the Alexander Forbes’ share price.
Retail

Whereas the group’s various retail businesses traditionally functioned independently, between 2010 and 2015 we began to drive our retail growth strategy with greater focus. While retaining the specialised focus in each of the respective business lines, our retail strategy seeks to use our trusted adviser status to provide clients with a common, holistic client experience to help secure their financial well-being while, at the same time, leveraging the group’s full solution set to provide a more holistic value proposition to clients within our institutional member base.

The success of our retail focus is borne out by these key performance indicators:

 

31 March
2015

31 March
2014

31 March
2013

31 March
2012

Net operating income (Rm)*

1 061

948

847

756

Number of FPC clients (’000)

44.1

41.0

38.4

36.0

Assets under advice (Rbn) Financial Planning Consultants (FPC)

56.9

48.5

40.3

32.7

Assets under administration (Rbn) AFICA*

43.3

37.9

32.5

26.6

Assets under management*

46.8

40.9

34.9

29.7

Gross written premium short-term insurance (Rm)

1 297

1 198

1 059

926

* Numbers presented for prior reporting years have been restated for reallocations made in the current year to ensure comparability.

 

Public sector

Research – and our own experience – proves that the public sector holds considerable opportunity for us to grow our institutional and retail offering. During the period under review, the public sector division has increased efforts to communicate Alexander Forbes’ holistic value proposition to both new and existing institutional clients. The division identifies opportunities, builds the new business pipeline through opportunities that include tendering, and retains existing public sector clients.

Between 2011/12 and 2014/15 our public sector division performed as follows:

 

31 March
2015

31 March
2014

31 March
2013

31 March
2012

Net operating income (Rm)

207

184

151

136

Public sector tender participation (%)

90

74

53

<20

Public sector new clients

38

42

15

 

AfriNet

Across sub-Saharan Africa economies are expected to grow at medium to high rates over the medium to long term. Financial markets in most of these countries are still at an early stage of development which, coupled with pension and social security reform, represents a major opportunity for Alexander Forbes to bring its holistic value offering to new markets. In the rest of Africa, we leverage off our institutional experience and expertise while adapting to the unique commercial, social and regulatory environment in each country.

Our AfriNet operation has achieved significant success since 2011/12:

 

31 March
2015

31 March
2014

31 March
2013

31 March
2012

Number of members under administration

381 592

351 796

322 128

257 253

Net operating income (Rm)

291

249

202

170


 

Framing efforts to differentiate by:

Building a respectable brand

Between 2010 and 2015, we succeeded in innovating and investing for growth, building our sales and service capability and enhancing our brand.

Better sales and service capacity

Client retention rates for Alexander Forbes Financial Services (AFFS) and Investment Solutions consistently averaged over

98%

Innovating and investing for growth

Consistently growing our business between 2010 and 2015, we kept investing to make our business better and to improve our offering to clients.

Giving better value for clients

Institutional clients valued the quality of our administration, advice, consulting, distribution and implementation services so highly that AFFS counted 70% of the JSE’s top 100 companies among its clients; for Investment Solutions the figure was 40%. Year after year, almost

80% of our revenue is recurring.