SA’s largest pension fund administrator Alexforbes, which is nearly 40% owned by Patrice Motsepe’s African Rainbow Capital, says retrenchments among its clients have more than halved year-on-year, indicating that the economic prospects for the country are improving.
But CEO Dawie de Villiers said the company, which changed its name from Alexander Forbes in March this year, had yet to see any “big pick-up” in employment, which would indicate that companies that retrenched during the worst of the pandemic have resolved to keep their staff numbers where they are for now.
Over time, he expects companies to start employing again especially if economic growth can gain more traction.
Alexforbes, which released results for the year ended March 31 this week, says retrenchments among its almost 900,000 clients fell 57% year-on-year.
De Villiers said this indicated the retrenchment trend seen during the pandemic was “definitely flattening out”.
“There are still companies that are deciding to go through some exercises around retrenchments but it is much less now and closer to normal. We have also started seeing salary increases coming through.”
He said Alexforbes, which has offloaded its insurance business, was benefiting from its change of focus over the past few years to consulting, administration and investments, and the company was making strong market share gains in these areas.
Alexforbes reported this week new business asset flows of R11.6bn for its individual consulting business, up 23% year-on-year, and R9.4bn in new institutional business assets under management, with an additional R4bn pending regulatory approvals.
The company said its operating income increased 7% to R3.2bn, “underpinned by substantial success in attracting new clients across all business segments coupled with strong investment performance”.
Headline EPS from continuing operations grew 19% to 37.2c/share, while profit from operations before nontrading and capital items was up 9% to R720m. A final dividend of 20c/share was declared, increasing the annual dividend by 45% to 32c/share.
De Villiers said the biggest boost to Alexforbes’s results have been gains in market share. The pension fund sector was experiencing consolidation as clients opted to sign up with larger pension fund administrators, rather than smaller operators, in the belief that the bigger administrators have better long-term prospects.
He said it was also becoming “very difficult for smaller players to operate in this environment because of the costs for systems, corporate governance and compliance”.
It is a question of time and then we will start seeing employment rise again. It’s already flattened off so it will then have to start rising, hopefully in the not so far future
— Alexforbes CEO Dawie de Villiers
De Villiers said overall the pension fund industry is “very mature and actually not growing at the moment” as there has been no major uptick in employment, which drives the industry. This means that the best growth opportunities are through market share gains.
“It is a question of time and then we will start seeing employment rise again. It’s already flattened off so it will then have to start rising, hopefully in the not so far future.”
He said a positive factor for SA was that foreign investors were keen to invest. Alexforbes itself announced in March that UK-based Prudential Financial, together with LeapFrog Investments, would be acquiring a nearly 15% interest in it.
Peter Armitage, CEO at Anchor Group, described Alexforbes’s headline EPS performance as “pretty decent”. The company had been “properly re-engineered” with businesses sold off and investors in the group now had a more streamlined product.
“I think it is well managed and the CEO is very competent,” he said.
But Armitage said there was “bigger-picture pressure” for large service providers in the retirement industry such as Alexforbes because to a certain extent “they have to run to stay in the same place”.
He said the problem with the pension fund and investment space in SA was that once a group reached a certain size further growth became difficult and “there is always some new competitor snapping at your heels”.
In view of all this, Alexforbes had done well, Armitage said. “They’ve grown and redefined their business in a fairly stagnant-to-declining market.”
De Villiers said Alexforbes was not actively on the prowl for acquisitions, but it was in a strong position to take advantage of any opportunities as it had no debt.
“We generate a lot of cash every year from which we can pay dividends or do acquisitions. We don’t have any debt. We’ve now secured a line for debt with second-tier credit for possible future acquisitions. We have quite a few options.”
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