Alexander Forbes set for African expansion

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This is part of the group's plans to expand into the rest of Africa and leverage off the pension reforms in countries such as Ghana and Tanzania.

CEO Edward Kieswetter said Alexander Forbes could register, get a licence and start a greenfields operation or look for a partner. "Our default is greenfields. We are not going to overpay," he said in an interview after the financial services firm released its interim results yesterday.

"We are not likely in the foreseeable future to use debt (to fund acquisitions) ... it will be covered by cash flows," he said.

Alexander Forbes posted a 17% rise in revenue to R2.3bn and a 16% rise in operating profit to R544m in the six months ended September. Cash generated from normal operations grew 18% to R639m. The company had R481m in available cash resources.

Kieswetter said the idea was not to hoard cash and the available resources would be used to meet regulatory requirements. Going into the full year ending in March next year, the company will consider making a full-year dividend payment.

"I thought the operational numbers were good," a Johannesburg analyst said of the results. "The organic growth seems to be quite good, but nothing spectacular. I think for us the stock is going to be judged as a dividend stock because the cash generation of the business is quite strong and it's a capital-light business."

The South African financial services division posted an 11% rise in operating income to R936m, while multimanager Investment Solutions grew 16% to R388m. At an operating profit level in the Alexander Forbes Group, Investment Solutions was the highest profit contributor, posting a 17% rise in operating profit to R195m compared to R193m of operating profit in the South African financial services division.

Investment Solutions' assets under management and administration grew 5.4% to R300bn in the period under review, while the South African financial services business saw its customers rise to more than 1-million.

Alexander Forbes Insurance reported a 13% increase in operating income to R200m, while Afrinet posted a 23% growth in operating income to R138m.

The international business, which includes Lane Clark & Peacock (LCP) and Alexander Forbes Channel Islands, reported a 25% increase in operating income to R715m. Alexander Forbes owns 60% of LCP, an actuarial consultancy with operations in the UK, Ireland and the Netherlands.

Before its listing Alexander Forbes trimmed down its international exposure and disposed of its UK consultants and actuaries unit in 2012.

Asked if the company was looking to sell its 60% stake in LCP, Kieswetter said: "We said Lane Clark & Peacock is part of the business. It's a solid revenue producer and there is no burning reason to sell the business."

The stock will be judged as a dividend stock because cash generation is quite strong

Source: Business Day