Johannesburg – Since taking the helm at Alexander Forbes last September, CEO Andrew Darfoor will be looking to deliver on the group’s value proposition, while building a successful business in an uncertain political and economic climate.
Under Darfoor the financial services group hopes to reach its goal in becoming a thriving, African business. A number of steps have been taken to achieve this since the group’s financial interim results announcement, where these intentions were highlighted.
The group delivered a profit of R416m for the six months ended 30 September 2016. However, Darfoor expressed his frustration with the group’s underperforming share price.
“I went on record in November and I said I was unhappy with the share price performance. It is up a lot since then, but I’m still unhappy,” said Darfoor.
He believes that the share price is undervalued and that there is still potential left to unlock.
“We are relatively pleased but not satisfied at the share price performance. I still believe we are below the real intrinsic value of the company.”
Going forward, defining a clear value proposition is important. Darfoor said that some people regarded Alexander Forbes as a retirement company, others an actuarial consultant firm.
“I want to clarify internally and externally who is Alexander Forbes and what we stand for.”
The second item on the agenda is to improve customer experience. This requires an understanding of customers and providing them with solutions throughout their life journey, he explained.
The strategy is to fix these issues in the short term and then execute plans for the long term.
To define a clear value proposition involves the “simplification” of the group, which required the disposal of non-core assets. Alexander Forbes recently sold its 60% stake in Lane Clark & Peacock (LCP). “LCP didn’t fit in the strategy,” said Darfoor.
From the get go, LCP was regarded as a non-core asset.
“It’s a good business but I think that business would thrive more in an environment where it is core.”
The cash proceeds from this disposal will serve as an investment to transform the group into an African financial services leader. Some of the value of the proceeds will go back to the shareholders through a buy-back programme, he explained.
Proceeds from the African Rainbow Capital (ARC) transaction which is to be completed next week through shareholder approval, will also be invested back into the business.
Fin24 previously reported that ARC would buy a 10% stake in Alexander Forbes.
Darfoor was bullish about the group’s plans to expand into emerging markets, mainly in Africa.
“Emerging markets only represent 6% of the group, we want that to be larger.”
Growth opportunities have been identified in Kenya, Ghana and Nigeria. Expansion into countries like Morocco and Mauritius is part of the group’s medium to long term strategy.
“To be very clear, we will be very cautious. We aren’t going to throw away money. We are not going to do deals for the sake of doing deals. They have got to be on strategy,” he reiterated.
Darfoor emphasised the group’s strategy to be Africa-focused. “We have got no ambition to be in North America… Our story is about Africa and emerging markets.”
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Doing business amid uncertainty
In light of commentary by analysts who project the US economy to improve growth under Donald Trump’s presidency, potentially drawing away opportunities in emerging markets, Darfoor said he was taking a long-term view of things.
“We are taking 20 to 30 year views. President Trump is around for four years, maybe eight years. We don’t manage our business because of President Trump.”
Looking at opportunities in Africa specifically, Darfoor explained that the population would grow to 2bn people by 2030. About 60% of these people will be under the age of 35 and working.
“The GDP explosion in Africa will be huge.”
For Alexander Forbes this presents opportunities to provide solutions for retirement, short-term insurance and savings, to name a few. Although there may be short-term pressures and uncertainty around what US President-elect Trump will do, Darfoor is confident in the business opportunity that will be available in Africa in the long term.
As for the low projections of GDP growth this year, Alexandar Forbes ’economists expect growth to be 1.3%, Darfoor said it was up to the business to demonstrate resilience through these tough economic times.
“Even with 1.3% growth, we can be more effective with costs. We can optimise processes and be more prudent,” he said. It may be harder in the current environment to deliver double digit revenue growth, Alexander Forbes projects revenue growth between 6% and 8%. These targets are deliverable, he explained.
“It is never easy managing in this environment, but you must control what’s in your hands. What’s in our hands is customer experience, expenses proposition, and taking a long term view. We will continue to do that.”
Darfoor said that the technical expertise of his staff, the brand’s long history since being established in 1931 and its “world class” wealth management business are among the group’s strengths.
Although Darfoor commends this “strong foundation”, externally these strengths are less apparent. He reiterated that the group was not delivering on its potential in the market place, but was on the journey to getting there.