The decision forms part of the group's cost-containment initiatives in response to Covid-19 impact.
Alexander Forbes has been forced to freeze the fees of all its non-executive directors as part of the group’s cost-containment initiatives in response to the impact of Covid-19 pandemic on its operations.
The group said that it planned no increases for the ensuing year with all directors remaining on the same remuneration as in 2019. It said it had, however, added a new lead independent director fee.
This follows the group’s financial results for the year ended March reporting a 9 percent fall in assets under administration and management to R310 billion, as well as a headline earnings decrease of 20 percent from 44.2 cents per share in 2019 due to the market disruptions.
The group said the operating environment has become more complicated, uncertain and difficult with the outbreak of Covid-19 and the country’s economic prospects. Alexander Forbes chief economics Isaah Mhlanga said the operating environment for the 2020 financial year was challenging.
“The weak economy leads to retrenchments, and thus, fewer active members, as well as competitive fee pressure,” Isaah said. “This also places savings and retirements markets under pressure, resulting in asset outflows demonstrated by the decline in the preservation rate for savings to 53 percent from 55 percent the prior year.”
The group reported that operating income increased 1 percent to R3.153 billion amid difficult trading conditions characterised by a weak environment, and the impact of clients lost in the prior financial year.
The group wrote off R1.145 billion in goodwill and a further R47 million in related intangible assets, included as non-trading and capital items, that reflected the uncertainty of projected income arising from the Covid-19 pandemic. The group said all the major global asset class returns were negative during the last quarter of the 2020 financial year, except for global bonds.
Alexander Forbes’ profit from continuing operations was flat at R757 million year-on-year owing to muted operating income growth coupled with good expense management. But this was offset by stranded costs relating to the short-term insurance business.
The board declared a final gross dividend of 12 cents per ordinary share, bringing the total dividend declared for the year to 30 cents per share.
The board has declared a special gross cash dividend of 50 cents per ordinary share, distributing the available cash to shareholders and reducing a significant portion of the surplus capital position.
Alexander Forbes CEO Dawie de Villiers (pictured) said the surplus would still provide sufficient liquidity and capital strength. De Villiers said the decision to de-risk their business model and simplify the structure was gaining traction.
“After robustly stress-testing various scenarios for our business, driven by Covid-19 and the sovereign downgrade, we are now confident that we will be able to navigate steadily through these turbulent economic times,” Dawie said.