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Trading statement for the year ended 31 March 2020
Alexander Forbes Group Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2006/025226/06
JSE Share Code: AFH and ISIN: ZAE000191516
(Alexander Forbes or the Company)
TRADING STATEMENT FOR THE YEAR ENDED 31 MARCH 2020
Alexander Forbes is in the process of finalising its full year financial results for the year ended 31 March 2020
("Current Period") which will be released on the Stock Exchange News Service and on the Company’s website at
www.alexanderforbes.co.za on or about 8 June 2020.
The results for the Current Period include the trading performance for the Current Period, the profit realised on the
sale of the Company’s short-term insurance business in South Africa (“AFI Disposal”) and the impact of the goodwill
write-off that reflects the uncertainty of the Company’s projected income arising from the COVID-19 pandemic and
its related economic effect.
Profit from operations before non-trading and capital items for the Current Period growth is expected to remain in
line with the prior year and is expected to be between 4% and -3% (between R731 million and R784 million)when
compared to the R754 million reported for the year ended 31 March 2019 ("Prior Period"). This reflects muted
operating income growth coupled with good expense management in the Current Period, offset by stranded costs
relating to the short-term insurance business, pursuant to the AFI Disposal.
On 31 January 2020, the Company announced the completion of the AFI Disposal to Momentum Metropolitan
Holdings, for a total consideration of R2 038 million. As a result of the AFI Disposal, the Company has recognised a
profit on sale of R861 million, which is calculated on the basis of the total proceeds, less the net asset value of the
business sold. Headline earnings per share for the period excludes profit on the sale of the business but includes the
operating profits from discontinued operations for the ten months prior to the AFI Disposal.
As a result of the COVID-19 pandemic and related economic impact, Alexander Forbes conducted an own risk and
solvency assessment ("ORSA"). The ORSA process is in line with the prudential standards for insurance groups and
considers various scenarios and the projected impact of these scenarios on revenue, profitability, cash flow, liquidity
and solvency. The expected scenarios and management actions in relation to those scenarios were discussed and
approved by the board of directors ("Board"). The scenarios tested as part of our solvency assessment were used
for the purposes of the goodwill impairment testing relating to the individual, retirements and health consulting
cash generating units ("CGUs"). Despite the solvency assessment indicating that Alexander Forbes remains
sufficiently solvent, the reduced operating income which is theoretically projected under each scenario resulted in
lower projected cash flows from each CGU. Across each of the respective CGUs where we have lower margins the
impact on the value in use was such that the goodwill balances were not supported and indicated impairment.
The Board decided to write off goodwill amounting to R1 145 million and impair related intangible assets of R47
million in relation to CGUs noted above. The goodwill asset arose from the private equity acquisition of the Company
in 2007. The write off and impairment has no impact on cash flows, liquidity or solvency of the Company. The
goodwill written-off and related intangible assets impairment are reversed from earnings per share in determining
headline earnings per share.
Additional factors that influence the movement in attributable earnings for the current period include the reduced
costs reflected in non-trading and capital items, specifically costs relating to strategic consulting projects in the Prior
Period, which are non-recurring, and an improvement in the results of our professional indemnity cell captive
insurance facility. The results for the Prior Period included the capitalised software development assets write-off
(R290 million) and the cost incurred on the termination of the IT contract (R50 million), both of which are non-
recurring in the Current Period. The software write-off was recorded in non-trading and capital items and adjusted
for in the calculation of headline earnings.
Earnings per share and headline earnings per share are expected to decrease from the results published in the Prior
Period. The expected decreases in earnings per share and headline earnings per share for both total operations and
continuing operations are disclosed in the table below:
Restated Expected
March 2019 March 2020 Estimated range
(cents) (cents) change*
year ended
Total operations**
Headline earnings per share 44.2 34.0 to 37.1 -23% to -16%
Earnings / (loss) per share 27.2 -12.8 to -10.9 -147% to -140%
Continuing operations**
Headline earnings per share 32.9 30.6 to 32.9 -7% to 0%
Earnings /(loss) per share 22.1 -68.2 to -66.6 -408% to -401%
* Percentages calculated based on rounded figures
** Prior year numbers restated for the effects of IFRS 16 Leases
The disciplined execution of strategic initiatives in the Current Period has improved the Company’s solvency and
liquidity position and provides Alexander Forbes with the solid base to withstand the economic fall-out of COVID-19
and the South African sovereign credit rating investment downgrade. The proceeds from the AFI Disposal, and the
restructuring of the Alexander Forbes sponsored umbrella fund to privately administered has increased the
Company’s surplus capital position. Our unleveraged balance sheet supported by the surplus regulatory capital and
available cash places Alexander Forbes in a strong financial position for the uncertainty that lies ahead.
Delivering on our strategic objectives and service-level agreements for our clients has resulted in improved client
retention, better member outcomes and internal efficiencies, laying the foundation for future growth. However, the
impact of COVID-19 during the final quarter and its expected further consequences on the economy will impede our
original growth and cost targets. Whilst our clients are experiencing the benefits of our client-centric and advice-led
consulting approach, the top-line benefits will take longer to fully materialise.
This trading statement is issued in accordance with paragraph 3.4(b) of the JSE Limited Listings Requirements. The
financial information on which it is based has not been reviewed and reported on by the Company’s external
auditors.
Carina Wessels
Executive: Governance, Legal and Compliance (Company Secretary)
27 May 2020
Sandton
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 27-05-2020 12:00:00
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