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| Our performance |
| During the past year, the
group has achieved many noteworthy successes and,
at the same time, confronted significant challenges.
The successes achieved by Alexander Forbes during
the year under review include: |
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Income from operations
has exceeded R5,3 billion, up 11% on the
previous year. |
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Client gains continued
to generate revenue growth in our core businesses
of risk and insurance services, financial
services and multi-manager investments. |
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Trading results from
our South African and African operations
increased by 13%. |
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Investment Solutions
in South Africa had significant revenue
growth of 29%. Global assets under management
totalled R124 billion at year-end, including
R10 billion (£890m) in the International
operation. |
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Africa Financial Services
recorded strong revenue growth with trading
results from operations up 12%. |
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The core corporate broking
part of our African Risk and Insurance Services
business traded well, with Africa Risk and
Insurance Services delivering a credible
trading result given the trading conditions
prevailing within the industry during the
year. |
| • |
Our International Financial
Services business benefited from favourable
pensions market conditions, increasing trading
results from operations by 39%. |
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Although the International
Risk Services revenue was flat year-on-year, the
profits declined significantly as the business
continued to trade in difficult conditions. The
business also incurred costs in implementing positive
changes, defending its market position and hiring
new production talent. Following a thorough review
by the new management team and material actions
taken thus far, a number of growth and development
opportunities are now being actively pursued.
Notwithstanding the strong trading results from
most of the group’s operations, this has
been one of the most difficult periods in Alexander
Forbes’ 70 year history, with significant
issues raised concerning the historic transparency
of income earned by our South African Financial
Services business. Alexander Forbes failed to
live up to our history of dedicated client service
in this area of our business, which we sincerely
regret. Importantly, the exposures identified
primarily relate to historical practices which
do not have a material effect on current earnings.
The implementation of additional compliance procedures
is underway and we have introduced a number of
significant changes to ensure transparency in
all our dealings with our clients. We do not underestimate
the task of restoring the trust of our clients
and staff, but are fortunate to have a pool of
talented people committed to the task of setting
the industry standard. |
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| Strategy |
Alexander Forbes’ strategy
has been centred on delivering to stakeholders
through the growth in our various operating areas.
Our stakeholders include shareholders, clients,
staff and the wider community. We recognise that
we cannot deliver to these various stakeholders
independently. We believe in empowering our people
to do great things for our clients in a way in
which we are proud. In this way, we can add value
for our clients in the various businesses and
countries in which we operate and create value
for shareholders. |
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| Clients |
| Alexander Forbes has always
recognised the significant importance of clients
as our key stakeholders. We are committed to operating
with the highest level of integrity and ensuring
that all stakeholders can absolutely rely on Alexander
Forbes in every respect. We again reassure our
clients of our absolute commitment to providing
services and adding value to them on a transparent
basis and we thank them for their ongoing support. |
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| Shareholders |
| The board has proposed a 59
cents per share distribution to shareholders,
in line with the previously committed policy of
2 times dividend cover (based on core earnings
per share). The combination of good organic growth,
supported by client gains in the majority of our
operations and focused attention on the underperforming
areas, leave the businesses well placed to achieve
further growth into the future. |
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| Staff |
We continued to bolster and
strengthen the management team with a number of
key executive positions both in South Africa and
internationally.
In South Africa, we welcomed Peter Moyo as managing
director of South Africa (including all African
operations) in November 2005. Peter has been promoted
to group chief executive with effect from 1 July
2006. Peter joined the group at a difficult time
and has demonstrated exceptional leadership. I
have no doubt that the group will continue to
thrive with him at the helm.
In all the areas where we operate, an operating
structure exists around each of our core businesses
ensuring that each entity has an empowered and
focused management team responsible for delivering
to our clients and driving the business forward.
We have 6 000 employees worldwide who
are dedicated in their commitment to do what is
right for the client and adding value for our
shareholders. We continue to attract and nurture
talented individuals to ensure that we are able
to provide innovative and appropriate solutions
for our clients’ varied needs. |
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| Transformation |
The group continues to make
progress on issues of transformation in the South
African business in respect of all stakeholders.
In addition, we are particularly proud of a number
of community projects in South Africa being driven
by the Alexander Forbes Community Trust.
The group’s relationship with Shanduka,
our empowerment partner, remains strong. Together,
we have created a solid foundation and we look
forward to continuing with them as we build a
larger and stronger business into the future. |
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| Governance |
| The group has made significant
strides in corporate governance over the last
number of years. The board was further strengthened
by the appointment of a number of non-executives
during the year and we welcome Alan van Biljon
and Wendy Lucas-Bull to the board. Geoff Todd
retired from the board and we thank him for his
significant contribution to the board and the
group over many years with Alexander Forbes. |
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| Conclusion |
I want to thank the board for
their support and counsel over the past year.
I am grateful to all our staff worldwide for their
efforts on behalf of our stakeholders. I particularly
wanted to thank the senior executives and divisional
management teams for their support and drive on
behalf of the group and our clients.
I conclude by thanking our clients for their support
and reiterating our absolute commitment to operating
with the highest standards of integrity within
the business. To the extent the group has failed
in any aspect of this in the past, we renew our
commitment to providing even stronger governance
to ensure no such failing can occur again. |
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| Rael Gordon |
| Group Chief Executive |
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| Outlook |
| Report from Peter
Moyo, group chief executive elect |
When I reflected on my decision
to join Alexander Forbes in November 2005 my reasoning
was quite simple – it was a company with
talented, intelligent individuals with a great
business model. Nothing has changed since I joined.
The group’s strategy is centred on delivery
to stakeholders through growth in our core businesses.
We have continued to trade strongly in the majority
of our operations and are in the process of reviewing
the position of our International Risk Services
with a view to optimising value for shareholders.
In addition, at the time of writing this annual
report, the group has had unsolicited approaches
by a number of private equity groups with a view
to potentially making an offer for the entire
group. Further details will be communicated in
due course.
As in the recent past, we will continue to be
cautious in terms of acquisitions.
Our focus remains to satisfy our clients’
needs in an environment where we can demonstrate
uncompromising governance and ethical standards
and we can do things and deliver value in a way
in which we are proud – both in South Africa
and Internationally.
During the past two years, we have dealt with
the group’s historical business practices
to ensure that our clients can be confident in
their business dealings with us. We are, therefore,
well positioned in the market moving forward into
the future.
In 2006, the group was again included in the JSE
Limited’s SRI Index. In South Africa, our
Black Economic Empowerment (BEE) credentials are
imperative in growing the business. For Alexander
Forbes, BEE has always been a business imperative.
Our policy remains to transform the business and
to work with all our stakeholders to do so to
our mutual advantage.
Being an intellectual capital business, our employees
are fundamental in ensuring that our business
continues to grow and succeed. In line with this,
our recruitment, training and retention strategy
and remuneration philosophy remain of major importance
within the group in every region where we operate. |
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| Appreciation |
I wish to thank the board for
their support in recent months and for having
the confidence in me to appoint me to the position
of group chief executive. I will continue to work
with Rael Gordon, who will focus on the International
business until 31 March 2007. Rael has been very
supportive of me and I thank him for his continued
guidance.
My appreciation goes to my dedicated colleagues
who have stood by the company during very challenging
times. To all of you, in every region, I look
forward to us moving ahead into the future together
in a very transparent, open environment where
we can be proud of being employees of Alexander
Forbes.
To our clients who have walked the road with us
– I thank you. You are the centre of our
world and I can assure you that Alexander Forbes
will always strive to do the right thing and operate
with the highest standards of integrity within
the business. What we have gone through has created
an impetus to renew our commitment to providing
even stronger governance to ensure that this will
not happen again.
I look forward to an outstanding year –
where, for all stakeholders, your association
with us is as beneficial as our association with
you.
Your World is our World |
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| Peter Moyo |
| Group Chief Executive Elect |
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