AlexForbes’s Technology Costs Increase by 13% Due to Two-Pot Strategy
JSE-listed financial services entity Alexforbes recorded an 8% increase in profit for the six months ending 30 September 2024 and announced an interim dividend of 22 cents per share, reflecting a 10% rise from the previous year.
In a statement on Sens released on Monday, the group reported its total closing assets, including assets under administration and management, reached R568 billion, a 25% increase compared to the same period in 2023.
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Read: Alexforbes posts strong gains with 16% AuM Rise
The group’s share price rose to R7.53 during early morning trading—an increase of 1.76% from Friday.
Headline earnings per share from total operations were recorded at 28.4 cents, a 3% increase from the previous period. Operating income for the group surged 12% to R2.1 billion, driven by the consolidation of prior acquisitions and higher average assets under management, which benefited from favorable market conditions, the statement noted.
“Our total return to shareholders over the last four years stands at 46.9% per annum, attributed to our strategic implementation by a dedicated team despite a tough operating environment,” stated CEO Dawie de Villiers.
Listen: Acquisition-led profit growth sees Alexforbes up dividend
Increased Costs
Operating expenses saw an 11% rise to R1.7 billion during the period, reflecting costs from acquisitions, increased personnel and technology expenses, and elevated two-pot-related costs.
The group mentioned that personnel expenses accounted for 63% of total operating costs and rose 12% year-over-year due to the need for enhanced client servicing teams addressing existing clients and preparing for the increased administration claims linked to the two-pot system.
Technology expenses increased by 13% year-on-year owing to costs associated with the two-pot system implementation, software and licensing fees, and greater reliance on outsourced services.
Alexforbes had previously indicated significant costs associated with rolling out the two-pot retirement system, effective from 1 September 2024.
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Two-pot Insights
Following the new regime’s implementation, Alexforbes surveyed 8,224 of its members, revealing:
- Approximately 350,000 members (about 32% of the membership base) have filed claims totaling around R6.5 billion pre-tax.
- The average claim is roughly R19,000 before tax implications.
- In total, 340,000 claims have been processed, amounting to around R4.6 billion after tax consequences.
- The number of claims processed within two months exceeds two years’ worth of typical claims volume.
Read:
FSCA wants reasons for high two-pot withdrawal fees
Two-pot admin fees could total R1.25bn in the first 6 months
Among the surveyed members who claimed:
- 86% expressed satisfaction with their withdrawal decision.
- 96% were aware that their long-term retirement outcomes would be affected, and the same percentage knew they would incur taxes on their withdrawals.
- 50% utilized their emergency savings pot claim to reduce debt.
- 30% used their emergency savings pot claim for essential living expenses.
- 13% allocated their emergency savings pot claim towards significant household purchases.
- 63% intend to make another claim.
- 37% do not plan to submit another claim.
Read: Two-pot withdrawals to surpass R5bn for state finances
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