Alexander Forbes Group Holdings Limited (AFH) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Alexander Forbes FY 2022 Interim Financial Results Presentation. My name is Zakira Amra, Head of Investor Relations. Today, leading the way, I have with me our CEO, Dawie de Villiers; and our CFO, Bruce Bydawell. I would like to turn over to Dawie to take us through the presentation. Thank you.

Thank you, Zakira, and welcome to everyone. We're really excited to be here today not only because when we do our results presentation, it also signals year-end, which everybody is looking forward to, but specifically, this time because we're excited about our results, the delivery and what the businesses has achieved in the last fall. So let's immediately go into it and take you through what we want to tell you today. And now I must wait for Bruce to settle down. Thanks, Bruce. So we will cover the highlights and go into a little bit of the results, cover the deals that we announced and certainly talk a little bit about the future and what it all for Alexander Forbes. This slide highlights what we're going to cover in detail today and as normal, we will spend some time on what drove the results, what are the underlying parts of the business that contributed to the revenue growth to the expense management, what's the bigger effect in the market like retrenchments and what that has -- what that effect is on our business, certainly cover new business because we're all about growth at the moment and talk a little bit about that. And then we'll go into a little bit of detail on the financial numbers, particularly proud about the 6% increase in operating income in this environment, the 5% increase in profits and continuing operations, which we've all seen in the results being released this morning, but we'll give a little bit of color to it. And certainly give an update on the sale of the AF Life business and what it means for capital release. Suffice to say that all the approvals have been gained, and we should have an effective date on 1st of February, if all goes well. And then I definitely want to end off by putting the transactions that we've announced in the past week into perspective and put it into how it links to our strategy and how we see that play out. I think it's important to position that. I know we'll go into, but I can't resist myself. I know we'll going into the drivers of the revenue for the business, and Bruce will explain the numbers to you. But what is pleasing for me is that every one of the drivers delivered again. And that shows that the business is really in a good space. And everything -- all the parts surprised us on the upside in the 6 months. And that's why we're quite proud of the results. It's small steps, but definitely big steps in the right direction. So the highlights are mostly on this slide, and I want to cover all 8 areas, all 8 blocks in a little bit of detail. As I said to you many times before, new business is a great indication of the position of our business -- of positioning of our business in the market and the changes in the brand, the changes in our clients view us. And on top of a great year last year, where we showed you ZAR 140 million worth of annualized new revenue in the past 6 months and other ZAR 82 million worth of revenue with a lot of client wins, some big wins and all in the strategic area. So we're very proud of that. And you know that will become part of the base into the future. The path that we've been talking about and have taken you along the journey is the automation in the EB administration part. We've been talking about the projects that we've launched to increase the automation in the claims processes and the automation and the premium receipting. And it is done. It's programmed. It's part of the system, and we're on-boarding clients. We've already on-boarded 500 stand-alone funds on that. We already benefit from that and we're already we're seeing the efficiencies on our side. And it's a process to get everybody onboard internally and externally. The HR users in the companies have to be trained up, and we do that very thoroughly so that everything works like clockwise work. And that's a big, big progress for us and is part of why we also believe that our administration base is now in such a good space that we can add members to it and build-on the scale and efficiencies. An important part that we've talked about quite a bit is the effect on our client base. We've had outflows in older days, a few years ago of administration plans. We've stopped that. We've actually turned that around, and we've had quite a number of big new stand-alone appointments in administration in the recent 6 months, which we can elaborate about. But we've also seen the effect of -- the negative effect of retrenchments on our base, which I know worried you as investors, and we kept a close eye on that. And even that has now turned around quite a bit where the outflows are -- as a result of retrenchments have slowed down, it's almost at normal levels to about 500 per month now. And since March, we've actually seen an increase in our client base despite the fact that there are store retrenchments coming through and the normal exits because of new business and because of the slowdown. So this is exciting for us. And we see it as you know that it's bottomed out, and hopefully, with the new business being added, we'll see a big increase in our active members under administration. Healthcare members up 6% year-on-year, which continues to grow a great business for us. Worthwhile to highlight the AFRIS assets under management. You know that is our drive to retain more members to build the assets that we manage through the retail consulting platform. And it sits under management of AFRIS up 55% and now over ZAR 12 billion. So really, really growing well with market growth, but specifically with new business. Umbrella fund reaching ZAR 100 billion, still top-performing umbrella fund in the market, very competitive, continuously tweaking it to make it even better with regards to all the solutions and the servicing. So we see this as a big growth area for us into the future. And then what bodes the wealth underlying for our members is the asset solutions. We can do great service, great advice, great administration, but ultimately, what drives the wealth is the asset management solutions. And our performer, which is our flagship portfolio, together with other solutions in the asset management space has really done well over the last number of years. And we continuously in the top quartile now with our performance solution within the large manager watch amongst the big portfolio managers. And by being consistently in the top 4 quartile over a longer period, like 10 years, 11 years now, we're #2 over that period. And this is really great for clients, the consistency of that performance, plus knowing that it's a very well-managed risk-adjusted return that the clients will get from that solution. So it becomes a big break out for us in our strategy. And then you've also seen here the flows on an annual that we've got in the books already, the 6 months of about ZAR 8 billion. And obviously, more written, which we -- which is still to flow in the past after the 6 months. So very excited about this. And then I'm going to spend 5 minutes on our strategic initiatives. We've set out the business is to say we've got our strategy. We've got our journey, but we have to have a lot of things that we concentrate on that we have to do now. And whether we package that as business as usual or projects or strategic initiatives, it has to have focus. It has to have ownership. There has to be time lines to it, and we have to deliver. Alexander Forbes was not known for delivery, for execution, and we wanted to change that around. So there's a focus, and I know this is a little bit of detail, but it kind of shows to you that the things that we focusing on is starting to deliver and is starting to come through in the results. And firstly, and secondly, it also shows you that we're focusing on the right things. From the financial perspective, we have specific targets for new business, specific ownership and it's throughout consulting platform, which now starting to function as a unit. And you can see that in the new business numbers. It doesn't just fall out of the air because we say we want new business. There's actual progress and everybody in the consulting business is involved in that. Expense management. We've got specific drivers in that specific targets. And that's a tricky one because we want to grow the business, and we want to continue to invest in the right thing. But what this is taught us is to invest in the right things and spend less on the things that aren't part of the core and part of the value adding that we need in the future. And then you've seen the results of our capital management, not just by selling the businesses but also being more prudent in the capital allocation and the management of that. So from a financial point of view, specific projects to deliver and you've seen the results come through. We've got the same type of project and focus in the customer space, digital tools. We know it's the future. We've -- both these tools, we are increasing the usage, and we're actually monitoring the percentage of clients using our digital tools. And we're enhancing the digital tools, creating new ones, as we speak. And the monitoring is -- and the success will be how many of our customers use it and get benefit from it, so that we know we're on the right track. And certainly, with the customers, with our wholesale solutions and increasing the usage of our solutions when people retire, when they exit, when they preserve money, which leads to more profits, but also very value add for the customer. So a lot of action around that, a lot of projects around that with sub-projects but starting to deliver. The last 2 are the internal processes, which are key. I've talked about the automated transaction usage in ops and admin, the less manual actions we have the less errors we make, the better reviews for the client and the better experience they use for the client. So we continuously through our engineering teams building that. We're continuously spending time on data. Data is key, not just to get a better value to the client, but also for us to just do our job better. And that's why you'll see how everything hangs together. The EB administration platform is so key to us because that's where we accumulate the data, that's where we have the tools to enable us to talk to clients on a powerful basis and really add value to their lives. So a lot of work and sub-projects on data, big progress made. And ultimately, single view of the client, single locking, client must be able to see all the different types of money, whether it's compulsory or discretionary and whether it's in a fund or separate that they can see that in one point and we're fast approaching that view. And then obviously, our base on risk management and compliance continuously improve. We want to make sure that we build off a very solid base from a regulatory point of view. And then the heart of the business is the people spend a lot of time on improving the engagement. There's been a big turnaround, but we won't stop because this is key in terms of having high performance being highly engaged, adding value internally but also adding value to the clients. So -- and ultimately, we're getting there where we're starting to attract very, very good talent. People knocking on the door wanting to be part of the business. And that's a great place to be in this environment where it's very tough to get the best talent. So doing a lot of work on that. And then as a business, but also amongst the people and specifically in the asset management space, looking at transformation of the industry, looking at ESG, looking at diversity and inclusion amongst the people, spending a lot of time on that. And as I said, each of these as a focus and is starting to deliver the results. So we wanted to show this to you to just give a context of we're not sitting and hoping that things are going to happen, there's a lot of work being done internally to get these things driven in line with our strategy. Every person in the business knows what their role is to get these things to deliver so that they deliver the strategy. And that is giving us a lot of comfort that we are on the right track. Bruce, I think it's over to you to deliver the results for us to unpack it and then we'll come back to end off with the strategy and where we're going.

Thanks very much, Dawie. We're very pleased to present this set of results. I think I'm pleased with the way that they have turned out and also the confirmation that they've -- they are in line with our strategy and driving growth in the future. I will unpack each one of these in more details in the slides to come at a 6% increase in the top line, which has now been adjusted for the discontinuance of the AFICA Group as part of the transaction. So there has been an adjustment to these numbers from a historical point of view, but 6% growth on the top line, 3% on the expense line, which we're very pleased with in terms of the management of those expenses. The profit from continuing operation of 5% increase also includes a decrease in the other income, which essentially was income which we were earning for the first 6 months last year from the short-term insurance sale that we did in 2019 that included things like some of the property lease subletting and other income line. We have got a loss from our discontinued operations in the group risk and retail life business and that's largely related to the increase in claims from a COVID perspective, mostly death claims, and I'll unpack that a little bit in the slides to come. We continue to trend downwards in our equity and our weighted average cost -- our weighted average capital and number of shares as we have continued to bring and return cash to and capital to shareholders and do share buybacks through the period. 9% increase in underlying regulatory capital. A large part of that is because of the increased COVID reserves we have in our group risk business. And that capital will be released once we have concluded the sale. And I'll give you an update on that at a later stage. Our available cash has increased and sits at ZAR 511 million, largely due to the fact that we brought our cover ratio from a solvency capital perspective down to 1.2x cover again. The Board approved that recently. And so we've returned to that 1.2x. Just another issue as I mentioned on cash conversion as we continue to drive strong cash conversion in our business. Our cash flow from operations in our cash flow statement is down 8%, but that's largely as a result of the settling of some of the ETV claims from last year, which essentially is a cash outflow and a decrease in the provision. So it doesn't impact our income statement. Excluding that, we would have increased our cash generated quite significantly. The interim dividend has been declared at $0.12. This is in line with our headline earnings per share, and it is above our sort of our normal policy of 1.5x. And that's as a result of the fact that we have not taken the COVID losses into account in terms of the calculation of that dividend for this period. Just unpack in a little bit more on the revenue. We're very pleased as most of -- all of our business segments have actually performed very well through this period. On the retirements consulting division, the revenue is coming flat year-on-year. And we think that, that's a commendable result given the fact that there's been a significant decrease in members under administration through the retrenchments of last year. And where that has benefited us -- I mean where we've got benefit from new business, we have actually recognized that new business in the last 6 months. We've had 75 new plants coming into the umbrella fund, 2 new significant stand-alone clients. And actually, as a result of that, despite the 6,500 retrenchments that we've had through the 6 months, we have had an increase in membership of 2% since March. In addition to that, there have been a number of different consulting opportunities, which have been taken up by our retirement consultants and additional fees been on through that. So a very pleasing result from what was expected in terms of the retirement consulting division. Health care is up 6% and that's been assisted by a 3% increase in the commission cap. That is also as a result of new business and a higher number of members under consulting on the healthcare side. We've had 26 new appointments through the last 6 months. New business flows from individual consulting have been exceptionally pleasing. We've had ZAR 5.4 billion worth of new flows coming in through the individual consultants for the 6 months period, and obviously, being assisted there by the increase in the market value of the assets under advice. So 13% increase in that revenue is very, very pleasing. On the investments side, Dawie mentioned that we're very pleased with our performance. Our performance forms the foundation of our consulting and certainly is why we believe Alexander Forbes is consulting is attractive as well as our administration products. On the multinational consulting side, we've had really good new -- or increasing operating income from Botswana and Channel Islands. That's been offset a little bit by the change in the foreign exchange rates. And so we've had some impact of foreign exchange on those 2 areas. And maybe has also reflected a marginal increase, which I think is pleasing in light of the economic environment that they are working at the moment. With regards to expenses, 3% increase in expenses, which we are fairly pleased with. We continue to try and constrain costs in different areas, making sure that we manage those costs efficiently. 1% underlying payroll cost increase, we think has also been good in terms of managing our headcount, which is 6% lower at the end of September compared to the end of March. Information Technology. Our management there have done really well to contain those costs year-on-year to being flat. That is basically managing our development spend very consciously in line with our requirements, but also looking at optimizing applications within that environment and trying to make sure that we are efficient in our spend. Our property costs have increased by 4% for the period, which is pleasing in light of the 8% escalation that we have on most of our lease contracts. We still have a few more years to go in our Sandton office, which is our biggest lease and have not yet resolved the -- that issue with regards to funding a subtenant in that property. Also managing professional fees down by 4% has been a good result. A lot of our projects we use consulting advice in terms of driving those projects, trying to deliver at the same time as managing those costs has been a fair effort. We continue to have cost pressures in the business, specifically with regards to talent, and we think that this is an industry-wide phenomenon. And basically, we continue to try and retain our talent and look for top performers to join us in Alexander Forbes. And as mentioned, the property installation, 8% continues to put pressure on our costs as well as increasing insurance premiums. Just going further down the income statement. The 5% profit from operations from nontrading items, as mentioned earlier in the presentation. Other noteworthy items carrying on down our income statement would be the investment income, which has decreased fairly significantly. And that's largely as a result of the ZAR 1.4 billion that we've returned to shareholders over the last 12 to 18 months. Our income -- effective -- our income tax effective rate is still significantly higher than it should be with regards to the corporate tax rate. And it's -- we do have a strategic project in place to make certain changes -- structural changes internally to try and drive that tax rate down. The current environment has not helped in that regard. And then I'll go into the discontinued operations on the next slide. What we have done is we've -- as I mentioned before, we have discontinued the AFICA Group, which is essentially the linked insurance service provider that we run internally, which was sold to Sandton. And the results of that have been highlighted in our note in the interim financial statements. Of the ZAR 79 million loss, ZAR 6 million profit reflected from that business. The Group Risk and Retail Life business has experienced significant COVID losses and paid out ZAR 847 million worth of claims in the last 6 months. Despite the claims losses, it's -- the business is doing well. Gross written premium has increased by 6%. And certainly, that business has managed the significant increase in workload and claims very, very well through this period. Moving on to the -- some of the ratios, the headline earnings per share has been marginally improved through the fact that we have less -- a lower weighted average number of shares, and that's obviously based on the share repurchases that we've done through the period. We also have recently canceled some of the treasury shares, which we had on hand, 47 million of those shares have been canceled and we will -- and certainly intend to continue with share repurchases through the next period as we have available cash and as the opportunity arises with regards to the share price. Just Important to understand that in the prior year as well, the ETV legacy matter, which we have disclosed significantly in the past, obviously affected the prior year numbers and the prior year headline earnings per share was also impacted by that. Thought it was important to try and give a sense of our return on equity and the improvement in our return on equity, if you exclude the extraordinary items. We set out in our strategy to measure and -- measure ourselves on our return on equity. And certainly, over the last couple of years, each year, there has been some extraordinary items, which has been impacted that number, which I believe is important to try and unpack. In 2020, we obviously had the sale of the short-term insurance business, and that created a significant capital gain, and that shot our return on equity up to 18.8%. This is inclusive of the goodwill that we have on our balance sheet, which stems from the private equity days. So just in terms of making sure that, that forms part of the base of the return on equity calculation. In FY '21, we had the ETV matter, which took our return on equity down to 3.8%. And certainly for the first half of this year, the return on equity, which is a 12-month measure, so it includes the last 12 months, includes the ETV matter as well as the group risk losses. So in each of the measurement periods, we have some extraordinary items which are impacting our return on equity. If you exclude those items and you look at the underlying core business only, the return on equity of 8.1% in 2020 has increased to 9.7%, which essentially reflects the underlying work that's been done in terms of trying to improve on that ratio. Importantly, we've also returned ZAR 1.8 billion worth of value back to shareholders through this 3-year period through both share buybacks, special dividends and dividends in the unit. Our capital journey continues. We had an increase in our capital for the period under review for the 6 months through the end of September. And as mentioned before, that's largely because of the increased reserves that have been put in place within the group risk business as well as some operational risk increases, which happen naturally in the business firm through each period. We do reflect in the slide the plans to -- or the expectations of the reduction of that capital as part of our capital-like journey, which essentially is once the AF Life business has been sold, there will be a release of the capital held in that business as we run down that balance sheet, as well as the share cancellation has reduced the share capital in the second half of this year. They're -- and we continue to look at other ways of making our capital efficient, and there is expected to be some further enhancements and efficiencies through the end of -- through to the end of this year. Just very quickly, I'll take you through the transactions that we've announced over the last week as well as the group risk transaction. Dawie will spend a lot more time on it, then I will in terms of his section following me just with regards to the strategy and how that fits into our long-term vision. But just some of the sort of highlights of each of the transactions from a financial perspective. We are -- and we have received competition commission approval for the group risk business. And we have also received in principal approval from the PA and has started communicating all of our clients with regards to that transfer. The anticipated effective date is February 2022. And that transition will then take place. The purchase of EBS International, which is essentially -- was announced earlier this week, at purchase price of ZAR 142 million was for the revenue that they recognize in terms of ZAR 86 million worth of revenue. We will continue to operate that business independently for the next year to 18 months, whilst we developed the strategy and also the synergies that we have identified in terms of being able to work together and start putting plans in place to deliver on those synergies. With regards to the EB purchase of the large stand-alone businesses -- I mean plants within Sanlam. The purchase price of that transaction is ZAR 154 million, with revenue coming across to us of ZAR 172 million. There is certain contingencies around that revenue dependent on client acceptance. There are 44 funds involved, 29 clients and 343 active clients -- active members, which we're hoping to bring across. That transition is going to take us some time. The plan to obviously ensure that once the client has signed across to us that we take our time, make sure that we are able to take on that client without any disruption to surplus, and we're anticipating 24 to 36 months on that transition process. The sale of the AFICA business had a purchase price of ZAR 200 million with revenue of GBP 154 million. We will retain 12.5% of that fee with regards to an outsource of the product development and marketing behind those products. And so we retain some of those functions within Alexander Forbes, and there will be a relationship agreement between ourselves and Sanlam with regards to marketing and managing those products. Again, the transition there is anticipated to be 18 to 24 months because of the development that's required in Glacier before we move those products on to Glacier. Just important in both of the 2 Sanlam and the EBS business, we are still awaiting and need to apply for competition commission approval. And so there will be a regulatory process that we go through with each one of those transactions. With that, I'm going to hand back to Dawie and he will take you through some more of the strategy.

Thank you very much, Bruce. And we've got a lot of time. I won't be too long, but I do want to explain to you in a nutshell, our strategy and how these transactions fit in and that will put us nicely on a path of what our outlook is for the future and where we're going as Alexander Forbes. And I think it's important to understand the package, and hopefully, it will make sense to you. The first thing is that is important is who we are and what we're about as Alexander Forbes. Everybody understands that we are quite innovative. We do a lot of research. We do a lot of information pieces. We've got a lot of data. And we're quite instrumental in the market in developing this market and putting new ideas out there. And this insight, we also use internally to drive our strategy. And to drive our advice framework and to build our solutions that ultimately, we aim to impact individuals. So this is what we're about. And if we use this insight to really package our advice and our solutions, and we can make a difference in people's lives, it will lead to revenue. It will lead to a positive brand. It will lead to people wanting to join us and be part of us. And we're beginning to monitor that impact that we make on people's lives through giving them better solutions, better advice and obviously, some good outcomes over time. What we've done is we've actually looked at how we see trends developing in our space. We did a lot of research on it. And you note on the left-hand side, you can see we do believe there will be some consolidation. And COVID-19 has probably fast tracked that consolidation in the industry. And in the wider financial services industry, that would be that. But certainly in our space, there's just so much increase in cost and in governance that the scale is needed to really do well and do well by our clients. Specialization is key. Some people are great at certain things, and we have to leverage that, which means that you will also need partnerships to make sure that you can deliver the best to your clients because you can't be best at everything. And digital, the way that we engage with individuals, the way that we engage with people, the way that people can engage with you and internal efficiencies are being driven by the digital agent and we have to adopt that. And then obviously, the member experience, the need of our members view savings, our members view the way that they interact with you and how they can transact with you. So those are key differentiators and key trends into the future. And we've built our strategy around that. And our strategy hasn't changed, but we constantly tweak it to make sure that we keep this in mind. And I wanted to keep an eye on that left-hand side as we go through these slides. Our opportunities are very tightly linked to these. We certainly think that our strategy around engaging members, giving member solutions and looking after the member base that are in our administration platform is key. And that will lead to better outcomes for them if we can do it well. But we have to interact well. We have to make sure it's digital. We have to talk their language and we have to have proper solutions driven by our insight for them throughout their lifetime. And that could lead to very good outcomes for them and very good prospects for us. But we have to be good. And if we look at specialization, we have to be good at our core. And that's why we've been focusing relentlessly on making our core business better because that's where we're specialize in. That's our differentiation. And we have to be the best in the market at those. No questions asked so that we can build the rest of our value proposition. So that's a little bit of a background I've jumped around, but you get the idea. And hopefully, that will give us good context for what we go forward. As I've stressed a lot through the years, our core business now is retirement fund administration, consulting and investments and the wider sense of consulting, if we think about we do investment consulting, we do health consulting. We do individual consulting when we talk to individuals, the normal, we're certainly very big in retirement consulting. So it's all of that. But let's start with retirement fund administration, where it's about scale. It's about capabilities. It's about being able to build on top of that platform. It's about efficiency and it's about being able to do it really, really efficient. I see and we certainly see retirement administration as core to the business and enabling us to really leverage our advice-led model. We can't do a pure advice-led model, if you don't have admin data, access to data, a great admin system and even think about actuaries doing valuations, you need the data, you need the insights into the funds. And that's why we think it's so crucial to be able to do that well, firstly, and secondly, to be able to have that as a base. And they have it close to us so that we can control it and actually improve constantly. The consulting I see is the sphear of the arrow. It's the part that has the contact with the clients. It's again all about the clients. But this is where our machine as Alexander Forbes with the enabling functions behind and the consultants in front of the clients can really add value to the lives of whether it is funds, corporates, individuals in all the different capabilities. And this has to be world-class leading edge, and we have to have the right people in there, and we have to have the right frameworks in place to be able to deliver this. And this is our brand. This is how we're going to amplify the impact. And then lastly, it's about creating the wealth through the investment solutions. It's about the draw card. It's about the performance and it's about making a difference in South Africa. And this is a totally being a multi-manager. This is about -- this is totally scalable. And we're quite excited about our base that we build here on the investment platform but also the future that we can drive here. So that's in a nutshell why we spend time and effort on this core business. And how did we get there? We disposed of our insurance businesses. AF Life is now done, approved and we're in the final stages of reaching that effective date. So we call it a capital-light strategy. But now we can concentrate. It's capital-light plus, it's focusing on the core. Now we can concentrate on our advice-led strategy, with our enabling functions to actually add value to the members. It's totally scalable. We put every cent that we have and every ounce of energy into this to try and make it very good and then ready for growth. We call it poised for growth. But certainly, all of these functions that we are -- that we see as part of our future now is scalable -- fully scalable and ready for growth, and has had a turnaround in their strategies, in their delivery and in their service to the clients. So quite excited about that. And then we say, okay, so what next? We've got this now. We've streamlined our business. We've disposed of the essential wealth businesses, and we've now streamlined, so how do you grow? And I've probably had this question a million times now. You're not diversified anymore and how you're going to grow? We're simply going to grow by adding new business, gaining market share, being the best at what we have in the core. We will get new business. We are already showing that improving that to the market and clients actually want to be part of a winning team, and we certainly see ourselves there. So building new business in the core capabilities through our advice-led strategy, through really adding value to the advice is key. And in all those areas, we have been building this new business. The second area to grow is through acquisitions. And hence, the presentation today where we feel that if we can add to this member base on the administration platform, we have access to these members. We can turn them into loyal Alexander Forbes customers over their lifetime, which means more assets, which means more advice opportunities and growing our base and growing our core business through adding more members onto the base. So all those synergy benefits can be unleashed over time. And that's why these acquisitions are key for us, and that's how it fits in. And then lastly, as we have more members in this administration base, as we get our consultants on a wholesale basis, on an individual basis, on health basis to really add value to these members convincing these members that Alexander Forbes is the place to be, our big growth factor is the combination of those first 2, but actually culminating and us becoming a very big IFA, a very big business talking to individuals and convincing and advising individuals and building their asset base in Alexander Forbes. So you can see how these 3 elements will lead to massive growth into the future. And that's why we've put it together like that. And then if we are unpack the individual transactions, starting with EBS versus given you the details, but if you think about the strategy, as I said, and the specialization and the consolidation, adding EBS International, which brings more capabilities through IT, through self-administered funds, through funds outside of South Africa, there's just a massive opportunity, not just with the business that we're buying, but also in terms of additional business that we can put on top of that base to grow synergies, to grow efficiencies and to grow scale. So now we're talking to funds and to corporates about the full scale of administration from funds that want to do self-administration right through to investment, unitization to umbrella fund administration, full 13B, half 13B, investment attribution, compliance, risk monitoring, analytics, everything. We're gathering the full scale now and that is a massive opportunity for us now to play, to play in a bigger space and to get -- to help more funds and more members to retire better. So this completes our total offering in the administration space. And then the next transaction is obviously buying the Sanlam standalone administration business, the large funds administration business. And this gives us -- just It gives us a lot of scale. It gives us access to 30 more corporates, building relationships with those corporates, adding value to their lives to their members' lives, but ultimately giving us scale so that we can invest more into admin over a wider base and add more value over time. So lots of synergy benefits in this 40% enhancement to the basis is great. And the quicker we can get the approvals and start to convert these into opportunities on our base, the better. And you can see how that fits into the advice framework. And then we want to end off with -- we've got now these 2 acquisitions adding to our member base, adding to the scale, giving us the access to the members. And then we did the last part of the transaction, which was -- which is actually enabling us to do our member engagement much better. We've got this force of financial advisers internally with great products, great solutions. And we've talked about AFRIS and we've talked about all of those solutions. We've got all of that. We've now got a much wider base to work off. And the only thing that was needed is to -- is a platform that is world class that we can transact on behalf of the members and the members can transact them. So if you couple this with the wide base, the advice framework, the investment solutions and you put that on a world-class base platform, that is the recipe for success in terms of our retail efforts in terms of getting member-orientated financial services and actually dominating that space. So you can read the slide, but this is actually the combination of getting that done. Glacier is a great platform, open source and it will enable us to really go into where we want to be quite quickly. We could bought it. We could have bought something else. We could have transferred our clients onto a different platform. This is actually through a lot of research, the best fit for us and the quickest way to get there so that we can actually do what we need to do, and that is give advice and look after our members. So that's how these transactions fit in. That's how it leads to our strategy. That's how it leads to our growth into the future. And that's why we're so excited. We are really excited about the combination of all of these things, building our strategy and how we see the growth into the future. I don't know whether there's another slide, Bruce. I can't remember. No, it's just an outlook before we get the questions. It's a powerful statement just under outlook, most impactful provider of financial advice to retirement fund members in South Africa. Alexander Forbes is seen as -- and that is internally and externally and brand-wise as a wholesale provider of financial services in our EB, looking after funds, looking of the trustees, looking after corporates. More and more, the strategy is changing to look after members and to sort out members and future, and help them to say where they help them to make better choices. And this whole strategy and transaction is now culminating into us fast tracking that quite fluently so that we can really look after and not just a wealthy that can afford advice, but our whole client base. So we are positioned to actually look after all the members in our funds and look after their futures and hopefully make them loyal Alexander Forbes clients over a lifetime. We feel that this puts us in a great space for growth, as I've said. Now we have to implement these transactions. We've made assumptions when we did these transactions, it is key to unlock the value through the implementation, make sure we get all the synergies we planned and also retain the clients and build on that. So that is the implementation, it's key. And then in addition to the transactions, we're quite excited about the future and the legislative changes that are being talked about in the market from the scary year or 2 ago when it was access to pension funds and Regulation 28 changes to where we are now when we're talking about preservation into the future, and we're talking about auto-enrollment, and we're talking about lots of tailwinds for members, certainly for better outcomes, but also for us as an industry. And that combination makes us very excited and then end off with our model. You've seen our pictures of all sky diving together holding hands. I think part of the success of Alexander Forbes in the last 2 years was this unity. One strategy driving as one and the interaction between the different sides of the business is to deliver on a positive outcome. So very excited about the future, and that's why we were quite excited to talk to you about our results and our strategy looking forward. Thanks for your time. And hopefully, it's clear as mud. And I'm happy to take some questions from here. Zakira?

Thank you, Dawie. Your first question is from Sandile Magagula from Umthombo Wealth. There are a few questions. I'll go slowly. How is Alexander Forbes incorporating ESG in its day-to-day operations. First question.

Okay. So critical, great question. Thanks. Both ESG and transformation, we see as critical. ESG, both also from a corporate and citizen prospect, we've -- we joined the UN Global Compact. We've done a lot of research. We also get a lot of intel from Mercer, our partner in the U.K. and certainly are building on ESG principles internally, and also within the investment space, we're actually designing a framework and we're in the final stages of that in terms of how to rate managers that we allocate money to from an ESG perspective. So I know in South Africa, I think we must stay and make it, and that's what we're trying to do, certainly in the investment space focusing on the social aspect and the governance expect more than necessarily the environment and making sure that we can make a difference, but practically make a difference. So very key for us. And hopefully, we'll be able, as an allocator of money and as a quite an influential corporate citizen to make a difference here. We certainly have embedded a lot of those principles already internally.

Second question from Sandile. In your recent update relating to EBS International acquisition, you mentioned that part of the stake, 25%, will be taken up by a related party -- Related party transactions tend to invite questions about the governance of the business. Does this concern you?

So it's the other way around. Sorry, Bruce, you can add on. So own 25% of EBS. EBS had a quite a few shareholders, staff, family and other shareholders, but own 25% or so of EBS and we bought the whole of EBS and fully own it now. So the related party -- part of the transaction was us buying the 25% from ARC, and that is -- was quite a clean transaction, obviously, following all the protocols, and we make sure that we do the right thing, get a fair and reasonable. So Bruce can talk to all of that. But it makes sense for us to own 100% so that we can extract the full value out of that business, firstly. And secondly, I think it makes sense for ARC as well to not have so many partial businesses. It makes a lot more sense for them to have that under one roof within Alexander Forbes in my view.

Yes. Just to add, Dawie, I mean ARC owned 40% or 39% of us and 25% of that business, they were happy to sell their stake to us. I mean, meaning that they obviously wanted and get a bigger chunk out of that business through us. So just their investment in it actually has increased, to be honest, which is having been invested in it for a while. Obviously, that's a very positive thing. But because of the fact that it was a related party also heightened level of governance through the whole transaction, obviously, with lots of independent advice, making sure the independent Board was involved in terms of making the decision, et cetera. So lots of governance as part of the process, yes.

And lastly from Sandile. Can you give color on the latest trends in retrenchments, which sectors have been reemploying? Have you seen a recovery of lately especially in the hospitality sector?

So Bruce touched on it a little bit. And Sandile, I think we've seen a total -- in our client base, a total factor off of retrenchments, as I said, almost back to the normal levels, which we're certainly quite excited about and engaging with our clients. I think most of the clients are done with retrenchment exercises. And the financial sector has certainly been net employment -- net employers or positive employers of people, and there's been an increase in employment in the financial sector. Obviously, some of the other sectors are still muted. And we don't know where the latest lockdowns or travel will mean to the hospitality industry. But certainly, what the companies have done where there was uncertainty is they have reached their level. And as they need employment, they will take in temporary employment and contracts employment until they have certainty and then they start hiring. So you never say never, but I'm pretty confident that given the info that we have that the retrenchment exercises are over and that people will over time start hiring but very, very cautiously. I don't think people will -- as the business picks up and as there's certainty they'll start hiring.

Thank you, Dawie. The next question is from Chris Stewart from 91. A lot of moving parts in capital once all transactions have settled beyond your ordinary dividend commitments and capital buffers, how much do you believe your surplus capital available for distributions or buybacks to be? What is your preference between the 2? Or are there going to be further acquisitions?

Sure. I'll pick that one up. And right, there is a lot of moving parts, which is one of the reasons why it's difficult to give a projection on that. Our intent to start with, as we've mentioned before, is to also leverage our balance sheet. So there will be work done in terms of trying to structure financial, some borrowings with regards to even the acquisitions that are here at the moment and to not, therefore, utilize our available cash in terms of these acquisitions. Obviously, that's something that will come and be communicated further in the next 6 months update. Secondly, I think that there is certainly appetite from our side to continue with further acquisitions and certain discussions are still happening. We're still looking in the market for these acquisitions. So in the future, there may well be further acquisitions coming along. With regards to the total amount of capital free and available, I think our dividend will continue to be in line with our earnings, and that's certainly the intention over time. And with the release of the group risk business capital once that sale has gone through as well as what we're hoping and anticipating as a return of the insurance claim that we have on the ETV matter, which were provided in the prior year, and we are hoping that the available capital will reach at least above ZAR 700 million. As to how and what and where we -- how we distribute that and get that back to shareholders, that's still under consideration. So I can't give any direction there.

Thank you, Bruce. We've got 2 questions from Warwick at Avior. Do you believe there is opportunity to win investment mandates and consulting revenue from the Sanlam EB acquisition?

So Warwick, I certainly do. I think it's a long game. Firstly, we understand that. We will now have the opportunity to build relationships with these clients. Some clients do prefer different providers. So they'll have different provider for every facet of the retirement funds. And there, there will be less opportunity. Certainly, if we can build trust with the client to deliver a great service, I think there must be opportunities for consulting for -- even if it's ad hoc consulting or appointments and certainly for investment opportunities and hopefully, opportunities to help their members with default products with advice. And those are part of the synergies that we will explore. The first point, though is, and that's important is we have to embed the admin appointment, which is the main concern, make sure that, that is clear, great service and that the client loves being with us. And we certainly one push other things down their throats if they don't want it. I'm sure we can -- we will be able to get some other appointments because of the great service that we'll give them.

Final question. How does the Sanlam partnership in AFICA sale improve the proposition for an Alexander Forbes adviser?

And almost thanks for that question because it is key. We had an hour session with our advisers this morning. And they think it's both Christmas and New Year and birthday altogether, so they're so excited. So our advisers now have firstly, an advice framework with a team behind them that provides these insights and which we think has always been a differentiator for us and the quality of that will remain. We've got, on the end, the investment solutions, which are wholesale priced in a way. It is packaged as this AFRIS solution which members love and it's very easy to get the right returns and get the right profile in there, which is available to us. But now it's for this adviser being able to transact on a platform that is world class. So the barrier to big growth for us in the past was the transaction ability, if I can use that word, that doesn't exist on AFICA. Because AFICA was very manual. It took a long time to onboard a client. It took a long time to transact. Everything was manual. And now the life of the adviser and the client will just be much quicker, much more seamless, much more digital in order to get the right advice and the right solution. So I think both the adviser and the client will be accepted with this. And that's why we say it's not necessarily that we're selling a business, it's actually an enhancement of a capability for our advisers.

Thank you, Dawie. There are no further questions coming through from the webcast. I don't know if you want to give it a few minutes or if not, we can close off.

It's the only way they can ask questions is if they type something. That's fine. Okay. All right. I think that's fine. There will be more opportunities through the week to talk to shareholders definitely, other opportunities to ask questions through the normal channels. Thanks a lot for dialing in. Thanks a lot for listening to our story. And if we don't see you again, enjoy the holidays, be safe. And let's all be fresh for the New Year. We're certainly going to have a magic journey. So I hope you too.