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

Good afternoon, everyone. My name is Zakira Amra, Head of Investor Relations at Alexander Forbes. I would like to welcome you all to the FY 2022 annual results presentation and live webcast. I would also like to remind you that this session is being recorded. Please note that the presentation material as well as the full results announcement and additional information will be made available on our website. With that, I would like to hand over to Mr. Dawie de Villiers, Chief Executive Officer.

Thank you very much, Zakira. And with me I have Bruce Bydawell, CFO. And hopefully, we'll be able to enlighten you on our results, strategy and what we've been busy with in Alex Forbes for the last 12 months. We look forward to it. We look forward to telling our story. And hopefully, you'll see the excitement in the numbers, see the excitement in the slides and hopefully, hear it in our voices. I'm going to straight -- shoot straight through the presentation. We thought long and hard about the opening slide. And ultimately, what this represents is a business that has been reconfigured, we concentrated on the core. The focus is there, and it's now working well. So we don't even have to talk about what we need to change from the past and that we've turned the corner within -- the growth is there. The growth is in the numbers. And we're winning market share, and we're very excited about that. The solid foundation enable us to get the growth into the future. You can see it from the highlighted numbers there, and Bruce will talk to it where it comes from and what it represents. But certainly, very proud of these numbers. And more so 7% growth in operating income is 7% year-on-year. We're very happy with that. But if you think of the context of where we were a year ago and what we thought we would be able to achieve. This is -- far exceeds any of our exceeded -- for any of our expectations a year ago and then represents a very comfortable growth year-on-year. So we're really excited about that. And then Bruce will unpack the dividend. But the comfort, the confidence in the business allows us to pay a dividend of 20 -- final dividend of [ ZAR 0.20 ]. So really, really excited about the numbers. It's been a year of action. It's been a year of implementation. Certainly, we showed our intent with the results and with the strategy during the year. And hopefully, we made an impact. I think we can see it in the numbers. But certainly, if I think of impact, we think about the effect on the clients, the effect on our staff and the environment that we touch all the stakeholders. So the new business numbers, again, at record levels of ZAR 148 million annualized revenue. That's starting to show that we are adding 5% a year to the revenue constantly now with regards to new business, and that's a great place to be. We've come a long way in terms of automation, and we're proud of that. And not only because it has an effect on our cost efficiencies and our scalability, but also there's a massive effect on the way that our clients perceive our business and our service to them. So that was always being set as one of our strategic initiatives to get right to lay the foundation for the business into the future. And we can see the results coming through. Our connection with members, we've increased connection in all spheres with our individual members in funds, our individual clients, and that will continue. That is the main story, and we'll talk a little bit about that later in more detail. And then the last 3 bullets there is certainly embedding the 3 transactions where it was critical for us to scale up our membership, scale up our membership to get the efficiencies in the admin, but also to enable us to talk to more members into the future, and that's the EB admin transaction with Sanlam. And then next to it, the effect that we wanted to have on those members, the effect on the digital journey, the engagement with us to get to a more modern-less platform was the idea to sell our less platform then to Glacier. Both of those in-flight waiting for final approval from competition commission and certainly, the majority of this year's effort on our side will be to try and make this work and lock in the value that we're trying there. And again, we'll talk about that a little bit later. Certainly, a year of action, laying the foundation for a lot of success into the future. I want to touch on our 5-year vision. I'm certainly not going to talk about all 6 blocks. But the first sentence is very important. This is how we see the business. Most impactful provider of financial advice both institutional and individual customers. And from there, if we look back in 5 years' time, we'll say this was the defining moment where Alex Forbes decided to really make a big impact in individual slides. You can see that from the way we launched the new brand, we refreshed the new brand. That is about making Alexander Forbes -- old Alexander Forbes into Alex Forbes impactful in the lives of individuals. And that is critical for us. We have to do a lot of things right. We have to have a total digital journey. We have to engage with members in a different way, but that is certainly the mission that we're on, and we're already seeing some of the impact there. Some of the other businesses, we have talked about stabilizing the core, growing the core. And growing the core at the moment is about winning market share. It's about winning market share. And we were quietly confident a year or 2 ago that we will be able to do that. But certainly, the new business numbers and the request from clients show that we can achieve that, and we we're confident that we're on that journey. So this is the journey that we're on, and we will hold ourselves accountable to achieve this 5-year vision. And I'm looking to Bruce to hold us accountable. So we're excited about this journey. I want to reiterate the purpose. These are not just words. We highlight the 3 words, insight, advice and impact. If you think about Alex Forbes as the think tank that has driven a lot of change in this industry over the past 85 years. We will continue to do that. We have the people, the infrastructure to really deliver the insight. But then we'll turn that into proper advice and proper solutions for individuals so that we can make an impact on their lives. This kind of is such a powerful sentence to really state what we're about and culminates into our whole strategy into the future. So we held ourselves to these words on everything that we do and on everything that we stand for. And this is quite powerful, and it's landed quite nicely within the business, and we're quite excited about this. I'm going to show a quick video to demonstrate what we're about in the new Alex Forbes. [Presentation]

Still gives me goose bumps every time I see this video and what we're about as the new improved Alex Forbes. And our vision is really to make an impact in people's lives and -- but for that, people must recognize us. People must know who we are and we must actually deliver a difference in their lives. We must actually have the impact. Otherwise, again, it's just empty words. So that journey has kicked off and certainly, we're excited about that journey. So to just summarize some of the delivery in the past 12 months on this slide. The new business we talked about, and I can't talk enough about it, but certainly does show that we're on the winning track. The strong market performance has helped. It's a big driver of our revenue. 60% of our revenue comes from our assets under management. So during the year, the strong markets helped us. And then it also landed us with a higher assets under management at the year-end, which gives us the ground for growth into the future on our revenue again. So the higher market are our performance in last year and gives us a great base to work off for this year. Certainly, a big declining trend in retrenchments, as we also spoke about in December and getting closer to normality, we will see every now and then a company still doing retrenchments now that we've got our eyes on it. But certainly, our members exiting the business through all the normal cases, including retrenchments are back to more normalized numbers, which we'll show you just now in detail. Very happy with how we landed, not just the brand, but also our value proposition to clients, to staff and basically what we're about and what we want to be in the longer run. So that all talks to the same strategy, very aligned, very simplified, and it seems like everybody has bought into that. So we're quite excited. And then I can explain a little bit about our digital transformation, our individualization strategy. I've called it retailization. You can call it what you want. It is about connecting with members. It's about all this [indiscernible] of getting individual members in our phones to want to deal with us to want to do business with us to want to remain with us for a long period and certainly invest their assets with us. So that is the strategy. And we've quoted a few numbers there. Engagement up 77%. That doesn't just happen. It's a program that delivers that. And we want to escalate that to even much higher numbers. This is just the start. Utilization of our digital tools. We develop these tools and then it's about rolling it out and getting people to work with it. And that's not only the individuals, but also the brokers and the FPC team, wealth team that actually works with those clients to utilize better digital tools. Our AFRIS assets under management, that's our institutional solution for individual clients, up to ZAR 14.4 billion of assets under management growing consistently every year, and long will that continue, may that continue. I talked about the automation in the administration. Again, not just the excitement of delivering it, but the excitement of how the clients perceive it and the difference that we've made in the clients' lives, but also in our [ stocks ] lives, able to do transactions much quicker and faster being tracked. So we're getting there where we're constantly spending year after year in the budget and actually money on administration in terms of constantly improving what we do. And that's a really exciting journey for us and certainly will, over time, lock in a lot of value. Also, if we think about the Sanlam transaction coming on, that's how we're going to unlock value in terms of synergies and efficiencies with this scale. So we have to do that, and we have to get it right, and we will continue. The group risk deal retail life sale to Sanlam is completed. That is great news for us in terms of finalizing our sales of capital-intensive businesses. Now we're truly advice-led because now that is back to the core business. And now we can look at closing down the license and releasing the capital over time. So Bruce will talk a little bit about that. But that was also a milestone to get that done before year-end. And the EBS transaction is almost completed with most of the approvals given and then we can start working together to enhance the offering there for some of our existing clients, some of our books and also our EBS to get a bigger growth. So all in all, a very nice year from a delivery point of view, and we're very excited about those. But if you really sit back and you say, what is transformed Alex Forbes and what are we most excited about? It's about our employees, and it's about the clients. And the clients have shown us, for the third year in a row, improved service, improved scores. We measure that thoroughly, and that is a big thumbs up for us. We're very excited about that, and we will continue to deliver even better service in the years to come. But it shows we're on the right track. And then certainly to change the culture amongst the people that must deliver the strategy was always critical for us. And the culture remains high, the morale is high through COVID, people came to the part they delivered. And we're seeing the results of that, and we're very excited about how we're engaging with our individuals and how they're engaging with us. And that's the brag slide, which you will forgive me for putting up. But adding, as I said, 5% almost to the revenue with regards to new business gives us a nice underpin for growth year-on-year. It's consistent now. It's not like a one-off. It's now 2 years in a row. And on top of this, we're seeing a great pipeline with lots of discussions going on in the market. And I'm not showing the names of the companies to show them, but to show you that this isn't fly by night. This is big corporates that want to partner with Alex Forbes into the future. And it is because they certainly believe that we're on the right track, we're doing the right investments, and we're a trustworthy brand to be able to partner with. So this is long-term decisions, and that's why we actually asked for permission to show their name. So it's quite exciting for us. Throughout all the businesses as well, I keep on missing out on it. Healthcare consulting at ZAR 54 million. It's a great business. And I think Bruce will talk to it a little bit later as well. It's a great business, growing constantly and delivering awesome returns, but also awesome service to their clients and rightfully so getting a lot of new business. I want to touch before I go into the individual business is just about our efforts to get to individuals, to help individuals, to support individuals. Another word for advice is actually help. And that's the way that we go out about helping the individuals that are in our funds. Some of them can't afford advice, but we want to help them to understand why they're saving and towards what they're saving and what they can change in their behavior. And one of the things that we measure is our RBC effort, 152% up in 1 year from the number of engagement that we have. Yes, it's smallest numbers. But you remember, those are all people close to retirement. So it's a small fraction of the environment. And to get those arrows that we've got there going straight up, we've developed the, My Money Matters toolkit, which was launched today, which incorporates everything that the individuals have told us they want it. It's the website that they can go on and click on and really get all the help that they want until they get to an adviser that can help them finally with making the transaction. So the digital tools are getting there. It's going to elevate these type of engagements and the real connection that we're making with members into the stratosphere. And that's what we're really excited about. We can see how these things are coming together. So before I hand over to Bruce, I'll go very quickly through the different revenue angles, the different businesses, starting with retirements. And it's probably, again, you shouldn't have a favorite child, but this is probably one of the areas where we're the most proud of how they've delivered, how this area has delivered at the time of having the most headwinds. COVID affected this business with retrenchments the biggest, and they came out flat with a very, very depleted base to work off. And that only came from hard work and trust and having the right relationships with the clients and fixing their administration so that the new business can come on to that platform. So the results are on there, the numbers are on there. The only other thing that I will highlight is, are we going to get to the members? I'll talk to it there. A nice ZAR 100 billion -- over ZAR 100 billion now assets under management in the umbrella funds with great growth. And a big part of our focus into the future is to make sure that, that umbrella differentiates itself from the rest of the market to enable us to grow that even more. Nice decline in retrenchments and therefore, this business is growing. A big driver of this business or this area of the business is obviously members, members under administration. The revenue is driven by those employed that we have under administration that pays an admin fee per member per month and those increase with salary increases. So the more members we have and the bigger the businesses grow, the better it is for us. So here, you can see it is flat year-on-year despite business is closing down, the liquidations. We lost some business and retrenchment, having a big effect on our member base, but 28,000 members added on in this year. Our year new business is over 80,000 members. So we just haven't onboarded another 50. That's already signed. They're in the process of being onboarded. And some have already started 1st of April, some already done. But during this year, in the next few months, we'll onboard another 50,000 members that are already signed. And even after March, we've landed another 20,000 odd members that must still come to this. So this is really a success story. And if you talk turnaround, I think this is the one to talk about, very excited about this. And it also proves that adding the Sanlam members, once they come across and once that transaction is approved, we're capable to do it. We're capable to do it. We're ready to do it. The systems allows us, the scalability and the people and the structure. Everything is in the right place now to do it. So this was the proof in the pudding. As I said, very excited about the healthcare business and the growth there, diversifying away from pure talking to medical aids and medical aid members into HMS, which is the health management solutions. You're now talking to individuals about attires and so forth on behalf of companies. A big growth area, and we're doing very, very well. They're adding lots of members in last year. It's a lower margin business, but certainly something that we're proud of delivering and really doing well in the healthcare space. Multinational, obviously, Botswana and Namibia still under pressure with normal growth in the countries. But certainly, fine-tuning their business as well and seeing green shoots there. We've got the stats there on the Arrive strategy by no means. It's flattened out a bit year-on-year, the results, but by no means, stop the effort there. We believe as Africa grows, this business is going to grow and we're 100% aligned for growth in emerging markets with this business. So quite excited about that. And then the investments is a big story for us, as I said, and it's been a very positive year. Yes, I would have loved to have more new business in assets under management, but certainly, good numbers coming through there, good growth in revenue as a result of the good markets. But then the performance of the portfolios, very good performance. Most of our portfolios beating benchmark, above benchmarks. Performer constantly ranks in the first quartile of the Alex Forbes manager watch. And then the investment the hedge fund has also won some awards. So a very positive story in the investment space. And certainly, what this proves is that the individual clients that are invested into our portfolios are getting good returns, good solid standard returns as a multi-manager should do. And we're seeing the benefits of that for ourselves and for them. And then we've made a huge efforts, as you know, in the ESG space and the transformation space with policies, with frameworks to really drive that underlying behavior in the industry. And certainly, the word out there for me is that we want to take the lead and be the leader in this industry with regards to ESG and transformation. And we will take that position in the market. The asset growth from ZAR 400 billion to ZAR 435 billion in the year has been mostly markets with uncontrollable flows, the normal contributions and the normal benefit payments, canceling each other out. As I said, the aim is still to get the normal benefit payments lower so that most of that gets invested in Alex Forbes again, making good inroads there, but still some way to go. And that's how we got to the ZAR 435 billion at year-end, 8% up, which is a very good number. And then the individual consulting, these are the stats for the year, the story there is a great improvement in preservation, great improvement in retaining those clients that reserves in Alex Forbes. Obviously, the growth in AFRIS, the growth in the membership, the growth in more clients signing up to AFRIS. So all of those exciting points. The bottom line in this space is this is where the future growth of Forbes is going to be. So this is just the start. These are great numbers, and it's good that we're getting it right. But certainly, this will have to be amplified even more. And hopefully, next year, we see you, you see even better numbers here. This is something that we're putting a lot of effort in to get even more right supporting our FPC team and the growth in FPC so that they can perform this valuable task of giving advice to our fund members. And now even I'm tired of my voice. So I think it's time for Bruce to do his part.

Thanks, Dawie. And yes, just to reiterate, we are very proud of these results more so because it is a reflection of the underlying strategy that we set out on a few years back and the fact that, that is coming through and delivering and as well as the fact that we have a fair amount of confidence that it will continue to deliver in the next couple of years. So driving a lot of our thinking is now the confidence that we believe we're on the right path in terms of the strategy. So just a combination of all of the different businesses, 7% up on revenue and 5% up on operating expenses, creating a 9% growth in underlying profit from continuing operations. You will recall from our half year that our discontinued operations including the group risk and retail life business had been impacted by COVID, and there was a fairly negative result there. And certainly, we -- we have, through the second half of the year, had more positive movement in that area as well as the profit and sale of that business, which is reflected in that number of ZAR 29 million. The profit on sale being ZAR 80 million for that business. I'll talk about that a little bit later. Total equity remaining fairly flat, although if you look at the average equity, it's down 7% year-on-year. And that has a fair amount of impact on our stats as well. Our capital required has increased marginally, largely because of some of the internal legal entity restructuring that we're doing and some of the changes in allocated costs and again, very conscious of managing that position as we become capital light. ZAR 574 million worth of available cash has resulted in a fairly strong dividend being declared of ZAR 0.20 for the year-end. Just moving on to operating income. Dawie has taken you through each of these divisions, just to reiterate, our understanding of the retirement consulting division is that they started on the back foot at the beginning of the year and have done exceptionally well in terms of new business and some ad hoc billing to get to a flat results, certainly ahead of expectations. The investments in individual consulting divisions doing very well, largely underpinned by the market growth. But specifically to reiterate the record new business and individual consulting, which is as a result of our sort of individualization process, which we're going through. And certainly, we are putting that team under pressure to grow exponentially going forward. On the expense side, 5% growth in expenses is pretty much in line with what we were targeting. It is a continuing area where we will be focusing and making sure that we deliver on our promises. You'll note that the personnel costs, an increase of 7% reflects that investment into our people costs, which is needed at the moment. I think that there is a war on talent out there and we are very conscious of that as well as the fact that there is an increased incentive cost based on the performance that we've had through the year and getting that back up to the levels that we anticipated. Some good management within the IT costs, largely underpinned by some exchange rate gains, which we had as well as the optimization of applications, which we have in that area. And then our ongoing management of premises costs, the 4% is below our sort of escalation rates, which are around 7% to 8% on most of our buildings. So a good result there. We are working on the Sandton building, and we have some fairly good news with regards to the fact that we have secured some relief in terms of subletting some of the floors within the Sandton building. That will be happening in the new year. So we have some -- essentially, we'll start reducing that property cost going into the future. And as everybody knows, we have 2 more years in terms of this lease in the Sandton building thereafter, we anticipate some good savings on that cost. Other expenses have increased by 10%. That's largely as a result of that apportionment within our AF Investments business. And again, their legal entity restructuring that we have been going through within the business. Just moving on down the rest of the income statement. Our nontrading and capital items reflects some of the amortization of our intangible assets. And additionally -- in addition this year, we've got -- and we've had some corporate transaction costs, and that's the reason for that increase. On our tax line, you will see a marked improvement on the effective tax rate. Again, a lot of the work that we've been doing with regards to our legal entity rationalization in the business. And I think we did highlight this in previous presentations. The -- just moving to the discontinued operations. You'll note that the loss from business operations, specifically from the group risk and retail life businesses, certainly improved from the half year that we announced. And then there's also a profit on sale, which is reflected there for that group risk business. We have transferred the policies to Sanlam as at the 31st of March. But there is still an ongoing process of closing down that balance sheet and continuing to honor the liabilities that we have with regards to policyholders from a historical perspective. It will take about 12 to 18 months to close down that balance sheet over the -- before we can take that company into liquidation. The discontinued operations also includes the results of our AFICA business, which is being sold to Glacier. And you'll see a marked improvement in the profitability of that business as well, which is also underpinned by the markets. It's -- those profits are linked to assets under management within that business. Moving to our stats and headline earnings per share. I think importantly, the headline earnings per share from continuing operations being 19% up as a good reflection of our underlying business operations. In the prior year, you would remember that we had a large provision for our ETV case in the U.K. and that certainly affected our headline earnings per share in the prior year, which is what's given us into an over 100% growth in the total operations hit. But the increased headline earnings has certainly given us the ability to be a little bit better on our -- more aggressive on our dividends. And so a final dividend declaration of ZAR 0.20 bringing our annual dividend to ZAR 0.32 for the year. Importantly, here, we did debate and I'll talk about capital as well shortly. But the Board has agreed to change our dividend cover ratio from 1.5 to 2x cover up to 1.5x cover, which has given us the ability to increase our dividend payout. In looking at our capital journey, just going back a little bit and looking backwards. We have done a number of things to improve our underlying regulatory capital position, specifically the sale of the insurance businesses as well as the restructuring of our umbrella fund. And I think both -- I mean all of those actions have resulted in our capital being close to ZAR 1 billion lower than it would have been had we not undertaken those capital-light transactions. This is something that we are reflecting on, I think that pretty much brings us to the end of that sort of capital-light restructuring. And our anticipation is that going forward, our capital will increase with our underlying operations growth as we grow into the future. We've also spent a bit of time looking at how we allocated capital over the last 3 years, largely returning capital to shareholders. And you will see that we've done that through share repurchases, special dividends and ordinary dividends. That's over and above the repayment of debt and the investment of some of our capital into business operations, including the developments that we've done through technology, our brand enhancement and some of the regulatory programs that we have been pursuing. I think it's important to reflect on this going backwards as we look forward and decide how we will allocate capital in the future. All of those actions have certainly improved our return on equity with the result of 11.2% for the end of this year. And that's after having returned ZAR 2.1 billion to shareholders over the last 3 years. So I think that that's been a very good journey for us, certainly put us in the right position. And as I said, going forward, we believe that we can improve on that position. As we look at the projected capital over the next 5 years, we've had debates certainly at the Board with regards to how we allocate capital and the need to continue to invest in the growth of our business. And that includes, again, enhancing our technology and certainly investing in our people. Other items, which have come up certainly is the allocation of capital to ESG and the discussion around that still continues. But our projections reflect that we will continue to return capital to shareholders, largely through ordinary dividends. And as a result, you've seen the change in our dividend policy to allow us to return cash to shareholders more aggressively. So we are confident about our projections of the future. We are optimistic about our growth and certainly want to, at this stage, reaffirm some of the objectives that we set out with at the beginning of our tenure at Alexander Forbes. And obviously, that was disrupted through this COVID period. But to come back and reiterate the fact that we do intend and certainly target to get our cost-to-income ratio back to 70% and to drive our return on equity above 14.5%. So looking at our future and understanding that, that certainly targets that we set out on and we want to reiterate that we -- those are still on the table for us. Moving on to our mergers and acquisitions and our transactions over the last year. Dawie mentioned the fact that we have completed the group risk and retail life. It's been a very collaborative effort between ourselves and Sanlam and certainly, the transition of those policies to Sanlam has gone very well. We will continue to support that transition process. And as I said, our plan to run down the balance sheet, the AF Life balance sheet over the next 12 to 18 months. The EBS transaction should complete within the next few weeks. And certainly, our focus will be on integrating that business into Alexander Forbes as quickly as possible. The purchase of the Sanlam stand-alone Employee Benefits business and the sale of the AFICA Group. We have submitted competition commission filings and we are responding to some of the questions that we're getting from the market and from the competition commission on those transactions. We also have a number of different additional agreements that we're trying to put in place and certainly hope to conclude all of that before the half year results are completed. We're also excited about the potential change in shareholding, which is currently sitting with the regulators for approval. As soon as that approval happens, the transaction between Prudential and MRSO will happen, which will make Prudential a 14.8% owner of Alexander Forbes. And thereafter, they will go to the market to increase that shareholding to the 33% as was announced. We're hoping that all of those transactions or that process will happen during the course of June and through into July. And certainly, there will be a lot of communication with shareholders around that process going forward. And that's it for me. I'll hand back to you, Dawie.

Thanks, Bruce. Was it easier to deliver better numbers?

Absolutely, absolutely.

I want to reiterate before I end of our big focus on our individual customer, our end client, our -- the person that we want to connect with that we can make a difference in their lives that we can impact. And this certainly our drive to get right as a business. And then I want to conclude by summarizing, but also just reaffirming our actions and intent for the next 12 months. Certainly, very excited about the new business pipeline. One of my new business people told me over the weekend that we should expand our range into anything that one can sell because there's a lot of interest in Forbes at the moment. And I said, well, then we've done our things right, but we won't sell medical equipment. We're not in that space. But certainly, the interest in Alex Forbes is there. We're quite excited about that. Modernizing the customer experience high on our priority. And one can never do enough. We have a long way to go small improvements every year. We can never do enough, but we're certainly going to catch up and improve that as we go along. The umbrella fund solution is something that we've spent a lot of time on to make sure that we are differentiated in the market. No question asked. We must stand out, we must be the best at it. The offering we have must be well explained, well articulated. And then the consulting on that as a solution must really add value to the bottom line. And then we have worked a lot on our consulting model and will continue to embed that in this year. And what I mean is our consultants, specifically healthcare, retirement, investments and then talking even more so about the individual consultants the [ AF ] force that we have. They -- I call them the spear. They're the spear of the arrow, and they are the impact in the market. And we're spending a lot of time to empower them through the whole business to be the best in the market so that they can look great in front of their clients, add value. So it's about empowering them and enabling them to do their best. And we're working a lot on that. And that's already reap the benefits. The continuation of the automation. It's both programming more stuff but also landing it with the clients and rolling it out so that the adoption is higher, so that everybody benefits. So there's a lot of work going into that for the year. Leading the changes in ESG and transformation, as I said, we'll continue to unpack that, work with the asset managers, work with the corporates to get that right. And then implementing the acquisitions. It's very, very important to -- for us to make sure that we unlock the value that we priced into those transactions. There's synergies that we must embed. There's value to unlock. So the transactions must be implemented to the best of our ability for the benefit of the existing clients that's going to come on, and they must have a great experience, and then we must lock in the benefits that we've actually priced into it. And then we'll continue to look for selective opportunities. We still have to grow in many areas of the business. And when there's opportunities to buy or partner with companies to achieve that, we will certainly look at that. And then to reaffirm what Bruce has said about the cost income ratio and the return on equity, it's -- we debated it a long time, but the confidence is there in our numbers. The confidence is there in our projections. We can see it come through now. And hopefully, that's a message that we've landed with you. But we don't want to just say it. We're actually proving it by saying, if we constantly grow our revenue line by 8% to 9%, we constantly keep our expenses under 6%, the jaws will open up, and that is the result, is a 70% cost-to-income ratio and a return on equity. And the numbers work out. We feel confident in the strategy and in the pipeline and that we can now set the targets to achieve that within the next 4 years. So leave you on that high note. And thank you for listening. Thank you for your support over the last number of years and certainly looking forward to the journey over the next number of years. Thank you very much.

Thank you very much, Dawie. We have 2 questions, one from -- the first from Matt at Laurium Capital. Congrats on the positive results, the dividend cover of 1 to 1.5x. Is this based on normalized earnings or IFRS earnings?

I think we haven't really ever looked at the specific measure of earnings. It would be [ HEPS ] and that's what we would target. And I guess, as I've discussed with Dawie on this underlying [ HEPS ] or earnings per share would be what we look at in terms of the total group, and that's IFRS earnings. It does depend on the actual cash flows. So for example, in the current year, our headline earnings per share includes the proceeds and sale of the group risk business, of which most of that proceeds and sale has been received in cash. And therefore, we would take that into account in terms of the earnings that we calculate off. So we have given the range and we would take into account the cash that we've received. So the intention is to return cash to shareholders as much as possible within that dividend range. So that's where it comes from.

The second question is from Chris Stewart at 91. With your free float potentially falling as low as 27% of and tradability of the share already as low as ZAR 5 million per day. What are the prospects for AFH as a listed entity?

Big debate, lots of factors coming into the debate on being listed or non-listed, Chris, and not only tradability. I think there's many companies who does well on the JSE for other reasons than free float. But certainly, the free float will become more of an issue. It is not necessarily worse than what we're currently off. We had -- Mercer at 30% not too far ago with [indiscernible] at 25% to 30% as well. So you know a free float in the fullness of time after the Prudential transaction won't be much worse than we were a few years ago. And we have long-term holders in some of the asset managers as well believes in the long-term strategy. So I think not worse off, but it is still something to consider. And then you throw in the extra governance requirements of the JSE listing and those things. But you play that off against and that is quite important for us, play that off against the benefits of being listed certainly to the clients. The clients love the fact that -- and we work with clients money, we're adviser. The clients love the fact that we are well governed there's an independent board looking after them and their interest with management. So that benefit, one can't put into actual money, but it's a massive benefit for us. And then the ability to attract top talent as a listed entity with a nice solid trusted brand out there. It's a huge benefit to attract the right talent. So we must look at those things. And certainly, at the moment, no interest to delist.

Second question from Chris. Can you comment on the magnitude of your capital surplus post the ZAR 0.20 final dividend and the conclusion of the remainder of the capital management actions?

Sure. So currently, we have a capital surplus of ZAR 1.3 billion. Of course, we do hold a capital cover ratio of 1.2x. So that would take that ZAR 1.3 billion down to ZAR 1 billion worth of available capital. The transactions, AF Life -- sorry, the group risk retail life transaction concluding, we have recognized some of that benefit in this year-end. But there's still approximately ZAR 100 million to recognize in the future. So as we run down that balance sheet over the next 12 months. So that takes you to ZAR 1.1 billion worth of surplus capital. The dividend that we're declaring is in the region of ZAR 320 million. And so that reduces it. Our -- the difference between our actual surplus capital and our available cash is that some of that capital sits in restricted areas. I use the word restricted. It is in entities where we don't really have access to the cash, such as our self captive insurance facility in Jersey. So we have a bunch of cash sitting there as part of the surplus, but it's not really cash that we're wanting to withdraw from that insurance facility and distribute to shareholders. So there are -- there is a restriction on certain amounts of cash, which takes our cash down to ZAR 574 million. As I said, of that ZAR 574 million, we're paying out ZAR 320 million. So it doesn't leave -- it leaves a few hundred million over and above that, which will remain in the business. And each year, we will look to sort of ensure that we pay out the cash that we earn going forward. I hope that's given some color to those numbers. I don't know if I've confused.

Next question is from Charl De Villiers at Ashburton. Please could you give us a better sense of scale of the scale of the subletting opportunity next year relative to the approximate ZAR 200 million of annual cash costs for property rentals?

Sure. Again, need to factor in the shorter and longer-term journey here for us. So in the short term, the benefit of the subletting opportunity, I think, is not significant. And the reason why I say that is because the current market rates that you can sublet it are certainly way below the rate that we're paying in terms of our contractual lease arrangement. So I don't think we have publish the number that's potential, and we can't really talk to that, but it's not a significant enhancement, but it will reduce costs slightly through the next year. The benefit of the -- or the ultimate benefit in terms of changing our lease will be when we end the term of the lease in September 2024. And we will then reduce our footprint significantly within this lease building. The target that we've kind of put out there in terms of our own sort of property team is to reduce that ZAR 280 million, which is the current cost of our property by ZAR 100 million. So we think that, that is a significant benefit, which will come in 2 years' time. Certainly, between now and the end of those 2 years, we will hopefully get some of that ZAR 100 million benefit, but certainly not all of it, no.

And we're busy finalizing those contracts. And as soon as we are ready, we'll make that available. We just don't want to give the final numbers at the time when we're busy with the negotiations. But certainly, a lot more certainty on those numbers once we've signed the deal, which is exactly what I would imagine the market wants.

And final comment from Chris. Thank you, Chris, We always appreciate the feedback, excellent, very clear answers from both Dawie and Bruce. So many thanks.

Thanks.

I think we must just be careful that they don't get too big an ego after that complement.

Thank you very much.

And with that, I've got no further questions. So I would like to thank everybody for taking the time to join us this afternoon. And we look forward to engaging with you through the course of this week. Thank you very much.

Thank you.