OM separation finalised by year’s end
FINANCIAL services group Old Mutual plc announced that its managed separation was set to be completed before the end of this year, giving rise to two separate entities to be listed both on the London Stock Exchange and the JSE.
The group said one would consist principally of the Old Mutual Wealth operations and one listing would be called Quilter plc. “The other will be the new South African holding company, Old Mutual Limited, which will consist of Old Mutual Emerging Markets (Omem), the Old Mutual holding in Nedbank and the residual Old Mutual plc,” the group said.
Chief executive Bruce Hemphill said a vast amount had been achieved over the past two years and they were delivering on both of the commitments they made in March 2016, when they announced the managed separation.
“The process has already delivered significant value through cost and debt reduction, and we are on track for material completion of the managed separation with the listings of Old Mutual Limited and Quilter within our expected timetable,” Hemphill said.
The group said once the managed separation was complete, each business would have its local regulator as its lead regulator and would have continued delivery of enhanced performance and allow the market to value it appropriately.
The group said yesterday that its strategy of managed separation aimed to unlock and create significant longterm value for its shareholders, which is currently trapped within the group structure and to remove the costs arising from it.
However, the group is also facing a challenge in the US, with two companies lodging a claim against it in a New York court relating to US assets Old Mutual sold eight years ago.
Hemphill refused to be drawn to comment on the matter, stating that “the litigation is ongoing and I cannot comment further beyond what we said on Tuesday”.
On Tuesday Old Mutual said it noted that The Travelers Companies, and St Paul Fire and Marine Insurance Company had lodged a claim in the Southern District Court of New York in relation to pre-existing plc head office legacy items relating to previously disposed US assets. “We believe that this action is without merit and we will resist accordingly,” the group said.
It has continued to be business as usual as it reported its results for the year to December, reporting 22 percent increase in pre-tax adjusted operating profit to £2 billion (R32.89bn), from last year’s £1.7bn.
Total revenue from continuing operations jumped to £10.4bn, from £6.2bn while profit increased to £909 million, from £570m. Headline earnings a share improved to 16.5 pence a share, from last year’s 14.1p a share. Old Mutual declared a second interim dividend for the year of 3.57p a share.
Bradley Preston, head of listed investments at Mergence Investment Managers, said Old Mutual’s results looked strong and broadly ahead of expectations.
“Some of the best came from performance fees in the UK. The increased certainty on capital requirements of the two separate businesses is also a positive,” Preston said.
Ron Klipin, a senior analyst at Cratos Capital, said the results looked solid against difficult operating conditions in South Africa as well as Brexit fears in the UK.
“Once-off profits from the sale of its US operation Omam was beneficial, as were lower finance costs and lower operating costs due to a downscaling of the London head office. The separation process into two separate listed entities should unlock value for shareholders late in 2018,” Klipin said.