Old Mu­tual shows 37% rise in its pre-tax profit

The Star Early Edition - - BUSINESS REPORT - Sandile Mchunu

OLD MU­TUAL de­liv­ered buoy­ant re­sults last week with its pre-tax ad­justed op­er­at­ing profit show­ing a 37 per­cent in­crease.

The fi­nan­cial ser­vices firm said on Fri­day that it was con­fi­dent its break-up plans would be fi­nalised by the end of 2018.

The group said the key fo­cus of this year was pre­par­ing its two un­listed busi­nesses, Old Mu­tual Emerg­ing Mar­kets (Omem) and Old Mu­tual Wealth (OMW), for in­de­pen­dence. “In both cases, we have made sub­stan­tial progress,” the group said.

Chief ex­ec­u­tive Bruce Hem­phill said the man­aged sep­a­ra­tion strat­egy, an­nounced in March 2016, would un­lock and cre­ate sig­nif­i­cant long-term value for its share­hold­ers, cur­rently trapped within the group struc­ture as well as re­mov­ing the sig­nif­i­cant costs aris­ing from that struc­ture.

“We are mak­ing ex­cel­lent progress in de­liv­er­ing the man­aged sep­a­ra­tion of Old Mu­tual hav­ing ma­te­ri­ally re­duced debt and largely dis­posed of our stake in OM As­set Man­age­ment (Omam).”

He said the com­pany’s fo­cus for the next phase of the sep­a­ra­tion was to fi­nalise the stand­alone bal­ance sheets for the two un­listed busi­nesses and “de­liver them to our share­hold­ers at the ear­li­est op­por­tu­nity in 2018 af­ter our 2017 full year re­sults” .

Old Mu­tual is also re­duc­ing its hold­ing in Omam to 5.5 per­cent, which will be achieved by selling Omam shares to US-based HNA Cap­i­tal. Old Mu­tual started selling down its stake in Omam in Oc­to­ber 2014.

It will then list Old Mu­tual Wealth on the Lon­don Stock Ex­change and JSE with Old Mu­tual Lim­ited (OML), a new hold­ing com­pany cover­ing its emerg­ing mar­kets di­vi­sion, its ma­jor­ity stake in South Africa’s Ned­bank and Old Mu­tual plc.

In the six months to end June, Old Mu­tual re­ported a 37 per­cent in­crease in pre-tax ad­justed op­er­at­ing profit (AOP) to £969 mil­lion (R16.95 bil­lion), up from £708m a year ago, helped by pound weakness and a strong per­for­mance by OMW.

Dur­ing the six months, the av­er­age rand rate was 25 per­cent stronger ver­sus the pound com­pared to the first half of 2016.

The IFRS pre-tax profit was up 76 per­cent to £940m, ben­e­fit­ing from a profit of £108m from the sale of Omam par­tially off­set by a good­will im­pair­ment of £71m in re­spect of UAP-Old Mu­tual in East Africa.

“Old Mu­tual Wealth had a strong six months and Omem and Ned­bank are trad­ing re­siliently given the con­tin­u­ing dif­fi­cult macroe­co­nomic con­di­tions in South Africa,” Hem­phill said.

Omem re­ported a 1 per­cent in­crease in AOP to R6bn, re­flect­ing a sig­nif­i­cant im­prove­ment at Old Mu­tual In­sure.

Ned­bank re­ported 10 per­cent growth in AOP to R9bn in its man­aged op­er­a­tions.

OMW re­ported a 29 per­cent in­crease in its AOP to £134m, driven by strong rev­enue growth and per­for­mance fees while Omam’s pre-tax AOP was broadly flat re­flect­ing its re­duced stake in the busi­ness.

Bradley Preston, the chief in­vest­ment of­fi­cer at Mer­gence In­vest­ment Man­agers, said Old Mu­tual’s re­sults were mixed with OM Wealth de­liv­er­ing very strong re­sults, while OM Emerg­ing Mar­kets re­sults were a lit­tle dis­ap­point­ing.

“The group head­line num­ber was flat­tered by the weaker pound over the pe­riod. Over­all I think this is a good re­sult as the good OMW per­for­mance is quite im­por­tant to the man­aged sep­a­ra­tion and sep­a­rate list­ing of this busi­ness in the UK is ex­pected in the first half of next year,” Preston said.

Jor­dan Weir, an eq­ui­ties trader at BayHill Cap­i­tal, said the gen­eral view on the mar­ket was that the half year re­sults were bet­ter than ex­pected.

“The share price did, how­ever, re­act slightly neg­a­tively to the news of Old Mu­tual’s de­ci­sion to rather pur­sue the list­ing of its busi­nesses that they were ini­tially plan­ning to sell. This is more than likely just a knee­jerk re­ac­tion that will cor­rect it­self once share­hold­ers bet­ter un­der­stand Hem­phill’s de­ci­sion to un­lock value through the list­ing route rather than the sale route,” Weir said.

Old Mu­tual shares closed 1.96 per­cent lower at R34.44 on the JSE on Fri­day.

PHOTO: REUTERS

Old Mu­tual says it is con­fi­dent its break-up plans will be fi­nalised by the end of next year.

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