Octodec has a watershed year
OLD MUTUAL, the insurer that owns banking group Nedbank, reported yesterday record sales for the three months to the end of September, driven by strong growth from its emerging market operations and acquisitions that boosted earnings.
The group’s trading statement resulted in its JSE-listed stock climbing by as much as 3.35 percent to a record high of R47.15. The stock was was last quoted up 0.2 percent at R45.71, which valued the company at R225bn.
Old Mutual reported a 31 percent rise in gross sales to £8.1 billion (R172.2bn).
Old Mutual’s gross sales were ahead of consensus, while new life business was better than expected, Eamonn Flanagan, an analyst at Shore Capital Group in London, said in a note to clients.
“The highlight was the progress achieved by Old Mutual Wealth with strong improvements in sales and own-managed flows.”
The biggest contributor to the improvement in the group’s sales was the gain at Old Mutual Wealth, where sales rose by 45 percent to £5.5bn.
Old Mutual Emerging Markets saw an 8 percent climb in sales to £2.6bn.
“This has been a very good quarter for the group,” Old Mutual group finance director Ingrid Johnson said.
South Africa
In South Africa, gross sales climbed by 28 percent on the comparative quarter, despite what Old Mutual called weaker conditions in the country.
Funds under management notched up to R955.1bn, rising by 6 percent on the start of the year due to the good Old Mutual Investment Group (OMIG) investment performance, strong year-to-date net client cash flows of R20.6bn and positive market movements.
Net client cash flows in South Africa were R3.7bn for the quarter with OMIG’s net client cash flows up R5bn.
“Although we expect exchange rate movements to temper sterling reported growth and conditions for emerging markets to remain challenging, we are confident that if we continue to focus on meeting our customers’ needs and improving operating efficiencies we can continue to deliver sustainable growth,” Johnson said.
Rest of Africa gross sales were 32 percent higher than the previous period due to “strong asset management flows in Kenya and Malawi, increased sales advisers and strong credit life sales in Zimbabwe and positive foreign exchange impacts”, the company said in a statement.
The group said it had made good progress with integrating East African group UAP and the business was being managed under the group operating model structure.
In June, Old Mutual completed the acquisition of an extra 37.3 percent shareholding in UAP. This acquisition took Old Mutual’s stake in UAP to 60.7 percent.
Founded in South Africa in 1845, Old Mutual moved its headquarters to London in 1999.
Chief executive
During the global financial crisis it reported losses and appointed Julian Roberts as the chief executive to effect a turnaround.
Since 2009, the share price has more than tripled and the insurer has redeployed capital to boost its UK operations and expand its presence in Africa.
While it sold a number of its Skandia units in Europe to release cash and resources, Old Mutual still has one such operation in Italy.
Roberts, who resigned as the chief executive of Old Mutual earlier this year, was succeeded on November 1 by Bruce Hemphill.
Hemphill was previously the head of wealth, insurance and non-bank financial services at Johannesburg-based Standard Bank and, prior to that, the head of Standard Bank insurance unit Liberty Holdings. – Additional reporting Bloomberg LISTED property firm Octodec Investments has entered into an equal joint venture with Renprop and other strategic partners to develop a residential apartment block in Sunninghill, Johannesburg, for R156 million.
Octodec’s chief executive Jeffrey Wapnick said yesterday that the aim of the joint venture was to explore a different segment of the residential market. He stressed, however, that this was not a shift from Octodec’s key operating areas in the central business districts (CBDs) of Pretoria and Johannesburg.
Wapnick said the venture was opportunistic and Octodec did not want to shut itself off from opportunities.
“It’s in a different price segment and something different. We found like-minded individuals to take us into that area and we are talking about other schemes,” he said.
“But we must see how this goes before we commit to another (scheme).”
Wapnick said Octodec could do only a certain amount of leasing deals in a month in the CBDs as take-up was slow.
He said the number of office to residential apartment conversion projects Octodec had in its portfolio would keep the company busy “for the next 12 years, if that was all we did”.
Called The Manhattan, the Sunninghill project will provide 180 rental units and is expected to be completed by late next year.
Octodec has a portfolio of 330 properties in Gauteng valued at R11.4 billion, plus three equity-accounted investments, with its 50 percent interest in these investments valued at R161.3m.
About 30 percent of the portfolio is residential, 10 percent conventional retail centres, 28 percent high street retail, 9 percent industrial and 23 percent office space.
Wapnick said total vacancies in the office portfolio, including offices that had been mothballed, was 30.9 percent, while core vacancies were at 12.5 percent.
Anthony Stein, Octodec’s financial director, said most of the mothballed offices were for residential developments or potential government deals.
This year was a watershed for Octodec, Wapnick said. The Treasury had given the Public Works Department permission to renew many outstanding leases for buildings owned by different landlords, which had brought rentals on a lot of them back to approximate market rentals.
Octodec yesterday reported a 7.7 percent growth in distributions to 189.2c for the year to August from 175.7c the previous year.
Net asset value a share increased 12.5 percent to R27.69c from R24.62c.
Revenue increase
Revenue increased sharply to R1.64bn from R537.8m, largely because of the merger with Premium Properties.
Wapnick said the residential portfolio continued to be ahead of expectations, with core growth in residential rental income at 6 percent and core vacancies below 3.5 percent of gross lettable area.
He said there was also a slight improvement in the industrial rental market and a decrease in vacancies.
Bad debt, write-offs and provisions declined to 0.5 percent of total tenant income from 1 percent.
Vacancies in the total portfolio, including properties held for redevelopment, dropped to 14.8 percent of gross lettable area from 16.7 percent.
Octodec acquired seven smaller properties during the year for R109.4m and disposed of three non-core properties for R15.9m.
Shares in Octodec dropped 0.98 percent yesterday to close at R25.25, which valued the company at R6.4bn.