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Cape Town - Old Mutual Plc shareholders approved a revised directors' remuneration policy as well as a proposed managed separation incentive plan at a general meeting, which took place after the group's annual general meeting (AGM) on Tuesday.
Concerns were raised earlier about a proposed pay-out of R203m to CEO Bruce Hemphill as being excessive.
"We are going to be turning the lights off, but not right now," Hemphill said at the AGM.
He said the current structure of the group does not make sense as the benefits currently derived from it do not offset the costs of the structure.
In his view, the emerging markets business is a good one and the intention is for it to be a stand-alone listed entity. As for Nedbank, Hemphill said the group has made it clear that it will unbundle it and demerge the shares on the SA register.
The long-term interest of stakeholders will be best served by a "managed separation" of Old Mutual's businesses, Hemphill repeatedly emphasised at the AGM. The interest of small shareholders will be taken into consideration during the process, he added.
Old Mutual [JSE:OML] has created four strong businesses and the board has concluded that these four businesses are strong enough to stand on their own without the support of Old Mutual Plc, Hemphill told shareholders.
"We are talking about unbundling Nedbank [JSE:NED], for instance. We want to take advantage of legislation available to us," he explained at the AGM.
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All the resolutions proposed at the AGM were passed. These included the approval of the directors' remuneration report, other than the part containing the directors' remuneration policy, for the year ended December 31 2015. Another resolution passed was to grant authority to allot shares in the company.
Special resolutions passed at the AGM included to grant authority to disapply pre-emption rights in allotting certain equity securities and selling treasury shares; to grant the board authority to repurchase shares by market purchase on the London Stock Exchange and to approve contingent purchase contracts relating to the purchases of shares on the African stock exchanges where the company's shares are listed.
In a statement issued earlier on Tuesday, Old Mutual indicated that it wants to spin off a significant portion of its stake in Nedbank to investors, leaving the SA company with a strategic holding in the lender through Old Mutual Life Assurance. It will also pursue a demerger of its wealth businesses and continue reducing its 65.8% stake in Old Mutual Asset Management, which will be used to reduce debt, it said.
"Therefore, the Plc will not be needed at the end of the managed separation and the Sterling cost base won't be required. In tough markets we continued to perform well. Our businesses have maintained their focus on operational performance, despite continued rand weakness and volatility in other African currencies," said Hemphill.
The way one should think about the proposed "managed separation" is that the group has four good businesses - two listed ones and two which are not listed, explained Hemphill.
"The two unlisted ones are not correctly valued by the market in my view. In order to run the operation we also have to rent a building in London, hire 290 people, pay them salaries and have lots of costs," he said.
"The group is trading broadly in line with our expectations. We expect, however, that the outcome of the Brexit referendum will drive increased volatility in the second half of the year and will impact performance. My objective remains increased shareholder value."
READ: Old Mutual shareholders to vote on CEO’s R203m payout today
Hemphil emphasised that the proposed "managed separation" of the businesses involves a complex process, which needs the right sequence and timing and many issues need to be taken into account for the optimum route. The aim is to have the process concluded by the end of 2018. Part of the process would be to restructure the head office of Old Mutual Plc.
He anticipates that the "managed separation process" would include material repayment of the holding company's debt and the ultimate demerger and delisting of Old Mutual Wealth. It would also involve establishing a new South African holding company for emerging market operations.
"We want to pay dividends while reducing debt. I am pleased with the progress we have made so far," said Hemphill and added that it remains important for the "underlying boards" to continue their commitments in the meantime.
During question time a shareholder wanted to know why the AGM took place six months after the year-end. To this Old Mutual chair Patrick O'Sullivan replied that there was a need to manage the new structure and compensation plans, which included a consultation process with major shareholders.
"Is there an individual board member, who is actively pursuing separation and who is standing to gain about £1.3m when the separation is completed?" asked the shareholder. To this O'Sullivan replied that the actual cash payments in terms of salaries and benefits are clearly set out in remuneration reports.
As for the potential impact of the Brexit vote on the group, O'Sullivan said in the context of market exposure, the Old Mutual board had spent lots of time beforehand looking at the issue. He pointed out that, with the exception of Italian operations, the group has very little exposure on mainland Europe.
In answer to a shareholder's concern about the impact the current situation in SA could have on the group, Hemphill said it is important to take a step back and reflect on all that has been achieved in SA over the past 20 years.
"South Africa is growing up. I am confident that in the longer term SA is a very attractive destination. We have strong businesses in SA. The country will emerge from the difficulties and our businesses will be stronger as a result," said Hemphill.
He added that he and the CEOs of Old Mutual Emerging Markets and Nedbank are working closely with the SA government to ensure alignment between the government and the private sector. In his view "enormous progress" has already been made in this regard.
On a question regarding the remuneration of Hemphill, an Old Mutual official said at the AGM that the group is not trying to hide anything. She said a number of awards are involved as well as what he had to forfeit in order to join the company.
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