OM CEO cracks his whip

Johannesburg - Executives at business divisions and subsidiaries of financial services group Old Mutual [JSE:OML] will be feeling the heat in 2010, judging by the ominous mood of CEO Julian Roberts who promised investors he'll be cracking his whip this year.

That much became apparent after a tough-talking results presentation from Roberts on Thursday, in which he set some very specific growth and performance targets for the next few years.

"Let me be very clear, we have developed a strategy which is aimed at delivering value to shareholders," said Roberts, following the release of annual results to end-December 2009.

Roberts has outlined a strategy which will see the group cut around £1.5bn in debt over the next three years, sell off its underperforming US life business, prepare an initial public offering (IPO) of its US asset management division and focus strictly on meeting pre-set performance goals.

Contrary to speculation, Roberts' strategy places the spotlight firmly on the South African and emerging market operations, and not the international businesses which have underperformed in the last few years.

He has highlighted local business units such Old Mutual South Africa (Omsa), Old Mutual Investment Group South Africa (Omigsa), Nedbank and short-term insurer Mutual & Federal as primary growth operations going forward.

In a further vote of confidence in the South African businesses, Old Mutual said it has begun moving information technology and back office functionality from European businesses back to the country, where the group enjoys a lower cost base.

As for performance criteria, emerging market businesses - including South Africa - will be expected to deliver return on equity (ROE) of 20% to 25% by 2012, while Nordic and wealth management businesses in developed markets are expected to deliver ROE of between 12% and 15%. European businesses should target ROE of 15% to 18%.

Asked by an analyst what would happen if a division should fail to deliver, Roberts responded: "We will be ruthless on these criteria".

Analysts who attended the results presentation were generally impressed with Roberts. However, some questions remained unanswered.

Greg Patterson, analyst at London firm KBW, pointed to a poor operating performance of the US asset management business which, he said, made the potential IPO unattractive.

Roberts agreed, saying the IPO would "definitely not happen in 2010".

Roberts also ducked a question by Brian Mushonga of Credit Suisse Standard Securities, who wanted more clarification on how Old Mutual was planning to pay down the £1.5bn in debt.

Roberts said he would not go into detail, but that figure should be borne in mind in future reporting periods.

Old Mutual shares were up 0.7% (9c) to 1 367c per share.

- Fin24.com