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Old Mutual profit drops on currency fluctuations

Feb 27 2015 11:08
Reuters and Bloomberg

Johannesburg - Old Mutual [JSE:OML] said 2014 profit fell after the average rate of the rand weakened 18% against the pound on Friday.

Net income from continuing operations declined to £902m (R16bn) from £980m (R17.4bn) a year earlier, the London-based company said in a statement on Friday.

Adjusted operating earnings per share fell 3% on a reported currency basis to 17.9 pence, which still beat the 17.8p median estimate of 12 analysts surveyed by Bloomberg.

“We have taken significant steps in building an African financial services champion,” CEO Julian Roberts said in the statement.

“Old Mutual Wealth has substantially completed its investment in building a modern UK retail investment company with its acquisition of Quilter Cheviot, in addition to Intrinsic earlier in the year. We are already seeing the benefits.”

Old Mutual was formed in South Africa more than 100 years ago and the bulk of its profit still comes from the region. In the past year, Old Mutual agreed to buy UK-based Quilter Cheviot, its US-based asset management unit held an initial public offering in New York, it bought microfinance company Faulu Kenya DTM and it sold Skandia units in Germany, Austria and Poland.

The insurer, which has a majority stake in Nedbank [JSE:NED], is focusing on emerging markets where growth rates may help boost profit.

“We have invested significantly and reallocated capital in our key markets to grow profits over the long term while holding appropriate levels of capital and leverage,” Roberts said.

“Our focus for 2015 is on integrating the acquisitions, delivering the operational improvements and creating value from these investments.”

Expansion in Africa

Old Mutual has only spent part of a R5bn ($435.18m) investment programme for expansion in sub-Saharan Africa. Its Kenyan purchase follows similar purchases in Ghana and Nigeria.

"We are not as big in Nigeria as we would like to be," Roberts said, though he also said: "We are not in any particular rush".

In India, Roberts reiterated the firm was waiting for "absolute clarity" on rule changes before looking to raise its stake in its joint insurance venture there with partner Kotak Mahindra.

Adjusted operating pre-tax profit for 2014 rose 16% to £1.6bn ($2.5bn) on a constant currency basis, against a forecast of £1.56bn in a poll provided by the company.

Net client cash flow came in at £4.9bn, with funds under management rising 6% to £319bn.

The company, which announced a final dividend of 6.25p, gained 0.6% to R39.84 as of 09:17 in Johannesburg trading.

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