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Push into Africa pays off for Old Mutual

Aug 06 2015 12:23

Cape Town - Investors on Thursday cheered Old Mutual's interim performance, sending the share price 3.25% higher to R45.07 in mid-afternoon trade.

Group CEO Julian Roberts said the businesses of Old Mutual in South Africa continue to perform very well, despite challenging economic conditions in large emerging markets.

Old Mutual [JSE:OML] in South Africa grew profits by 14%, while Nedbank [JSE:NED] grew its headline earnings by 16% in the six months to the end of June 2015..

"We are making good progress on these businesses working more closely together. This has been an exceptional six months for Old Mutual. Last year, we reallocated significant capital to buy quality businesses in our core markets," said Roberts during his last results presentation as group CEO.

"This year is about ensuring that these investments are fully integrated and making the returns we expect. We have an absolute focus on achieving this, while being a responsible business."

During the interim period the group's profits grew strongly, up 20% in constant currency to £904m and up 19% in reported currency. Gross sales of £15.6bn were up 25% in constant currency, with funds under management up 7% to £335.7bn also in constant currency.

Annualised group return on equity (RoE) at 15.0% was at the top end of our target range of 12% to 15%, benefiting from profit growth and the impact of a weaker rand.

Rest of Africa and UK

Old Mutual’s Rest of Africa businesses are growing strongly, with profits up 31%, and Nedbank’s Rest of African division has seen very significant growth through the acquisition of a 20% stake in ETI.

“In the UK, we are seeing further proof that we have the right business model and believe we will be a net beneficiary from the ongoing reform in the pensions market. Pressure to deliver full access to pension freedoms, including drawdown for beneficiaries of a pension, creates additional opportunities for Old Mutual Wealth as one of the leading retail investment businesses," said Roberts.

"Nevertheless, I believe that the government must balance pension liberalisation with the need for individuals to save for their retirement."

On the future outlook Roberts said, while the group expected the next six months to be challenging for emerging markets, and exchange rate movements would likely temper sterling reported growth, he was confident that by remaining focused on meeting customers’ needs and improving the operating efficiencies of the business, the group will continue to make good progress.

The group announced an interim dividend of 2.65p, which is up 8%.

nedbank  |  old mutual  |  insurance  |  financial services


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