Old Mutual delivers on most commitments

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Old Mutual delivers on most commitments

Published Date: 2019-03-12 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Old Mutual delivers on most commitments

The group missed its main profit target due to volatile markets and the weak SA economy as it announced R2 billion in share buybacks.

Old Mutual says 2018 was momentous for the group. It completed the managed separation of its UK and SA businesses before listing on the JSE last June. That was followed by the unbundling of a 32% stake in Nedbank in October, returning R38.8 billion to shareholders, while it retained a 19.9% stake in the bank. On top of that, it also returned R10.7 billion to shareholders through special and ordinary dividends.

While the financial services group believes it has delivered well against the commitments it made to shareholders, it admits that it failed to grow its Results from Operations (RFO), a key performance indicator for the group. Its results for the year were delivered in what it says was a difficult operating environment due to volatile markets and a weak SA economy.

Persistently high unemployment, the VAT rate increase and rising fuel prices resulted in lower disposable income for its retail customers and made it difficult to acquire new customers - and hold onto old ones. Although business and consumer confidence improved a little, it said it remained fragile, with concerns around government debt levels and uncertainty particularly around the proposed policy on land expropriation without compensation.

While its SA business was affected by poor investment returns, it took a hit in Zimbabwe due to the change in its functional currency in October, which reduced its contribution to the group.

For the year to end-December, RFO declined by 3.9% to R9.96 billion, missing its growth target of GDP plus 2%. Profit after tax jumped 154% to R36.6 billion. Headline earnings rose 8.4% to R14.2 billion. Adjusted headline earnings declined by 11.1% to R11.5 billion due to the lower RFO and lower investment income in SA as a result of weaker equity markets. It's paying a final dividend of 72c per share, taking its total dividend for the year to 117c.

It said it was on track to achieve its efficiency target of R1 billion in run-rate savings by the end of the year after achieving R750 million of cost savings last year. It would be in a position to manage its expense growth within inflation thereafter.

Following a review of its capital position, Old Mutual said it planned to use excess funds to conduct on-market share buybacks of up to R2 billion.

Its shares dropped 5.5% to R20.59 yesterday.





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