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Old Mutual, new tricks

The Africa-biased financial services group is weathering the emerging markets slowdown
August 7, 2015

Departing Old Mutual (OML) chief executive Julian Roberts is leaving what looks like a tidy ship to successor Bruce Hemphill, who takes over in November. Part life insurer, part asset manager, part banker, the South African group saw profit growth across all of its divisions in the first half.

IC TIP: Hold at 229p

Its core African business - which is centred on South Africa and the sub-Sahara region - delivered adjusted operating profit of £333m, up 16 per cent at constant currencies. Mortality trends, better client retention and growing equity markets all played to its benefit, as did the profit contribution from building its controlling stake in personal loan provider Old Mutual Finance. Nedbank also upped its return on equity from 15.1 per cent to 16 per cent But the business faces challenges in South Africa as consumers start to feel the effect of an economy restrained by falling commodity prices.

In the UK, Old Mutual Wealth has expanded its presence in the financial advice and wealth management market through acquisitions, and four months of profit from discretionary manager Quilter Cheviot helped boost its adjusted operating profit by a quarter to £151m. The group's US asset management business grew its funds by a modest 3 per cent to $227bn, but its adjusted operating profit was up more than a third, partly due to strong fee income.

Prior to these results, broker Investec Securities was expecting full-year EPS of 20.3p, compared with 17.9p in 2014.

OLD MUTUAL (OML)
ORD PRICE:229.2pMARKET VALUE:£11.3bn
TOUCH:229.1-229.3p12-MONTH HIGH:241pLOW: 164p
DIVIDEND YIELD:3.9%PE RATIO:16
NET ASSET VALUE:146p*FUNDS UNDER MANAGEMENT: £336bn

Half-year to 30 JunGross life premiums (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.625644.72.45
20151.596835.92.65
% change-2+21+26+8

Ex-div: 24 Sep

Payment: 30 Oct

*Includes intangible assets of £3.3bn, or 68p a share