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Steady progress at Old Mutual

First-half figures from Old Mutual showed a significant improvement, thanks to higher sales and strict cost management, but were up against some pretty weak comparables from 2009. Even so, adjusted operating profits rose from £513m to £735m, and funds under management grew from £285bn to £292bn. However, there was still a £1.6bn net outflow of funds, although most of this came from the US asset management operation, where clients withdrew funds to realise significant gains.

Group profits were also boosted by favourable currency movements against the South African rand and the Swedish krona, which accounted for 39 per cent of the rise in adjusted operating profits. Business notably improved in wealth management, where sales of long-term savings products jumped by 54 per cent and net cash client inflows more than trebled to £2.3bn. Operating profits from long-term savings also rose strongly, up a third to £477m, and there was even a modest underlying improvement in profits in the group's part owned South African based Nedbank, which came despite weak credit demand and only modest progress in reducing levels of default.

Subject to revision, Keefe Bruyette & Woods expects full-year EPS of 12.8p.

OLD MUTUAL (OML)
ORD PRICE:128pMARKET VALUE:£6,948m
TOUCH:127-128p12-MONTH HIGH:131pLOW: 85p
DIVIDEND YIELD:0.9%PE RATIO:NA
NET ASSET VALUE:167p*EMBEDDED VALUE:148p**

Half-year to 30 JunGross premiums (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20091.82160-1.80nil
20102.204435.101.10
% change+21+177--

Ex-div:13 Oct

Payment:30 Nov

*Includes intangible assets of £5bn, or 92p a share

**Calculated on a market consistent embedded value basis

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More analysis of company results

IC View

Old Mutual continues to restructure the US operation, while overall margins are being underpinned by a further push to cut costs. Shareholders have also seen the dividend reinstated, but with the shares trading 14 per cent below embedded value this is already reflected in the price. Fairly priced.

Last IC view: Fairly priced, 122p, 11 March 2010

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