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A new Old Mutual emerges

Splitting the business into four parts leaves a few ends still to be tied up

A new Old Mutual emerges

This is the new Old Mutual (OMU) following last year’s split into four separate businesses. It also means that a lot of comparative numbers have been restated and the group’s half-year results are now reported in South African rand. The company was listed on the Johannesburg stock exchange as recently as 26 June, with four secondary listings including London on the following day.

IC TIP: Hold at 157.2p

Funds under management grew by 2 per cent, but the return on net asset value slipped from 19.4 per cent to 17.5 per cent as equity weakness in South Africa and Zimbabwe cut the investment return by 37 per cent.

The simplified business model translated into recurring cost savings of around ZAR270m (£14m) after incurring one-off costs of ZAR70m, and the company remains on target to achieve ZAR1bn by the end of 2019.

Trading in South Africa remained tough, with a squeeze on consumer disposable income caused by high unemployment, a rise in VAT and a rise in fuel prices slowing new customer acquisition significantly. Even so, life sales were up by 13 per cent and management remained sufficiently upbeat to declare a special dividend of 100¢ a share, which trimmed the group solvency ratio from 167 per cent to 164 per cent.

Steps are also in hand to further streamline the balance sheet through the distribution of 32 per cent of Nedbank to shareholders. This is expected to take place in the fourth quarter of 2018, and for every 100 Old Mutual shares held investors will receive approximately three Nedbank shares. Following this unbundling, Old Mutual will still own 19.9 per cent of Nedbank in its shareholder funds.

The trading climate in Zimbabwe showed some signs of improvement, having been hit by economic instability and a liquidity crisis. A new president was elected in July, but it is too early to judge whether much-needed economic reforms will be made. Investment returns from Kenya were affected by volatility in equity markets, while Nigeria and Ghana benefited from rising oil prices.

OLD MUTUAL (OMU)   
ORD PRICE:157.2pMARKET VALUE:£7.77bn
TOUCH:157.2-157.3p12-MONTH HIGH:177pLOW: 148p
DIVIDEND YIELD:1.5%PE RATIO:17
NET ASSET VALUE:212¢SOLVENCY RATIO: 164%
Half-year to 30 JunGross premiums (ZARbn)Pre-tax profit (ZARbn)Earnings per share (¢)Dividend per share (¢)†
201735.24.1954.3nil
2018 †39.77.8812745.00
% change+13+88+134-
Ex-div:20 Sep   
Payment:16 Oct   
£1=ZAR19.1 † Not including special dividend of 100¢ a share