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Old Mutual battles it out

The Pan-African savings, insurance and investment group is facing some tough macroeconomic headwinds
September 2, 2019

Old Mutual (OMU) “made good progress against our battlegrounds” in its half year to June, according interim boss Iain Williamson. It’s an odd turn of phrase, but look at the backdrop for the financial service group’s core markets (rather than the unfolding courtroom battle with former-CEO Peter Moyo), and you get the picture.

IC TIP: Hold at 97p

In South Africa, where equity markets remain depressed, inflation continues to outstrip economic growth, hitting both disposable incomes and individuals’ propensity to save. And while stable economic conditions in Kenya contributed positively to Old Mutual’s financial performance in East Africa, the period ended with inflation running at 176 per cent in Zimbabwe. As such, Old Mutual has had to adopt hyperinflationary accounting standards for the country, thereby shaving ZAR493m (£26.8m) from its post-tax profit contribution.

Despite all of this, the group has managed to grow its funds under management, improve its debt terms, and even marginally increase its heavily-adjusted “results from operations” earnings metric – which excludes financing costs and non-controlling interests. With markets set to remain challenging, Mr Williamson is keen to laud all costs reductions, including the employment of “over 122 bots”, which have so far saved “more than 2.8m minutes of processing time”.

Bloomberg consensus forecasts are for full-year earnings of 242¢ per share, rising to 262¢ in 2020.

OLD MUTUAL (OMU)   
ORD PRICE:97pMARKET VALUE:£4.68bn
TOUCH:96.95-97.03p12-MONTH HIGH:138pLOW: 91.4p
DIVIDEND YIELD:6.6%PE RATIO:2
NET ASSET VALUE:1,570¢SOLVENCY RATIO:166%
Half-year to 30 JunGross premiums (ZARbn)Pre-tax profit (ZARbn)Earnings per share (¢)Dividend per share (¢)†
201839.75.065.845.0
201938.77.2125.045.0
% change-3+44+90-
Ex-div:19 Sep   
Payment:14 Oct   
£1=ZAR18.4 †Excluding special dividend of 100¢ a share