Old Mutual profits tick up

International long-term savings‚ investment and protection group Old Mutual plc (OLM) on Wednesday reported adjusted operating earnings per share of 8.7 pence for the six months ended June‚ which was a 2% improvement on last year’s earnings of 8.5 pence.

The group’s adjusted operating profit before tax amounted to GBP791 million‚ 12% up on the GBP709 million profit recorded for the previous comparable half-year.

The group declared an interim dividend per share of 1.75p – a 17% increase on the previous interim dividend of which was 1.50p.

Julian Roberts‚ Group Chief Executive‚ commented: “Against a backdrop of sustained low growth and falling interest rates we continue to deliver good strategic and operational progress. We are expanding in attractive African markets; introducing new products across the Group; and today are unveiling our UK Platform pricing ahead of the introduction of the Retail Distribution Review.”

“We have built a portfolio of resilient‚ high quality and cash generative businesses. Although economic conditions remain uncertain‚ we remain confident that we have the right offering‚ the right people and exposure to both emerging and developed markets that will allow us to continue to create value for both shareholders and customers.”

Funds under management grew by 2% from GBP264.7 billion to GBP260.7 billion.

Roberts said cost reductions had been met and return on equity (ROE) and margins were on track.

A further GBP603 million of debt had been repaid in 2012‚ with less than GBP450 million left to hit the group’s GBP1.5 billion target.

Roberts said Old Mutual’s performance in the first six months of the year reflected the benefit of the group’s substantial exposure to emerging markets and the resilience of the group operations in the face of the continued challenging macro-economic environment‚ including falling interest rates.

“During the half we saw excellent operational performance and good profit growth‚ with IFRS basis adjusted operating profit (IFRS AOP or AOP) up 12% on a constant currency basis to GBP791 million.”

The reported results of the group's businesses were affected by a significant depreciation of the rand against sterling‚ with the average rand rate declining during the period by 12%. Group return on equity (ROE) was down 2.2% as a result of the sale of Nordic. The Group is in a strong financial position‚ with reduced debt levels. We have made substantial returns of capital to both equity and debt holders and have increased our interim dividend to 1.75p (or its equivalent in other applicable currencies).

“We have substantially restructured the Group and it is now comprised of high quality‚ resilient businesses which have maintained profit margins and continued to generate increasing amounts of cash. In the six months to 30 June 2012 NCCF was GBP3.8 billion‚ as reported from core operations‚ against outflows of GBP4.2 billion in the comparative period on a constant currency basis‚ and funds under management (FUM) at continuing businesses increased 6%.

“We are particularly pleased with the sales performance of our Emerging Markets business and its uplift in APE margins to 22%.”

Old Mutual was also busy establishing a substantial presence in fast growing African markets.

“Our bias toward the higher growth emerging markets‚ and in particular sub-Saharan Africa‚ has ensured that we have maintained our momentum‚ notwithstanding the demanding macro-economic environment. The growth in these markets is underpinned by a number of structural factors: a growing and sizeable population that is entering the formal economy for the first time and is keen to protect and increase its wealth and assets; strong domestic GDP growth; growing political stability; and an underpenetrated financial services sector‚” Roberts said.

“We believe that the recent economic growth in the African continent is a sustainable‚ long-term trend. Our expansion into other attractive markets in sub-Saharan Africa continues. As part of our African growth strategy‚ we will follow a strict approach in picking the markets in which to operate: we will either target countries with significant populations where we see the opportunity to roll out our Mass Foundation business; or countries with pockets of populations which we believe we can service with existing products and expertise outside of the Mass Foundation business. Our expansion will be through a combination of organic growth and bolt-on acquisitions‚” he added.

“We are awaiting final regulatory approval for our acquisition of Oceanic Life in Nigeria. We have had an experienced integration team in Lagos for some time and the process of launching our life business there is progressing well. Old Mutual Nigeria will be the hub for our expansion in West Africa and we are looking at options both in Nigeria and Ghana to gain scale. In East Africa‚ we are making progress with our plans to expand further in Kenya and the rest of the region.”

“Nedbank has had another excellent half with profits up 27%. We remain pleased with the benefits of our controlling shareholding in Nedbank and see opportunities for our Emerging Markets business to work closely with Nedbank as we expand further into sub-Saharan Africa‚” Roberts added. - I-Net Bridge