The financial services firm said on Friday that it was confident its break-up plans would be finalised by the end of 2018.
The group said the key focus of this year was preparing its two unlisted businesses, Old Mutual Emerging Markets (Omem) and Old Mutual Wealth (OMW), for independence. “In both cases, we have made substantial progress,” the group said.
Chief executive Bruce Hemphill said the managed separation strategy, announced in March 2016, would unlock and create significant long-term value for its shareholders, currently trapped within the group structure as well as removing the significant costs arising from that structure.
“We are making excellent progress in delivering the managed separation of Old Mutual having materially reduced debt and largely disposed of our stake in OM Asset Management (Omam).”
He said the company’s focus for the next phase of the separation was to finalise the standalone balance sheets for the two unlisted businesses and “deliver them to our shareholders at the earliest opportunity in 2018 after our 2017 full year results” .
Old Mutual is also reducing its holding in Omam to 5.5%, which will be achieved by selling Omam shares to US-based HNA Capital. Old Mutual started selling down its stake in Omam in October 2014.
It will then list Old Mutual Wealth on the London Stock Exchange and JSE with Old Mutual Limited (OML), a new holding company covering its emerging markets division, its majority stake in South Africa’s Nedbank and Old Mutual plc.
In the six months to end June, Old Mutual reported a 37% increase in pre-tax adjusted operating profit (AOP) to £969million (R16.95 billion), up from £708m a year ago, helped by pound weakness and a strong performance by OMW.
During the six months, the average rand rate was 25% stronger versus the pound compared to the first half of 2016.
The IFRS pre-tax profit was up 76% to £940m, benefiting from a profit of £108m from the sale of Omam partially offset by a goodwill impairment of £71m in respect of UAP-Old Mutual in East Africa.
“Old Mutual Wealth had a strong six months and Omem and Nedbank are trading resiliently given the continuing difficult macroeconomic conditions in South Africa,” Hemphill said.
Omem reported a 1% increase in AOP to R6bn, reflecting a significant improvement at Old Mutual Insure.
Nedbank reported 10% growth in AOP to R9bn in its managed operations.
OMW reported a 29% increase in its AOP to £134m, driven by strong revenue growth and performance fees while Omam’s pre-tax AOP was broadly flat reflecting its reduced stake in the business.
Bradley Preston, the chief investment officer at Mergence Investment Managers, said Old Mutual’s results were mixed with OM Wealth delivering very strong results, while OM Emerging Markets results were a little disappointing.
“The group headline number was flattered by the weaker pound over the period. Overall I think this is a good result as the good OMW performance is quite important to the managed separation and separate listing of this business in the UK is expected in the first half of next year,” Preston said.
Jordan Weir, an equities trader at BayHill Capital, said the general view on the market was that the half year results were better than expected.
“The share price did, however, react slightly negatively to the news of Old Mutual’s decision to rather pursue the listing of its businesses that they were initially planning to sell. This is more than likely just a knee-jerk reaction that will correct itself once shareholders better understand Hemphill’s decision to unlock value through the listing route rather than the sale route,” Weir said.
Old Mutual shares closed 1.96%lower at R34.44 on the JSE on Friday.
-BUSINESS REPORT ONLINE