TIDMOMU
RNS Number : 9427W
Old Mutual Limited
24 August 2020
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or "Company" or "Group")
Ref 29/20
24 August 2020
TRADING STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020.
Shareholders are advised that Old Mutual Limited is currently in
the process of finalising its interim results for the six months
ended 30 June 2020 ("current period"). This trading statement
provides an indication of a range for Headline Earnings per
ordinary share (HEPS) and earnings attributable to equity holders
of the Group per ordinary share (EPS) in terms of paragraph 3.4(b)
of the JSE Limited Listings Requirements compared to the six months
ended 30 June 2019 ("comparative period"). The Group's interim
results will be released on the Stock Exchange News Service of the
JSE Limited on Tuesday, 1 September 2020.
Further to our previous communication to shareholders on the 29
May 2020, the COVID-19 pandemic continues to have an unprecedented
impact on our business, our lives and how we work and interact.
Government enforced restrictions to control the spread of COVID-19
in most geographies we operate in have dramatically reduced the
level of economic activity during the first half of 2020 and
negatively impacted growth forecasts for the remainder of the year.
In this challenging environment we adapted to this new normal by
leveraging our digital capability to enable most of our employees
and certain of our advisers to work remotely.
New business sales volumes were negatively impacted, as most of
our tied advisers were unable to sell during the lockdown period
due to the partial closure of the branch network and lack of access
to customers' homes, worksites and branches. Although lockdown
restrictions have been eased, and economic activity has somewhat
resumed, sales levels remain below prior year levels. This impact
was most severe in the Mass and Foundation Cluster, where sales
volumes were too low to cover the largely fixed initial expenses
and this resulted in negative Value of New Business for H1 2020 for
this segment.
Although local and global equity markets have recovered in the
second quarter, the JSE SWIX was down 8% at the end of June 2020
and average equity market levels were 10% lower than the prior
year. During the second quarter we saw credit spreads widening by
between 50bps and 100bps, more than increases in previous market
crises.
Throughout the period, in this tough economic environment, our
solvency capital has remained strong. At the end of June 2020, the
solvency ratio was 182% for the Group and 208% for OMLACSA. This
demonstrates the capital strength and resilience of our Group to
withstand periods of prolonged market stresses and positions us
well to take advantage of growth opportunities as they arise.
The significant deterioration in the operating environment
compared to the comparative period has however negatively impacted
our earnings. While there is still much uncertainty around the
pandemic and the impact that it will have on experience, we have
raised short term provisions in anticipation of worsening
mortality, morbidity and persistency experience in the second half
of 2020. These reserves are intended to allow for expected short
term variances to our long term assumptions.
Weaker growth forecasts and higher observed credit spreads have
led to notable unrealised mark to market losses in the first half
of the year in our unlisted equity and credit portfolios in
Specialised Finance, although we believe the quality of our credit
book remains high. As these are unrealised they could reverse in
future periods as market conditions recover. We have also increased
our provisions for expected credit losses in Old Mutual Finance in
recognition of declining GDP forecasts, and the anticipated impact
of this on future credit losses.
There was an increase in business interruption (BI) claims in
Old Mutual Insure during the second quarter. We also made a
decision to offer commercial settlements to certain qualifying
Small, Medium and Micro Enterprise (SMME) customers to enable them
to continue operating.
Taking into account the operating environment and factors
outlined above shareholders are advised that the Group's key profit
measures are expected to fall within the ranges outlined below:
Key Performance Indicators Estimated 30 June 2019
(R million unless stated Estimated 30 June 2020
otherwise) % change
Results from Operations (61%) to (71%) 1,760 - 1,308 4,512
---------------- --------------- --------------
Adjusted Headline Earnings (62%) to (72%) 1,980 - 1,459 5,211
---------------- --------------- --------------
AHEPS (cents)(1) (60%) to (70%) 43.7 - 32.7 109.1
---------------- --------------- --------------
(1) AHEPS defined as Adjusted Headline Earnings divided by WANS
adjusted to reflect the Group's BBE shares and shares held in
policyholder and consolidated investment funds.
The notable decrease in the GDP growth for South Africa and
increased uncertainty around future cashflow projections is
expected to result in the recognition of material impairments in
respect of the carrying value of our investment in Nedbank and the
goodwill related to our investment in Old Mutual Finance. These
impairments are recognised in the IFRS income statement, however,
are not recognised in Headline Earnings as this is an explicit
adjusting item in accordance with the JSE Circular. Accordingly
they are also not recognised in Adjusted Headline Earnings
(AHE).
Headline earnings is higher than AHE, as AHE excludes the
results related to the operations of Residual plc and Zimbabwe and
the adjustment in respect of investment return for group equity and
debt instruments held in life funds, all of which were positive in
H1 2020.
Taking into account the decrease in operating earnings and the
significant impairments outlined above shareholders are advised
that HEPS and Basic EPS are expected to fall within the ranges
outlined below:
Key Performance Indicators Estimated 30 30 June 2019
(R million unless stated Estimated June 2020
otherwise) % change
Headline Earnings (23%) to (33%) 4,507 - 3,922 5,854
---------------- ------------------ --------------
HEPS (cents) (20%) to (30%) 102.5 - 89.7 128.1
---------------- ------------------ --------------
IFRS profit after tax attributable
to equity holders of the Greater than (5,621) -
parent (100%) (6,745) 5,817
---------------- ------------------ --------------
Greater than
Basic EPS (cents) (100%) (128.5) - (154.2) 127.3
---------------- ------------------ --------------
The financial information in this trading statement is the
responsibility of the Old Mutual Limited Board of Directors and has
not been reviewed or reported on by the Group's external
auditors.
Sandton
Sponsors
JSE Merrill Lynch South Africa (Pty) Limited
Namibia PSG Wealth Management (Namibia) (Proprietary)
Limited
Zimbabwe Imara Capital Zimbabwe plc
Malawi Stockbrokers Malawi Limited
Enquiries
Investor Relations
Sizwe Ndlovu T: +27 (0)11 217 1163
Head of Investor Relations E: tndlovu6@oldmutual.com
Tokelo Mulaudzi T: +27 (0)11 217 1042
Investor Relations Manager tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe T: +27 (11) 217 1953
Head of Communications M: +27 (0)60 547 4947
E: ttsengiwe@oldmutual.com
Notes to Editors
About Old Mutual Limited
Old Mutual is a premium African financial services group that
offers a broad spectrum of financial solutions to retail and
corporate customers across key markets segments in 14 countries.
Old Mutual's primary operations are in South Africa and the rest of
Africa, and it has a niche business in Asia. With over 175 years of
heritage across sub-Saharan Africa, we are a crucial part of the
communities we serve and broader society on the continent.
For further information on Old Mutual, and its underlying
businesses, please visit the corporate website at www.oldmutual.com
.
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