TIDMOMU
RNS Number : 6300X
Old Mutual Limited
01 September 2020
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
ISIN: ZAE000255360
LEI: 213800MON84ZWWPQCN47
JSE Share Code: OMU
MSE Share Code: OMU
NSX Share Code: OMM
ZSE Share Code: OMU
("Old Mutual" or "OM" or "the Company")
Ref 30/20
1 September 2020
Interim results for the six months ended 30 June 2020
A MESSAGE FROM OUR CEO
The COVID-19 pandemic has had an unprecedented impact on our
business, our lives and on how we work and interact. Although the
resultant lockdown adversely affected us, particularly the
productivity of our physical distribution channels, we were agile
and adapted to this new normal. We leveraged our digital capability
and through the use of digital sales platforms and the provision of
data and network access, we enabled most of our employees and
certain of our advisers to work remotely. There is still a
considerable amount of uncertainty around what we can expect within
the next 12 months. However, we believe we have taken sufficient
actions to provide for the impact of the pandemic in the short
term. We will continue to closely monitor the situation and make
further provisions if necessary. We believe that the actions we
have taken to maintain our capacity will allow us to take advantage
of opportunities in this environment and be in a position to
accelerate activity as restrictions are lifted.
Although the pandemic adversely affected earnings in the first
half of the year, our business remains robust, with sufficient
levels of liquidity and strong solvency positions in our regulated
subsidiaries. We have performed stress tests to assess our
liquidity and solvency positions under various recovery scenarios.
In all scenarios, our liquidity levels remain positive and our
solvency ratio remains within our target range. Due to the
significant level of uncertainty in the current environment we have
deferred our decision to declare an interim dividend. We believe
this action is necessary in a period of heightened uncertainty and
we will revisit this decision for the full year dividend
declaration when we have more clarity on the shape of possible
economic recovery scenarios.
New business sales volumes were negatively impacted, as most of
our tied advisers in the Mass and Foundation Cluster 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. In Personal Finance, the impact was less severe as we
could enable remote working for a larger proportion of advisers.
Although lockdown restrictions have been eased, and economic
activity has somewhat resumed, sales levels remain below prior year
levels. The continued financial pressure on our customers led to a
decline in sales activity and poor persistency experience, which
adversely affected distribution efficiencies. Customers also opted
for lower margin risk and investment products resulting in a
significant decline in VNB compared to the prior year. The decline
in closing and average equity markets led to pressure on our asset
based fees and resulted in unrealised mark to market losses in our
equity portfolios. Initially lagging the equity markets, credit
spreads widened in the second quarter as the crisis contributed to
a weakening economic outlook. Credit spreads increased by between
50bps and 100bps, higher than increases seen in the previous
financial crisis, resulting in significant mark to market losses in
our unlisted credit portfolio. There was an increase in business
interruption and rescue claims in Old Mutual Insure during the
second quarter.
We have presented certain of these COVID-19 impacts separately
within our presentation of Results from Operations, in order to
reflect the underlying results of our segments on a more comparable
basis to the prior year. Only items that are separately
identifiable and reliably measurable have been presented in this
line item. Accordingly, Normalised Results from Operations,
excluding COVID-19 impacts, was down 4% from the prior year largely
driven by a significant decrease in Mass and Foundation Cluster's
profits due to lower sales volumes, poor persistency, and higher
credit losses experienced in Old Mutual Finance due to the
strengthening of our provisioning. This was mostly offset by a
decrease in catastrophe losses in Old Mutual Insure and growth in
profits of Personal Finance and Wealth Management due to improved
mortality and a release of reserves following a change in the
investment strategy for the closed annuity fund. Rest of Africa
profits were up 27% mostly due to lower losses in West Africa and
foreign exchange gains as the rand depreciated most notably against
the Kenyan shilling and Malawian kwacha.
Despite the changes the pandemic has brought to the business,
our focus remains unchanged. We continue to put customers first and
simplify our business through digital transformation. With the
scaling of Old Mutual Protect, we have implemented digitalised
customer and intermediary service models with a large degree of
straight-through processing. Continued use of robotics and
artificial intelligence to service customers and process
transactions have saved 8 million processing minutes to date. These
initiatives do not only provide a better experience for customers
and intermediaries, but also simplify various business processes
which lead to cost efficiencies. We continue to drive our cloud
strategy via Amazon WebServices, with the first 85 workloads now
live on the cloud. This has resulted in no unplanned downtime
experience for customers and has allowed us to rapidly deploy
solutions across the business.
Iain Williamson
Chief Executive Officer
GROUP HIGHLIGHTS (EXCLUDING ZIMBABWE)
% change
(H1 2020
vs
-------- -------- -----------
(Rm unless otherwise stated) H1 2020 H1 2019 H1 2019)
-------- -------- -----------
Adjusted Headline Earnings (AHE) 1,704 5,211 (67%)
-------- -------- -----------
Adjusted Headline Earnings per share (cents) 37.3 109.1 (66%)
-------- -------- -----------
Results from Operations (RFO) 1,541 4,512 (66%)
-------- -------- -----------
Normalised Results from Operations 4,334 4,512 (4%)
-------- -------- -----------
Interim Dividend per share (cents) - 45 (100%)
-------- -------- -----------
(1 120
Return on Net Asset Value (RoNAV) (%) 5.2% 16.4% bps)
-------- -------- -----------
FUM (Rbn)(1) 1,057.2 1,048.5 1%
-------- -------- -----------
Life APE sales 4,716 5,814 (19%)
-------- -------- -----------
Gross flows 90,835 79,801 14%
-------- -------- -----------
NCCF (Rbn) 1.5 1.4 7%
-------- -------- -----------
Free Surplus Generated from Operations 808 3,739 (78%)
-------- -------- -----------
(2 500
% of AHE converted to Free Surplus Generated 47% 72% bps)
-------- -------- -----------
Group Solvency ratio(%)(1,2) 182% 189% (700 bps)
-------- -------- -----------
(1) These comparative amounts and % change reference FY 2019
(2) The FY 2019 Group solvency position has been re-presented in line
with the final group designation by the Prudential Authority
Changes in the macro environment including negative GDP growth
forecasts and interest rate cuts, have resulted in increased
uncertainty around future cash flow projections for certain assets.
This has resulted in the recognition of impairments in respect of
the carrying value of our investment in Nedbank and the goodwill
related to our investment in Old Mutual Finance. In calculating the
valuation for our investment in Nedbank we performed a range of
valuations assuming several different earnings and economic
recovery scenarios and, although in certain scenarios a higher
value could be supported, greater weight was given to the downside
scenarios given the increased uncertainty around forward looking
information in the current environment. These impairments are
recognised in the IFRS income statement, however, are not
recognised in Headline Earnings (HE) as this is an explicit
adjusting item in accordance with the JSE Circular. Accordingly
they are also not recognised in AHE.
IFRS HIGHLIGHTS % change
(Rm unless otherwise stated) (H1 2020 vs
---------- -------- ------------
H1 2020 H1 2019 H1 2019)
---------- -------- ------------
Profit after tax attributable to equity holders of the parent (5,621) 5,817 (>100%)
---------- -------- ------------
Headline Earnings (HE) 4,215 5,854 (28%)
---------- -------- ------------
Basic earnings per share (cents) (128.5) 127.3 (>100%)
---------- -------- ------------
Headline Earnings per share (HEPS) 96.3 128.1 (25%)
---------- -------- ------------
OUTLOOK
The increased levels of forecast risk and observed variability
in possible recovery scenarios has made it increasingly difficult
to provide guidance around the achievement of previously disclosed
medium term targets. In light of this, we are withdrawing our
guidance in respect of these targets and replacing them with
targets more appropriate for measuring our progress as we
transition the business through the crisis. These targets focus on
the maintenance of appropriate levels of solvency and liquidity and
improving the efficiency of our business given the pressure on
revenues COVID-19 introduces. To demonstrate improved efficiency we
will deliver R750 million of pre-tax run rate savings on a like for
like basis by the end of 2022. During the second half of 2020 we
will focus on improving adviser productivity to normalised levels
as rapidly as possible, improving customer access through increased
digitalisation and finding opportunities for further cost
efficiencies. Further guidance on expected outcomes for the full
year 2020 will follow once we have greater certainty on the
expected impacts of COVID-19 in the second half of the year.
TRADING STATEMENT
In terms of paragraph 3.4(b) of the Listings Requirements of the
JSE Limited, shareholders are advised that we expect HEPS and EPS
for the year ended 31 December 2020 to be more than 20% lower than
the reported HEPS and EPS for the comparable period (FY 2019 HEPS:
236.1 cents, FY 2019 EPS: 208.3 cents) due to the significant
impact COVID-19 has had on our results. We will publish a further
update once there is more certainty on the probable ranges of the
expected decrease in HEPS and EPS.
SHORT FORM ANNOUNCEMENT
This short form announcement is the responsibility of the
directors. It is only a summary of the information contained in the
full announcement and does not contain full or complete details.
Any investment decision should be based on the full announcement
accessible from Tuesday, 1 September 2020, via the JSE link
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/OMUE/HY20Result.pdf
and also available on the Company's website at
https://www.oldmutual.com . The short form announcement has not
been reviewed or reported on by the external auditors.
A webcast of the presentation of the 2020 Interim Results and
Q&A will be broadcast live on 1 September 2020 at 11.00 am
South African time on the Company's website www.oldmutual.com.
Analysts and investors who wish to participate in the call may do
so using the following link or telephone numbers below:
https://www.diamondpass.net/4423517
South Africa +27 10 500 4108
UK +44 203 608 8021
Australia +61 73 911 1378
USA +1 412 317 0088
International +27 10 500 4108
Replay Access Code 36487
Pre-registration to participate in the call is available at the
following link:
https://78449.themediaframe.com/dataconf/productusers/oldmutual/mediaframe/40166/indexl.html
Sponsors
Johannesburg Stock Exchange
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
Head of Investor Relations
T: +27 (0)11 217 1163
E: tndlovu6@oldmutual.com
Tokelo Mulaudzi
Investor Relations Manager
T: +27 (11) 217 1042
E: tmulaudzi3@oldmutual.com
Communications
Tabby Tsengiwe
Head of Communications
T: +27 (11) 217 1953
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 market segments in 14 countries. Old
Mutual's primary operations are in South Africa and the rest of
Africa, and we have a niche business in China. 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR KKDBKPBKKNCK
(END) Dow Jones Newswires
September 01, 2020 02:00 ET (06:00 GMT)
Old Mutual (LSE:OMU)
Historical Stock Chart
From Apr 2024 to May 2024
Old Mutual (LSE:OMU)
Historical Stock Chart
From May 2023 to May 2024