REG - Old Mutual Ltd - Unaudited Interim Results and Dividend Declaration

Old MutualAnnouncement

30/08/2022 07:16

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RNS Number : 4728X  Old Mutual Limited  30 August 2022

Old Mutual Limited

Incorporated in the Republic of South Africa

Registration number: 2017/235138/06

ISIN: ZAE000255360

LEI: 213800MON84ZWWPQCN47

JSE Share Code: OMU

LSE Share Code: OMUMSE Share Code: OMU

NSX Share Code: OMM

ZSE Share Code: OMU

("Old Mutual" or "OM" or "the Company")

 

Ref 41/22

 

30 August 2022

 

Short-form announcement: Unaudited interim results for the six months ended 30
June 2022 and interim dividend declaration

 

A MESSAGE FROM THE CEO

 

OVERVIEW

 

The first half of 2022 delivered a strong set of results, which for the first
time, following the unbundling of our strategic investment in Nedbank in
November 2021, excludes the income associated with this stake. This solid
performance was against the backdrop of an increasingly volatile global
economy. Although the economy showed positive signs in the first quarter, the
global and local outlook was dampened in the second quarter by increased
inflationary pressures negatively affecting market levels and consumer
sentiment.

 

South Africa and the other countries we operate in experienced their fourth
and fifth waves of COVID-19 over the current period. Despite the complete
easing of lockdown and other COVID-19 restrictions in South Africa, pandemic
impacts have been relatively benign. The volatility in our operating earnings
caused by the pandemic over the last two years has stabilised as the ongoing
impact of the pandemic becomes muted. Following the easing of lockdown
restrictions, our employees across the continent returned to work based on our
hybrid working model and we are starting to see the benefits of increased
face-to-face collaboration on productivity. As employees adjust to the hybrid
model, we anticipate seeing increased engagement.

 

The positive outcome at the General Meeting held on 12 August 2022, when the
Bula Tsela Broad-Based Black Economic Empowerment (B-BBEE) ownership
transaction was approved, allows us to achieve our objective and fulfil our
commitment to be best in class, measured at the time of listing, within five
years post our listing in 2018. The implementation of this transaction in the
latter half of 2022 will increase our B-BBEE ownership to above 30%. The Bula
Tsela transaction together with a sale of 21.2% of Futuregrowth to African
Women Chartered Accountants Investment Holdings will result in Futuregrowth
becoming majority Black owned and should also result in Old Mutual Investment
Group (OMIG) becoming majority Black owned.

 

OPERATING CONTEXT

 

The first half of 2022 was dominated by the economic fallout from the conflict
in Ukraine as economies experience sharp rises in food and energy prices,
upside surprises to inflation, and significant interest rate increases as
central banks attempt to control inflation. These factors have resulted in
significant pressure on consumer and business spending and confidence, and has
led to expectations of weaker growth. As a result, global financial markets
were hit particularly hard during the second quarter of 2022.

 

In South Africa, the strong rebound in economic growth experienced during the
fourth quarter of 2021 spilled over into the first quarter of 2022 recording
much stronger growth than expected. Second quarter growth was, however,
negatively impacted by global factors such as the conflict in Ukraine, and
local factors such as severe flooding in KwaZulu-Natal which damaged
infrastructure and manufacturing facilities and reduced economic activity due
to loadshedding.

 

Consumer inflation in South Africa rose to a 13-year high of 7.4% in June,
driven by increased fuel and food prices. This resulted in the South African
Reserve Bank raising interest rates by a cumulative 100 basis points during
the first half of the year, with the repo rate at 4.75% at the end of June
2022.

 

South African equity markets rallied in the first quarter followed by a dip in
the second quarter on the back of global market volatility.

 

In our Rest of Africa markets, real GDP growth is being eroded by higher
inflation and depreciating currencies, attributed to both local and global
factors. The conflict in Ukraine has resulted in imported inflation due to
disruptions in the supply of grains and energy products. Socio-political risk
continues to heighten in several countries, due to pending elections in
Zimbabwe and Nigeria.

 

All selected equity indices across our Rest of Africa regions and China
(except for Malawi) are in negative territory due to similar pressures.

 

SUMMARY OF GROUP RESULTS

 

I am pleased with the continued growth in Life APE sales of 15% to R6.2
billion in the first half of 2022 as we retain our strategic focus on ensuring
we become our customers' first choice to sustain, grow and protect their
prosperity.

 

The recovery in Net client cash flows (NCCF) due to lower COVID-19 related
claims was more than offset by a decrease in Gross flows, resulting in NCCF
decreasing by 27% to negative R4.3 billion. The decrease in Gross flows of 14%
to R83.4 billion was largely driven by the prior year including large
transactions in Old Mutual Investments and Old Mutual Corporate which did not
repeat in the current year.

 

Lower market levels in South Africa and globally drove a 7% decrease in Funds
under management.

 

Strong growth in Value of new business (VNB) in Mass and Foundation Cluster,
Old Mutual Corporate and Rest of Africa was more than offset by a VNB
reduction in Personal Finance on the back of volume and sales mix strain. This
resulted in VNB for the period of R708 million, down 4% on the prior period.
VNB margin of 2.2% remains within our medium-term target range of 2% to 3%.

 

Strong operating performance and muted COVID-19 impacts led to an increase in
Results from operations of 87% to R4.1 billion. Despite the large relative
drop in market levels, our Adjusted headline earnings would have been up 19%
on a like for like basis if the income from Nedbank had been excluded from the
comparative period. Including Nedbank results in the comparative period sees
our Adjusted headline earnings decrease by 7%.

 

Our Return on net asset value increased by 60bps to 9.6%. This was due to the
lower average adjusted IFRS equity base resulting from the unbundling of 12.2%
of our stake in Nedbank at the end of 2021, thus delivering on our promise to
simplify the Group's capital structure and provide a substantial return of
capital to our shareholders.

 

The Group solvency ratio remains robust and increased by 300 bps from December
2021 to 187% mainly as a result of a lower prescribed equity risk stress
factor. Old Mutual Life Assurance Company (SA) (OMLACSA) issued a further R1.1
billion of subordinated debt, helping to optimise the Group's weighted average
cost of capital.

 

The Old Mutual Limited Board declared an interim dividend of 25 cents per
ordinary share which amounts to 44% of Adjusted headline earnings. We were
able to maintain a dividend in line with our prior interim dividend due to our
robust operational performance and our strong capital and liquidity position.

 

Iain Williamson

CEO of Old Mutual Limited

 

UNAUDITED GROUP HIGHLIGHTS

 

 

 Rm (unless otherwise stated)                                           H1 2022  H1 2021  Change   FY2021
 Gross                                                                  83 385   96 989   (14%)    194 757
 Life APE                                                               6 171    5 343    15%      11 400
 Net client cash flow (NCCF)                                            (4 333)  (3 414)  (27%)    92
 Funds under management (FUM)(Rbn)(1)                                   1184.5   1171.2   (7%)     1273.6
 Value of new business (VNB)                                            708      740      (4%)     1 266
 Value of new business margin (%)                                       2.2%     2.3%     (10bps)  1.9%
 Results from operations (RFO)                                          4 097    2 190    87%      4 384
 Adjusted headline earnings (AHE)                                       2 691    2 899    (7%)     5 402
 Adjusted headline earnings per share (cents)(2)                        59.2     63.4     (7%)     118.5
 Return on net asset value (%)                                          9.6%     9.0%     60 bps   9.0%
 Free surplus generated from operations                                 2 998    3 090    (3%)     6 149
 % of AHE converted to free surplus generated                           111%     107%     400 bps  114%
 Group solvency ratio (%)(1,3)                                          187%     177%     300 bps  184%
 Headline earnings (HE)(3)                                              5 140    3 155    63%      7 209
 Headline earnings per share (HEPS)(3)                                  116.3    71.7     62%      163.8
 IFRS Profit after tax attributable to equity holders of the parent(3)  5 222    2 984    75%      6 662
 Basic earnings per share (cents)(3)                                    118.1    67.8     74%      151.3
 Declared dividend per share (cents)                                    25       25       -        51

 

 1  The % change has been calculated with reference to FY 2021.
 2  Weighted average number of shares used in the calculation of the Adjusted
    Headline Earnings per share is 4 544 million (H1 2021: 4 570 million).
 3  These metrics include the results of Zimbabwe. All other key performance
    indicators exclude Zimbabwe.

 

OUTLOOK

 

Global growth is expected to slow over the rest of 2022, especially in the
large economies of the USA and Europe where high inflation will likely result
in further interest rate increases. The International Monetary Fund's (IMF)
World Economic Outlook for July 2022 revised its global economic growth
forecast downward, from 4.4% to 3.2%.

 

In South Africa, ongoing pressure on consumers, combined with loadshedding
risk, will likely further impact economic growth. The IMF has forecast growth
in Sub-Saharan Africa to slow to 3.8% from the 4.6% recorded in 2021.

 

The macro-economic environment in our markets is expected to remain
challenging. Low wage growth across sectors limits options for the
pass-through of rising cost inflation, exacerbating the financial pressure
experienced by our retail customers. Rising inflation further impacts our
corporate customers' growth and liquidity levels. These factors continue to
put strain on persistency levels across the Group. Increased market volatility
and resultant decreases in asset levels puts further pressure on asset-based
fees.

 

We remain committed to working toward meeting our medium term targets although
this has become more challenging given the current economic backdrop.

 

With a balance sheet that remains well capitalised and our solvency ratios
within or slightly above the target range, we are well set up to weather the
challenging operating environment across all of our operating regions.

 

We are currently running parallel reporting processes for IFRS17 and are on
track to producing an opening balance sheet. We will provide an update at our
Capital Markets Day in the fourth quarter.

 

INTERIM DIVIDEND DECLARATION

 

The Old Mutual Limited Board declared an interim dividend of 25 cents per
ordinary share which amounts to 44% of Adjusted headline earnings. The interim
dividend will be paid out of income reserves. We were able to maintain a
dividend in line with our prior interim dividend due to our robust operational
performance and our strong capital and liquidity position. The interim
dividend is in line with Old Mutual Limited's dividend policy, which targets
an ordinary dividend cover of 1.50x to 2.00x of Adjusted headline earnings
over the financial year.

 

Shareholders on the London, Zimbabwean, Malawian and Namibian registers will
be paid in the local currency equivalents of the interim dividend.

 

Old Mutual Limited's income tax number is 9267358233. The number of ordinary
shares in issue in the company's share register at the date of declaration is
4 708 553 649.

 

 Declaration date                                                               Tuesday, 30 August 2022
 Finalisation announcement and exchange rates announced                         Tuesday, 6 September 2022

                                                                                by 11.00
 Transfers suspended between registers                                          Close of business on Tuesday,

                                                                                6 September 2022
 Last day to trade cum dividend for shareholders on the South African Register  Tuesday, 20 September 2022
 and Malawi, Namibia and Zimbabwe branch registers
 Ex-dividend date for shareholders on the South African Register and Malawi,    Wednesday, 21 September 2022
 Namibia and Zimbabwe branch registers
 Last day to trade cum dividend for shareholders on the UK register             Wednesday, 21 September 2022
 Ex-dividend date for shareholders on the UK register                           Thursday, 22 September 2022
 Record date (South African Register and Malawi, Namibia and Zimbabwe branch    Close of business on Friday,
 registers)

                                                                                23 September 2022
 Record date (UK register)                                                      Friday, 23 September 2022
 Transfers between registers restart                                            Opening of business on Monday,

                                                                                26 September 2022
 Interim dividend payment date(1)                                               Monday, 17 October 2022

 

 1  The interim dividend payment date for shareholders on the Malawi Stock
    Exchange will be Tuesday, 18 October 2022 due to a public holiday on Monday,
    17 October 2022.

 

Share certificates for shareholders on the South African register may not be
dematerialised or rematerialised between Wednesday, 21 September 2022 and
Friday, 23 September 2022, both dates inclusive. Transfers between the
registers may not take place between Tuesday, 6 September 2022, and Friday, 23
September 2022, both dates inclusive. Trading in shares held on the Namibian
branch register through Old Mutual (Namibia) Nominees (Pty) Limited will not
be permitted between Tuesday, 6 September 2022 and Thursday, 22 September
2022, both dates inclusive.

 

For South African shareholders, the dividend will be subject to dividend
withholding tax of 20% for all shareholders who are not exempt from or do not
qualify for a reduced rate of withholding tax. International shareholders who
are not exempt or are not subject to a reduced rate in terms of a double
taxation agreement will be subject to dividend withholding tax at a rate of
20%. The net dividend payable to shareholders subject to withholding tax at a
rate of 20% amounts to 20 cents per ordinary share. Distributions made through
the dividend access trust or similar arrangements established in a country
will not be subject to South African withholding tax but may be subject to
withholding tax in the relevant country. We recommend that you consult with
your tax adviser regarding the in country withholding tax consequences.

 

Shareholders that are tax resident in jurisdictions other than South Africa
may qualify for a reduced rate under a double taxation agreement with South
Africa. To apply for this reduced rate, non-SA taxpayers should complete and
submit a declaration form to the respective registrars. The declaration form
can be found at:
https://www.oldmutual.com/investor-relations/dividend-information/.
(http://www.oldmutual.com/investor-relations/dividend-information/)

 

SHORT FORM ANNOUNCEMENT

 

This short form announcement is the responsibility of the Board and is only a
summary of the information contained in the full announcement. Any investment
decision should be based on the full announcement available on the Company's
website at

https://www.oldmutual.com/investor-relations/reporting-centre/results on 30
August 2022 or accessible via the JSE link
https://senspdf.jse.co.za/documents/2022/jse/issue/OMUE/HY22Result.pdf

 

The full announcement may be viewed at the registered offices of the Company
and the sponsor, at no charge, during office hours from the date of the
announcement for a period of 30 days. The short form announcement has not been
reviewed or reported on by the external auditors.

 

A webcast of the presentation of the 2022 Interim Results and Q&A will be
broadcast live on 30 August 2022 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://78449.themediaframe.com/dataconf/productusers/oldmutual/mediaframe/48319/indexl.html
(https://78449.themediaframe.com/dataconf/productusers/oldmutual/mediaframe/48319/indexl.html)

 

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 42878

 

Pre-registration to participate in the call is available at the following
link:

https://events.mannmade.co.za/old-mutual-investor-results-accept
(https://events.mannmade.co.za/old-mutual-investor-results-accept)

 

The replay will be available until 30 September 2022.

 

Sponsors

Johannesburg Stock Exchange

Merrill Lynch South Africa (Pty) Limited t/a BofA Securities

 

Malawi

Stockbrokers Malawi Limited

 

Namibia

PSG Wealth Management (Namibia) Proprietary Limited

 

Zimbabwe

Imara Capital Zimbabwe plc

 

Enquiries

 

Investor Relations Sizwe Ndlovu

Head:  Investor Relations

T: +27 (0)11 217 1163

E: tndlovu6@oldmutual.com (mailto:tndlovu6@oldmutual.com)

 

Communications

Vuyo Mtawa

Head: Group Communications

M: +27 68 422 8125

E: VMtawa@oldmutual.com (mailto:VMtawa@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 it has a niche business in Asia. With over
177 years of heritage across sub-Saharan Africa, Old Mutual is a crucial part
of the communities they serve and the broader society on the continent.

 

For further information on Old Mutual and its underlying businesses, please
visit the corporate website at www.oldmutual.com. (http://www.oldmutual.com/)

 

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