Old Mutual warns it may miss targets due to market turmoil

Financial services provider Old Mutual battled challenging macroeconomic conditions during 2019, reporting a 25% decline in headline earnings to around R14 billion. However, according to the group, adjusted headline earnings which increased 5% from R9.4billion to R9.9 billion is an appropriate reflection of its performance.

The headline earnings figure does not include the profits of Quilter and Nedbank, following the managed separation strategy, which is the main driver of the decrease recorded, according to a shareholder notice on the group's annual results for the year ended 31 December 2019. 

The group, which is in a legal battle with former CEO Peter Moyo, on Monday released its annual results. It warned that due to the market turmoil and "significant downward pressure" on economic growth, it does not expect to reach its targets for results from operations for the current financial year. 

Headline earnings per share were down 23% from 306.9 cents to 236.1 cents. Adjusted headline earnings per share increased 7% from 195.1 cents to 209.3 cents. Its dividend for the year (120 c) was 3% higher than the previous year. 

In a note to shareholders, interim CEO Ian Williamson described the group's financial performance as "resilient" amid challenging macroeconomic factors in South Africa, its largest market, and the rest of Africa.

Old Mutual's funds under management increased by 2%  to R1.04 billion.

Williamson said it was "commendable" to deliver a positive figure in a tough trading environment. 

Coronavirus impact

Williamson noted that the spread of coronavirus had caused "disruption" in global equity markets, with the JSE SWIX declining 23% since the start of the year.

"We are monitoring this situation on a daily basis," Williamson said. Old Mutual has established a special committee to ensure that its employees can work safely.

This comes after an Old Mutual employee tested positive for the coronavirus last week. Old Mutual instructed the employee not to return to work for another 21 days, News24 reported.

"We have placed restrictions on all cross border business and personal travel to ensure we limit the risk of infection to our employees and customers," Williamson said.

The group also plans for scenarios like this and its stress tests show it remains "sufficiently capitalised" and has appropriate liquidity levels.

"We remain confident that the benefits of our well diversified business, strong balance sheet and stable cash generating ability will stand us in good stead, in what is anticipated to be a difficult year," Williamson said.

Battle with Moyo

Commenting on the litigation with Moyo, who is challenging his axing by the group, Williamson said Old Mutual sticks by its decision.

"After careful consideration of the relevant facts and actions, our board took the difficult decision to dismiss our former chief executive, Peter Moyo," he said. "The board remains confident that the decision made was in the best interests of our stakeholders and that their duties were discharged in line with the high standard of governance and ethics expected of an established and respected organisation like ours," he added.

*This article was updated at 15:10 on Monday 16 March, 2020 to include adjusted headline earnings. 

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