Old Mutual plc records decline in revenue

Harare Bureau
OLD Mutual plc revenue for the six months to June this year declined by 17,5 percent as premiums were hurt by South Africa’s fragile economy.
Turnover declined to £8 billion pounds from £9,6 billion in the corresponding period last year and Africa’s largest insurer said business conditions for the remaining part of the year will remain challenging for its emerging-market businesses.

Despite the revenue drop, adjusted operating profit of £761 million was 17 percent higher on a constant currency basis but, was 5 percent lower in reported currency.

“While we expect the external conditions for our emerging markets businesses to continue to be challenging in the next six months, particularly given the lower GDP growth expectation in South Africa, we will focus on what we do best: meeting the needs of our customers through innovative, attractively priced and transparent investment, savings, insurance and banking products as well as continually improving the operating efficiencies of our business,” OM chief executive Julian Roberts said.

The group managed to reduce expenses by 16,4 percent to £7,4 billion. Funds under management grew 2 percent to £300,5 billion and return on shareholder funds was at 13,2 percent and was also in line with the company’s target of between 12 and 15 percent.

Basic earnings per share based on profit from continuing operations was down 49,4 percent to 4,5 pounds and the group declared a interim dividend of 2,45 pounds per share.

Local analysts say the major attraction of Old Mutual is its international and regional exposure for local asset managers who find it very difficult to invest in foreign assets.

Currently on the London Stock Exchange, the stock is trading at 1,90 pounds.

Although fungibility is currently restricted due to the limits imposed on the transfer of shares from the local register, investors on the LSE are paying 18 percent more for a single unit of the same earnings than those on the Zimbabwe Stock Exchange.

For the same amount of earnings the dividend yield for the local shares will be more than the dividend yield for the LSE listed shares.

“Although the price has been coming off on both the Johannesburg Stock Exchange and the LSE we believe there is still scope for the local price to close the gap on the international price in London,” said one stock broking firm.

“In the event that fungibility is restored on the ZSE there might be arbitrage opportunities.”