Old Mutual Plc's soon-to-be-independent components reported strong growth in the second half of 2017, with Nedbank Group Ltd., Old Mutual Emerging Markets Ltd. and Old Mutual Wealth all seeing their adjusted operating profits rise sharply despite "punishing" conditions in the group's largest market, South Africa, CEO Bruce Hemphill told analysts during an earnings call.
Nedbank's adjusted operating profits for the period increased 37% year over year to £472 million, while Old Mutual Emerging Markets' rose 34% to £362 million and Old Mutual Wealth's grew 40% to £363 million.
The last of these three units will list on the London Stock Exchange as Quilter Plc and saw its assets under management and administration rise 20% year over year to £138.5 billion in the second half of 2017. Net inflows more than doubled over the period to £10.9 billion from £5.2 billion, while performance fees were £84 million in the last six months of 2017 compared to zero a year earlier.
Paul Feeney, CEO of Old Mutual Wealth, said the wealth manager had "completed our separation activities" and was "ready to list" as a multi-asset manager. Later in 2018, Old Mutual Wealth will sell off its single-strategy business, Old Mutual Global Investors, to a senior management team for £600 million.
'Quite a journey'
Hemphill said the group remained on course for the "material" completion of its breakup into four separate businesses, adding that Old Mutual had been on "quite a journey" in a managed separation it calculates will incur exceptional costs of £230 million, but promises £95 million in annual savings from the wind-down of its London head office. Staff headcount there had already halved to 130, and Hemphill expected only a "skeleton staff" of roughly 25 would remain into 2019.
He said the group was "making excellent progress" on "deeply unglamorous pieces of work" that needed to be done prior to the managed separation. Though the final schedule would depend on regulatory and judicial permissions, Old Mutual had filed the majority of regulatory applications and was having "good ongoing dialogue" with regulators, according to the CEO.
The group, which is in discussions with possible buyers over selling its Latin American and Chinese businesses, reported a 59% year-over-year increase in annual profit to £909 million. But Group Finance Director Ingrid Johnson warned that its "performance on a reported basis is unlikely to be repeated to the same extent in the second half" of the financial year, which for Old Mutual runs from the beginning of July until the end of June. The current half was "likely to be tough given the challenging macro environment," Johnson added.
"Punishing" conditions in Old Mutual's largest market, South Africa, included a sovereign credit rating downgrade in April 2017. Nevertheless, the group had managed to deliver a resilient performance, according to Hemphill, who predicted that February's replacement of South Africa's President Jacob Zuma with Cyril Ramaphosa would increase investor confidence.
