Wrap Text
Old Mutual Wealth Update on UK Platform Transformation Programme
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOMOL
Old Mutual
Ref 92/17
2 May 2017
OLD MUTUAL WEALTH UPDATE ON UK PLATFORM TRANSFORMATION PROGRAMME
Key highlights:
- Old Mutual Wealth (“OMW”) has terminated its contract with IFDS for the “Bluedoor” back-end
investment administration platform and associated business process outsourcing and the
related work with DST on the “Opendoor” front-end solution.
- OMW has contracted with FNZ to deliver platform and outsourcing services. FNZ is a proven
platform supplier and outsourcer with an existing, fully functioning UK platform service of
significant scale. FNZ has a number of major UK financial institutions as clients.
- These decisions considerably de-risk OMW’s UK Platform Transformation programme. We
expect an enhanced customer and adviser proposition supplied by FNZ to be operational for
new business by late 2018/early 2019 with migration to follow swiftly thereafter.
- OMW guided the market in October 2016 that the costs of implementing the platform systems
with IFDS/DST could be up to £450 million. As at end of April 2017, UK Platform
Transformation costs of approximately £330 million have been incurred, of which £110 million
was in relation to the Heritage business. The end April total is stated net of a £30 million
receivable from our previous supplier.
- Preliminary cost estimates for the operational delivery of the FNZ system are of the order of
£120-160 million. This preliminary estimate is supported by our contract with FNZ, but this
plan will be confirmed through our joint planning and configuration phases. The new platform
is expected to provide additional functionality that was not included in the previous
arrangements. Management estimate this would have cost in excess of a further £50 million
and taken a further two years post migration to deliver.
- We expect to provide a further update on developments in the autumn.
- These decisions do not affect Old Mutual plc’s managed separation.
Paul Feeney, Chief Executive of OMW, said: “Given the cost, effort and time already invested in the
programme, we have not taken these decisions lightly. This has been a difficult journey for all
stakeholders. We have made tough decisions today but we believe they are the right decisions for our
customers, their advisers, our business and our shareholders.”
Bruce Hemphill, Chief Executive of Old Mutual plc, said: "Old Mutual Wealth continues to grow and
develop its business as demonstrated by its recent strong Q1 net flows and growth in funds under
management. Today's announcement on the UK Platform Transformation programme shows decisive
action and we do not expect these decisions to affect the managed separation of Old Mutual plc."
FURTHER INFORMATION ON OLD MUTUAL WEALTH’S UK PLATFORM
TRANSFORMATION PROGRAMME
Further to the announcement made at Old Mutual plc’s preliminary results on 9 March 2017 regarding
the UK Platform transformation programme, OMW today gives an update to the market on the
programme.
In our statement on 9 March 2017, we explained that there were certain pressures which, potentially,
could increase timescales and costs and that we were in active negotiations on these areas to reduce
delivery and consequent cost risks and to ensure that we achieved the best outcome for the
business. These negotiations have been unsuccessful. Coupled with other existing issues, this
resulted in increased concerns about further extended timescales, quality of delivery and
consequential increased costs which were shared by our project assurance advisers. We now believe
the costs of implementation with IFDS/DST would have been materially greater than those advised to
the market in October 2016.
We have, therefore, reached the conclusion that continuing with the current suppliers would not be in
the best interests of our customers, their financial advisers, or our shareholders.
Accordingly, we have exercised our termination rights under the contract between Old Mutual Wealth
Limited and Old Mutual Wealth Life & Pensions Limited and International Financial Data Services
(UK) Limited and International Financial Data Services Limited (together “IFDS”) in relation to the
“Bluedoor” back-end platform and associated business process outsourcing. We have also notified
DST Bluedoor PTY Ltd (“DST”) that contractual arrangements with it in relation to the use of the
associated “Opendoor” front-end solution in connection with UK Platform transformation which have
time expired, will not be renewed nor extended. Our programme to re-platform the closed life book of
Old Mutual Wealth Life Assurance Limited (the Heritage business) remains paused as announced in
October 2016.
OMW has conducted a comprehensive review of the options available to our UK Platform business
and has concluded that FNZ’s scale, market-proven and functionally rich offering is the most suitable
to meet the current and anticipated needs of the business. In partnership with FNZ, we expect to
deliver all the existing functionality of our platform with increased levels of straight-through processing
and enhanced functionality including cash accounts, ETFs and investment trusts, adviser back-office
system links and a range of other new features. Importantly, we will retain the functionality and user
experience of our award-winning adviser portals and our industry-leading client service centre.
OMW guided the market in October 2016 that the costs of implementing the platform systems with
IFDS/DST could be up to £450 million. As at end of April 2017, UK Platform transformation costs of
approximately £330 million have been incurred, of which £110 million was in relation to the Heritage
business. The end April total is stated net of a £30 million receivable from our previous supplier which
is triggered as a result of our termination today and is payable over the next three years. Preliminary
cost estimates for the operational delivery of the FNZ platform are of the order of £120-160 million.
This preliminary estimate is supported by our contract with FNZ, but this plan will be confirmed
through our joint planning and configuration phases. The new platform is expected to provide
additional functionality that was not included in the previous arrangements. Management estimate this
would have cost in excess of a further £50 million and taken a further two years post migration to
deliver.
Based on the work done to date, we believe that through the successful implementation of the FNZ
contract, we can deliver the new operational platform and complete the outsourcing to FNZ, at lower
risk for three key reasons:
- We will be configuring and adopting an existing, proven UK solution with a single supplier
rather than converting an overseas system to work in the UK market.
- FNZ has an established track record of successful platform implementations, continuing
investment and system upgrades.
- We have a strong customer-focussed contract with appropriate risk sharing.
We have a strong platform business and continue to invest in maintaining our existing systems to
ensure we meet the needs of our customers and advisers. We expect to provide a further update on
developments in the autumn.
Conference call
A conference call for investors and sell side research analysts will be held today, 2 May 2017, at
10.30am UK/11.30am SA time. Those wishing to participate in the call should dial the following
numbers and quote the pass-code 98395213#:
- UK/International: +44 (0)203 139 4830
- South Africa: 021 672 4008
- US: 718 873 9077
Playback will be available for 30 days from 2 May 2017 using pass-code 686844#:
- UK/International +44 20 3426 2807
- South Africa: 0800002877
- US: 866 535 8030
Investor Relations website
http://www.oldmutualplc.com/ir
Enquiries
External communications
Patrick Bowes +44 20 7002 7440
Investor relations
Dominic Lagan +44 20 7002 7190
Media
William Baldwin-Charles +44 20 7002 7133
+44 7834 524833
Notes to Editors
Prior to publication, the information contained within this announcement was deemed to
constitute inside information under the Market Abuse Regulation (EU) No 596/2014
Old Mutual
Old Mutual provides investment, savings, insurance and banking services to 19.4 million customers in Africa, the
Americas, Asia and Europe. Originating in South Africa in 1845, Old Mutual has been listed on the London and
Johannesburg Stock Exchanges, among others, since 1999.
Old Mutual is executing its strategy of managed separation, which will entail separating its four businesses into
standalone entities. The four businesses are:
Old Mutual Emerging Markets: an attractive business with a dominant position in South Africa, well-placed to
capitalise on sub-Saharan African growth as a diversified financial services provider with strong operations in key
East and West African markets.
Nedbank: one of South Africa’s four largest banks with very strong corporate, commercial and property finance
franchises, and a growth opportunity in the retail market, as well as pan-African optionality through its stake in
Ecobank Transnational Inc (ETI).
Old Mutual Wealth: a leading, integrated wealth management business, focused on the UK upper and middle
market, with strong prospects in a rapidly growing £3 trillion market.
OM Asset Management: an institutionally focussed, multi-boutique asset management business, delivering
strong, diversified growth in attractive asset classes through organic initiatives and acquisitions.
For the year ended 31 December 2016, Old Mutual reported an adjusted operating profit before tax of £1.7 billion
and had £395 billion of funds under management. For further information on Old Mutual plc and the underlying
businesses, please visit the corporate website at www.oldmutualplc.com
FNZ
“FNZ is a global provider of outsourced technology, transaction processing and asset servicing to financial
institutions, enabling wealth management and banking across direct, intermediated and workplace channels.
We build long-term partnerships with our customers, that help people achieve their financial goals through digital
engagement, lower costs, seamless service and personalised solutions. https://www.fnz.com/”
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Joint Sponsor:
Nedbank Corporate and Investment Banking
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