Trading Statement for the six months ended 30 June 2020
Old Mutual Limited
Incorporated in the Republic of South Africa
Registration number: 2017/235138/06
JSE Share Code: OMU
NSX Share Code: OMM
MSE Share Code: OMU
ZSE Share Code: OMU
("Old Mutual" or “Company” or “Group”)
24 August 2020
TRADING STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020
Shareholders are advised that Old Mutual Limited is currently in the process of
finalising its interim results for the six months ended 30 June 2020 ("current
period"). This trading statement provides an indication of a range for Headline
Earnings per ordinary share (HEPS) and earnings attributable to equity holders
of the Group per ordinary share (EPS) in terms of paragraph 3.4(b) of the JSE
Limited Listings Requirements compared to the six months ended 30 June 2019
("comparative period"). The Group's interim results will be released on the
Stock Exchange News Service of the JSE Limited on Tuesday, 1 September 2020.
Further to our previous communication to shareholders on the 29 May 2020, the
COVID-19 pandemic continues to have an unprecedented impact on our business,
our lives and how we work and interact. Government enforced restrictions to
control the spread of COVID-19 in most geographies we operate in have
dramatically reduced the level of economic activity during the first half of
2020 and negatively impacted growth forecasts for the remainder of the year. In
this challenging environment we adapted to this new normal by leveraging our
digital capability to enable most of our employees and certain of our advisers
to work remotely.
New business sales volumes were negatively impacted, as most of our tied
advisers were unable to sell during the lockdown period due to the partial
closure of the branch network and lack of access to customers’ homes, worksites
and branches. Although lockdown restrictions have been eased, and economic
activity has somewhat resumed, sales levels remain below prior year levels.
This impact was most severe in the Mass and Foundation Cluster, where sales
volumes were too low to cover the largely fixed initial expenses and this
resulted in negative Value of New Business for H1 2020 for this segment.
Although local and global equity markets have recovered in the second quarter,
the JSE SWIX was down 8% at the end of June 2020 and average equity market
levels were 10% lower than the prior year. During the second quarter we saw
credit spreads widening by between 50bps and 100bps, more than increases in
previous market crises.
Throughout the period, in this tough economic environment, our solvency capital
has remained strong. At the end of June 2020, the solvency ratio was 182% for
the Group and 208% for OMLACSA. This demonstrates the capital strength and
resilience of our Group to withstand periods of prolonged market stresses and
positions us well to take advantage of growth opportunities as they arise.
The significant deterioration in the operating environment compared to the
comparative period has however negatively impacted our earnings. While there is
still much uncertainty around the pandemic and the impact that it will have on
experience, we have raised short term provisions in anticipation of worsening
mortality, morbidity and persistency experience in the second half of 2020.
These reserves are intended to allow for expected short term variances to our
long term assumptions.
Weaker growth forecasts and higher observed credit spreads have led to notable
unrealised mark to market losses in the first half of the year in our unlisted
equity and credit portfolios in Specialised Finance, although we believe the
quality of our credit book remains high. As these are unrealised they could
reverse in future periods as market conditions recover. We have also increased
our provisions for expected credit losses in Old Mutual Finance in recognition
of declining GDP forecasts, and the anticipated impact of this on future credit
There was an increase in business interruption (BI) claims in Old Mutual Insure
during the second quarter. We also made a decision to offer commercial
settlements to certain qualifying Small, Medium and Micro Enterprise (SMME)
customers to enable them to continue operating.
Taking into account the operating environment and factors outlined above
shareholders are advised that the Group’s key profit measures are expected to
fall within the ranges outlined below:
Key Performance Indicators
(R million unless stated Estimated Estimated
otherwise) % change 30 June 2020 30 June 2019
Results from Operations (61%) to (71%) 1,760 - 1,308 4,512
Adjusted Headline Earnings (62%) to (72%) 1,980 - 1,459 5,211
AHEPS (cents)¹ (60%) to (70%) 43.7 - 32.7 109.1
1. AHEPS defined as Adjusted Headline Earnings divided by WANS adjusted to reflect the
Group's BBE shares and shares held in policyholder and consolidated investment funds.
The notable decrease in the GDP growth for South Africa and increased
uncertainty around future cashflow projections is expected to result in the
recognition of material impairments in respect of the carrying value of our
investment in Nedbank and the goodwill related to our investment in Old Mutual
Finance. These impairments are recognised in the IFRS income statement,
however, are not recognised in Headline Earnings as this is an explicit
adjusting item in accordance with the JSE Circular. Accordingly they are also
not recognised in Adjusted Headline Earnings (AHE).
Headline earnings is higher than AHE, as AHE excludes the results related to
the operations of Residual plc and Zimbabwe and the adjustment in respect of
investment return for group equity and debt instruments held in life funds, all
of which were positive in H1 2020.
Taking into account the decrease in operating earnings and the significant
impairments outlined above shareholders are advised that HEPS and Basic EPS are
expected to fall within the ranges outlined below:
Key Performance Indicators
(R million unless stated Estimated Estimated 30 June
otherwise) % change 2020 30 June 2019
Headline Earnings (23%) to (33%) 4,507 - 3,922 5,854
HEPS (cents) (20%) to (30%) 102.5 - 89.7 128.1
IFRS profit after tax Greater than (5,621) - (6,745) 5,817
attributable to equity holders (100%)
of the parent
Basic EPS (cents) Greater than (128.5) - (154.2) 127.3
The financial information in this trading statement is the responsibility of
the Old Mutual Limited Board of Directors and has not been reviewed or reported
on by the Group’s external auditors.
JSE Merrill Lynch South Africa (Pty) Limited
Namibia PSG Wealth Management (Namibia) (Proprietary)
Zimbabwe Imara Capital Zimbabwe plc
Malawi Stockbrokers Malawi Limited
Sizwe Ndlovu T: +27 (0)11 217 1163
Head of Investor Relations E: email@example.com
Tokelo Mulaudzi T: +27 (0)11 217 1042
Investor Relations Manager firstname.lastname@example.org
Tabby Tsengiwe T: +27 (11) 217 1953
Head of Communications M: +27 (0)60 547 4947
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
markets 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
175 years of heritage across sub-Saharan Africa, we are a crucial part of the
communities we serve and broader society on the continent.
For further information on Old Mutual, and its underlying businesses, please
visit the corporate website at www.oldmutual.com.
Date: 24-08-2020 08:00:00
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