March 11, 2019 / 5:47 AM / 5 months ago

UPDATE 3-S.Africa's Old Mutual FY profit drops; co plans $138 mln buyback

* Launches 2 billion rand stock buyback

* Headline EPS down 12 percent

* Misses target on results from operations (Adds shares, more CEO comment)

By Emma Rumney and Tiisetso Motsoeneng

JOHANNESBURG, March 11 (Reuters) - Old Mutual Ltd posted a 12 percent drop in adjusted full-year profit on Monday, missing its 2018 targets as a sluggish economy weighed on South Africa’s No.2 insurer’s first year as a stand-alone Africa-focused entity.

The company also announced a 2 billion rand ($138 million) stock buyback in a bid to placate shareholders following an almost one-third drop in its share price since it listed on the Johannesburg stock exchange in June last year.

Previously an Anglo-South African group consisting of a U.S. asset manager, a British wealth manager, an African financial services division and bank, Old Mutual is now one of four separate entities that executives said would fare better alone.

But cash-strapped consumers in South Africa have struggled to keep up with premium payments while currency devaluation weighed on its operations in Zimbabwe.

Headline earnings per share (HEPS) fell to 239.1 cents ($0.1663) from 271.1 cents a year earlier, when adjusted to exclude businesses earmarked for sale as part of the radical break-up of its former conglomerate structure, which it completed last year.

The bottom line was also hit by weaker results from operations (RFO), which missed the company’s own growth target of gross domestic product growth plus 2 percent. Operating profit fell 4 percent to 10 billion rand in 2018. South Africa’s GDP growth was 0.8 percent.


The share buyback brings the money returned to shareholders since becoming a standalone entity to 52 billion rand, according to a company statement.

The total distribution includes 2018 dividends of 117 cents per share, and around 40 billion rand proceeds from the spin-off of a portion of its stake in Nedbank — one of the four units that was hived off as part of the break-up.

Chief Executive Peter Moyo said he hoped the distributions that equate to nearly half Old Mutual’s market capitalisation, would be enough to lift the company’s share price after it missed its own targets with the drop in annual profit. “It would be good if (the market looked past our performance),” he told Reuters in an interview. “But the thing for us is we are serious about delivering what we promised to the market.”

However, the stock dropped as much as 4 percent in early trade on Monday, before recouping some of the losses to trade 2 percent lower at 21.34 rand as of 0809 GMT.

Moyo also said the company would assess the group’s capacity to return more cash to shareholders when proceeds from the sale of its Latin American business flow in.

$1 = 14.4293 rand Reporting by Emma Rumney and Tiisetso Motsoeneng; Editing by Gopakumar Warrier/ Rashmi Aich and Emelia Sithole-Matarise

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