Old Mutual share price: HY pre-tax profit drops to £608 million

Uncertain environment continues in group's largest markets

Old Mutual share price: HY pre-tax profit drops to  £608 million

Old Mutual (LON:OML) has updated investors on its interim performance this morning.

Highlights from the company statement:

Bruce Hemphill, Group Chief Executive, said:

"The first six months of the year were characterised by volatile currencies and lower average equity markets but our underlying performance demonstrated the strength of our franchises and the positive momentum within each of our businesses.

"We are making good progress with our managed separation strategy we announced in March 2016 and which we expect to be materially complete by the end of 2018. At this stage, we are doing a lot of preparation work that will lay the foundations for the future and is critical for success. We are clear about the task at hand and we are absolutely confident that this is the right strategy to unlock value."


· The macro-environment has been challenging with a weaker rand against the first half of 2015 and lower average market levels. Pre-tax adjusted operating profit (AOP) of £708 million down 9% in constant currencies, down 22% in reported currency;

· IFRS pre-tax profit of £608 million (H1 2015: £683 million);

· AOP earnings per share 8.0p down 11% in constant currencies, 22% in reported currency;

· First interim dividend of 2.67p; second interim dividend expected to be in the mid to upper end of the cover range of 2.5 to 3.5 times AOP;

· Adjusted NAV at 193.3p per share (FY 2015: 178.9p per share) boosted primarily by a strengthened rand and US dollar from year-end levels;

· NCCF of £3.5 billion (excluding Rogge), down 13% in constant currencies; FUM (excluding Rogge) at £342.7 billion up 4% in constant currencies and up 13% in reported.

Current trading and outlook

The second half of the financial year has started in line with management's expectations. An uncertain environment continues in our three largest markets of South Africa, UK and US which may lead to further challenges, although:

· In the UK, OMW is in a strong position given its model of providing advice-driven investment solutions to financial advisers and customers via a vertically integrated, multi-channel business. Despite uncertainty over investor sentiment we have seen positive inflows of money since the EU referendum result, although we do not expect the first half's strong NCCF to repeat in H2;

· OMEM expects economic conditions in South Africa to remain tough with consumers under pressure. However, the business is in good shape and we continue to focus on our customers by offering a broad and innovative product suite that meets their needs through all stages of the economic cycle.

· Nedbank expects growth in Diluted Headline Earnings Per Share (DHEPS) in 2016 to be positive but lower than the growth achieved in 2015 and the target;

· OMAM should benefit from its soon to be completed acquisition of Landmark, which has been successfully financed in the US bond market;

We announced a new capital management policy in March, the aim of which is to provide flexibility, recognising the need to balance complex considerations, including the background of volatile markets, costs associated with the managed separation and continued investment in the businesses while increasing their capital strength.

We are still at an early stage in the managed separation with significant variables ahead of us and therefore any dividend under consideration for the year ending 31 December 2016 is likely to be at the mid to upper end of the cover range of 2.5 to 3.5 times adjusted operating profit. The full effects of the capital management policy on the dividend will be felt in the second half.

As of 07:09 BST, Thursday, 11 August, Old Mutual plc share price is 225.50p.

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