- Recorded a 78% profit decline in 2019
- Performance attributed to low economic growth in SA and unbundling of Nedbank Group
Harare – Dual listed Old Mutual Limited with a primary Johannesburg Stock Exchange (JSE) and secondary Zimbabwe Stock Exchange listing (ZSE) registered a contracted 2019 performance as was earlier projected by the company in an earnings guidance publication.
In an earnings guidance published recently, Old Mutual Limited expected its Results from Operations (RFO) to decrease by circa 0 to 5% for the year ended 31 December 2019 compared to the prior year.
Profit for the group stood at R9.6 million, a 78% contraction from R42.7 million recorded in the previous comparable period.
The company attributes the performance to slow economic growth in South Africa and the unbundling of Nedbank Group Limited (Nedbank).
South Africa’s economy contracted by 1.4% in the fourth quarter of 2019 which inevitably resulted in the economy sliding into its third recession since 1994.
Seven of the ten industries contracted in the fourth quarter with transport and trade as the main drag on overall economic activity.
On 26 September 2018, Old Mutual announced the unbundling of its majority shareholding in Nedbank to its shareholders, a separation that was concluded on 15 October 2018. Old Mutual Limited through its wholly owned subsidiary Old Mutual Life Assurance Company retained a 19,9% strategic minority shareholding of the issued share capital of Nedbank Group.
Old mutual also added that Southern Africa excluding Zimbabwe recorded good growth in asset-based fees in their Asset Management business and a solid profit growth in Banking and Lending business with higher net lending margin driven by lower credit losses.
East Africa reported loss of R40 million due to poor claims experience and lower new business volumes and West Africa had a significantly lower loss as a result of the ongoing cost rationalisation project and suspension of underwriting of oil and gas business.
The company however did not state the performance for its Old Mutual Zimbabwe subsidiary.
“Until such time as we are able to access capital by way of dividends from the business in Zimbabwe, we will manage it on a ring fenced basis and exclude its results from AHE. The lack of ability to access capital by way of dividends is exacerbated by the volatility that a hyperinflationary economy and the reporting thereof introduces. This adjustment has been applied from 1 January 2019 and we have restated comparatives to reflect this decision.”
Commenting on the Coronavirus outbreak, the company said it will continue too monitor and assess the impact of the emerging COVID-19 crisis.
“On 11 March 2020, COVID-19 was declared as a pandemic due to the rising rate and scale of infection observed. The rapid spread of this virus has caused significant disruption in global equity markets. We model the impact of ‘perfect storm’ scenarios on our solvency capital and liquidity levels. These stress tests have shown we remain sufficiently capitalised with appropriate liquidity levels through these scenarios.”
However, profit after tax from continuing operations was R9.5 million in 2019 from R4.9 million recorded last year, indicating a 94% increase.
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