Old Mutual plc - Capital Markets Day
Old Mutual plc
Ref 520/16
11 October 2016
old mutual plc - capital markets day 2016
Old Mutual plc ("Old Mutual" or "plc") is holding a Capital Markets Day today 11 October 2016 which is scheduled to start at 12.30pm BST.
The event is being webcast (details of which are at the end of the announcement). It will be hosted by Bruce Hemphill, Group Chief Executive of Old Mutual and will include presentations from the Chief Executive and Chief Operating Officer of Old Mutual Wealth ("OMW"), and the Chief Executives of Old Mutual Emerging Markets ("OMEM"), Nedbank and OM Asset Management ("OMAM"), as well as an update on the managed separation process by the Director of Managed Separation, Rob Leith.
Slides and transcripts will be available after the event on the plc's website www.oldmutual.com
Bruce Hemphill, Chief Executive of Old Mutual plc, said: "Old Mutual has four good businesses. We are now in the process of getting the unlisted entities of Old Mutual Wealth and Old Mutual Emerging Markets ready for independence. The managed separation process is acting as a catalyst for delivering long-term sustainable earnings and growth and positioning the underlying businesses to be great on a standalone basis."
Managed separation
At Old Mutual's preliminary results for 2015, the company announced that the long term interests of its shareholders and other stakeholders would be best served by a managed separation of the Group into its four constituent businesses: OMEM, Nedbank, OMW and OMAM. Old Mutual's current plan for the managed separation envisages one or more transactions which will ultimately deliver two separate entities, listed on both the London and Johannesburg stock exchanges into the hands of Old Mutual's shareholders. One entity will consist principally of the UK Old Mutual Wealth operations, with the primary means of achieving this being through a demerger, and the other will consist principally of the Emerging Markets operations through the creation of a new South African holding company.
We intend to continue with the phased reduction of our 66% holding in OMAM in an orderly manner while supporting the development of its strategy. Through asset disposals and the use of Old Mutual's surplus cash, we intend to materially reduce Old Mutual's holding company debt.
Following the creation of the new South African holding company, we intend to distribute, in an orderly manner, a significant proportion of the Group's shareholding in Nedbank to the shareholders of the new South African holding company at that time, leaving OMEM as the principal business within that group. Through its ownership of Old Mutual Life Assurance Company (South Africa), the new South African group will retain an appropriate strategic minority stake in Nedbank, with the exact level still to be determined together with Nedbank, based on OMEM's commercial relationship with Nedbank and influenced by the implications of the incoming Twin Peaks regulations. The respective boards of directors and management teams of Old Mutual and Nedbank continue to work closely together on these matters.
The announced target date for the material completion of the managed separation is by the end of 2018, with material completion including the reduction of the stake in OMAM and the creation of the two separate listed entities. This remains the target date which ideally would include the distribution of the Nedbank stake but, if circumstances dictated otherwise, the distribution could occur after that date.
The managed separation is highly complex and subject to ongoing discussions with key stakeholders, as well as legal and financial advisers. The plans are subject to change as a result of factors such as stakeholder consent, regulatory conditions and/or the readiness of the underlying businesses. Equally, Old Mutual may receive approaches for some or all of its businesses. There can be no certainty as to the nature of the final outcome.
Business readiness
The key determinant of the timing for the managed separation is the readiness of the businesses for independence. The process of preparing for independence is more significant for the unlisted businesses, OMEM and OMW. This process for each of these businesses will include reviewing, inter alia, businesses and operating models, capital and governance structures and management. In addition, OMW has announced that for the three months ended 30 September 2016, it recorded net client cash flow of £0.9 billion (Q3 2015: £2.3 billion) and had funds under management of £119 billion (FY 2015: £104 billion). It will also provide an update to the IT business transformation programme. A future-ready wealth platform, which will improve the sales of new business and the retention of existing customer assets, remains very important for OMW's strategy. To simplify and de-risk the overall project and focus resources on the open book build, the building of the Heritage platform has been paused. In addition to the £225 million spent to the end of June 2016, we estimate that the remainder of the revised programme will cost a further £200 million to £225 million to complete. This will mean the total cost to complete the re-platforming will be in the range of £425 million to £450 million, excluding any further spend on Heritage.
Costs of the managed separation
The plc defines managed separation costs as costs relating directly to the managed separation process. These include: the transaction costs to give effect to the corporate actions set out above, which cannot be subject to advance guidance; the recurring incremental costs directly associated with the listing of the OMW and OMEM entities, currently estimated at £5 million to £10 million per annum; and the one-off costs of between £50-£65 million for winding down the head office and its activities in London.
There will be additional one-off and recurring incremental costs for the unlisted business units so they can function as standalone entities through strengthening capabilities and infrastructure. The businesses will seek to mitigate these incremental recurring costs through capturing cost efficiencies.
Plc will develop clear disclosure to allow stakeholders to track both the managed separation and business stand-alone costs and associated cost savings.
H2 2016 cost guidance
Plc corporate costs are expected to reduce as the plc head office winds down. Corporate costs in 2016 are expected to be in line with 2015, due to the costs of new appointments during H1 being offset by savings attributable to redundancies during H2.
Managed separation costs incurred by plc head office during 2016, including advisory and redundancy costs, will be recognised in other net shareholder expenses. Plc head office managed separation costs are expected to be higher in 2016 than one-off costs recognised during 2015. However, plc 2016 other net shareholder expenses are not expected to exceed those of 2015, assuming the revaluation gains related to non-sterling plc assets recognised during H1 do not reverse during H2 2016.
For OMW, managed separation costs and business stand-alone costs in the second half of 2016 are expected to be approximately £10 million.
Analyst and investor engagement
This is a multi-year project and we are committed to updating the market on a regular basis. The next scheduled update will be on 9 March 2017 when the plc will publish its 2016 FY financial results.
Management teams from the businesses will be conducting investor meetings following the Capital Markets Day in both South Africa and the UK.
Enquiries
External communications
Patrick Bowes UK +44 20 7002 7440
Investor relations
Dominic Lagan UK +44 20 7002 7190
Sizwe Ndlovu SA +27 11 217 1163
Media
William Baldwin-Charles +44 20 7002 7133
+44 7834 524833
Notes to Editors
1. Old Mutual provides investment, savings, insurance and banking services to 18.9 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.
2. For the year ended 31 December 2015, Old Mutual reported an adjusted operating profit before tax of £1.7 billion and had £304 billion of funds under management. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutual.com
3. Managed separation entails separating the Group through a series of steps that will ultimately result in four standalone entities:
o Old Mutual Emerging Markets: An African financial services leader, providing long-term savings, protection, investment and lending to retail and corporate customers
o Nedbank: Old Mutual owns a 54% stake in Nedbank, one of South Africa's top four banks, providing wholesale and retail banking, insurance and asset management for individuals and businesses
o Old Mutual Wealth: a leading wealth management business in the UK and international markets
o OM Asset Management: Old Mutual owns 65.8% in the New York Stock Exchange listed OM Asset Management which offers a diverse range of investment strategies and products for institutions, delivered worldwide through seven US-based boutiques.
Details of the webcast
A webcast of the presentations and Q&A will be broadcast live at 12:30 BST / 13:30 SAT today. Those wishing to participate in the call can register for the webcast on the company website www.oldmutual.com, dial the following numbers and quote the pass-code 18055153#:
UK/International: +44 20 3139 4830
US: +1 718 873 9077
South Africa: +27 21 672 4008
Playback will be available for 30 days from 11 October 2016, using pass-code 677392# at the following numbers:
UK/International: +44 20 3426 2807
US: +1 866 535 8030
South Africa: 0800 002 877
Transcripts will be available from the company website following the event.
This information is provided by RNS
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