The 173-year-old insurance group, which is embroiled in a bitter legal spat with its axed chief executive Peter Moyo, said it had excess cash to conduct a further share buyback after completing a similar exercise that yielded R2.5bn in the first half of 2019.
It said it expected to repurchase up to 169million ordinary shares, equivalent to 3.5percent of its issued share capital.
Interim chief executive Iain Williamson said the company believed its share price was undervalued.
“The board believes that the share price is trading at a discount to its intrinsic value and is of the view that a share repurchase programme will deliver longer-term incremental value to shareholders,” Williamson said.
It said the legal battle with Moyo would not have a significantly adverse effect on its financial position. Moyo was sacked in June after the board cited a complete and irreparable breakdown in confidence and trust. Last month, it wrote an open letter to shareholders in which it fired him again.
The managing director of Old Mutual Personal Finance, Karabo Morule, told analysts during the group’s presentation of its half-year results to the end of June that customers were asking advisers about the litigation and the economy.
“What we have been seeing is that a lot of our advisers, regardless of whether they are in independent space, have had a lot of questions. They have been focused on reassuring their customers more so, given the economic environment,” she said.
The group reported a 10percent increase in adjusted headline earnings to R5.2bn from R4.75bn in 2018, due to higher investment returns in South Africa and good profit growth in personal finance and the rest of Africa.
It declared an interim dividend of 45cents a share, in line with the policy that sat at 40percent of adjusted headline earnings.
The group said it was focused on defending and gaining market share in the personal finance division amid fierce competition from the likes of Capitec, which launched a new funeral cover policy last year.
It said personal finance was resilient in the first half of 2019 in a challenging macroeconomic and highly competitive environment. “Higher unemployment rates continue to place pressure on the disposable income and savings levels of our customers,” the company said, adding that it had added an accidental death benefit to the iWYZE Life product range.
Michael Porter, a trader at Unum Capital in Johannesburg, said the share buy-back programme was usually interpreted as good news by investors.
“At this stage, it does not look as if it is good news. It’s looking more like a miss, because the share price has declined. The company has also reported higher adjusted headline earnings. The lower share price could also be as a result of uncertainty around the ongoing litigation with Moyo.”