Peter Moyo. Picture: MARTIN RHODES
Peter Moyo. Picture: MARTIN RHODES

Old Mutual said on Friday that it plans to spend up to R2.5bn on buying back its own shares, which the market currently undervalues.

The financial services group has extended its buyback programme by R500m after saying in March it would spend up to R2bn on repurchases.

“The Old Mutual board believes that Old Mutual 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,” the group said on Friday.

“The management team remains committed to following a disciplined trading approach under the share repurchase programme and will only repurchase shares to the extent that market conditions are favourable.” 

Old Mutual’s shares were 1.4% up at R22.98 shortly before noon on Friday.

The company said the programme will reduce its share capital as the repurchased shares will be canceled as issued shares.

The group, headed by Peter Moyo, had cash and cash equivalents of R32.3bn at the end of December 2018, from R30.8bn a year before, it said in March.

At the time, Old Mutual said it might return more capital to shareholders in the future as it expected further cash inflows from the sale of its Latin American operations, as well as more inter-company dividends.

In the year ended December 2018, the group’s adjusted headline earnings fell 11% to R11.5bn, partly due to lower investment income in SA as a result of weaker equity markets.