Momentum Group delivered strong normalised headline earnings (NHE) of R4.4 billion for the year to June 30, up 27% on the prior year, with operating profit up 31% to R3.6bn, as the financial services group readies for a new three-year growth strategy, CEO Jeanette Marais said on Friday.
NHE a share increased 32% to 309.7 cents, reflecting also the positive impact of the share buyback programme. Headline earnings a share increased 39% to 298.6 cents. A final dividend of 65 cents a share was declared, bringing dividends for the year up 4% to 125 cents a share. A further share buy back of R1bn was approved.
“We are pleased that, despite the challenging economic backdrop, our results and earnings are strong. This was the outcome of positive contributions from most business units that included a recovery in Momentum Insure and Metropolitan’s earnings, solid life annuity profits from Momentum Investments, and strong underwriting experience in Momentum Corporate and Guardrisk.” Marais said in an online interview.
She said some encouraging signs of improvement had become visible in the South African economy. Inflation was expected to ease, the formation of the Government of National Unity had instilled confidence among consumers, the interest rate cut would begin to bring financial relief to clients, and the absence of load shedding should all gradually improve confidence levels. This confidence had not yet translated into better trading conditions for the group, she said.
The annual results concluded the group’s three-year Reinvent and Grow strategy, and a new Impact strategy would run for the next three years until the 2027 financial year.
Marais said the past strategy resulted in a “step-change” in earnings growth from the 2022 year, after considering accounting changes. It had also resulted in the implementation of the more entrepreneurial federal model of operating the group’s companies, while the advisor network had been substantially improved to the extent that it held leading market shares in their product categories.
“The independent financial advisers have a choice on whether to recommend our products, so these market shares are a feather in our cap,” she said.
A big part of the strategy for the next three years would be to tap into the value that could be extracted with more collaboration between the group’s businesses. The dividend payout was in the middle of the group dividend policy range, and cash had been held back to be cautious and for possible acquisitions.
“For the next three years, we will focus on excelling at advice, building and protecting our clients’ financial dreams through simplified products and service, technology enablement and disciplined capital management – we invest in those businesses that outperform on their return on equity targets and we fix under-performing businesses,” she said.
Group new business sales in the past year, as measured by the present value of new business premiums, increased 19% to R82.1bn. Businesses that contributed significantly to the increase were Momentum Corporate, which increased sales 47%, Momentum Investments by 19% and Momentum Retail by 11%.
“We pride ourselves on our strong distribution capabilities, particularly in the Independent Financial Adviser market,” said Marais.
Value of new business (VNB) marginally declined by 2% to R589 million. Financial director Risto Ketola said even though VNB improved significantly in the second half, new business margins were not yet where they should be.
“Management will continue to focus on increasing sales volumes, improving new business pricing and the sales mix, and reducing acquisition costs. Each business unit has clear plans in place to address the VNB,” said Ketola.
A share buyback programme was completed on June 12, 2024. The group bought back 23.6 million shares at an average price of R21.11 per share, representing a 43% discount to the June 30, 2023 embedded value per share of R36.94.
The group’s corporate and retail savings businesses were well prepared for the implementation of the two-pot retirement system and were able to process and pay withdrawals from the first business day.
By September 25, the Momentum Group had received close to 150 000 withdrawal applications worth R2.5bn.
“Our investment in digital solutions helped our teams manage the significant volume of client interactions,” said Marais.
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