South African savings, investments and insurance group Old Mutual has announced plans to pay a special dividend of 18p per share out of the proceeds from the sale of its Nordic business.

The special dividend is expected to be made in early to mid-June of this year.

The cost to the company of the special dividend will be around £1bn, which it can well afford after trousering £2.1bn from the sale of its Nordic units to Skandia. The rest of the sale proceeds will be used to reduce debt, and £600m of the funds from the sale have already been applied to this end. The group is now set to meet its £1.5bn debt reduction target by the end of 2012.

A total of around £1.7bn is to be repaid under the group's increased debt repayment plan, the company said.

The firm also said its capital flexibility will be enhanced by retaining an increased proportion of the cash flows expected to be generated from operational activity and other corporate actions planned for 2012.

The South African financial group also gave a brief trading update in which it said that it has suffered from unfavourable movements in the sterling/rand exchange rate in the second half of 2011.

The weakening of the South African rand against sterling has had a negative impact on sterling-denominated earnings and the year-end net asset value per share.

The translation impact on the group's sterling net asset value as at 30 June 2011 of the rand depreciation was around £940m. However, this reduction in net assets will be partially offset by profits earned over the period, the inclusion of the other African operations in the consolidated results of the group and other financial and foreign exchange movements.

In the fourth quarter of 2011, net client cash flows in the Long Term Savings business remained positive, but annualised premium equivalent (APE) life assurance sales were down year-on-year; unit trust sales, however, were up on the fourth quarter of 2010.

The group said its Nedbank unit delivered solid earnings growth in the second half of 2011, though it is going up against tough comparatives from the second half of 2010. In the US Asset Management business, net client cash outflows look like they continued during the fourth quarter of 2011 largely due to short-term outflows, though the final figures have not been audited yet.

The group warned that the carrying value of goodwill in the US Asset Management business is likely to be written down by around £270m.

The impairment charge would be excluded from Adjusted Operating Profit but would reduce International Financial Reporting Standards (IFRS) net income and the net asset value in the 31 December 2011 statement of financial position, the company revealed.

The share price rose 2.9% to 155.9p by 12:48.

NR

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