Old Mutual closes branches and warns of dip in second-half profits

Old Mutual, one of the hoard of struggling financial services companies, said yesterday it would close several branches of its stockbroker Gerrard, leading to a £5m restructuring charge this year.

The company, which is listed in London and South Africa, also warned that earnings would be lower in the second half of the year than in the first six months. Its shares dropped 4.75p to 90p.

Old Mutual has overhauled its UK business in the last 12 months following a period of rapid expansion in this country and in the United States, which was part of its plan to become less dependent on the South African market and its struggling currency.

Gerrard has about 30 branches across the UK. Julian Roberts, the finance director of Old Mutual, said the company was looking at "taking out some of the unprofitable ones or rationalising them so that not all offer a full service".

Old Mutual has also slashed its UK staff from 1,800 to 1,200 this year. The company is expected to reduce the headcount further in the next few months as Gerrard is on track to fall back from an operating profit of £3m earlier this year to the break-even point.

Mr Roberts said market conditions had been "tough", depressing the results of Old Mutual and its rivals. Assets under management at Old Mutual fell 16 per cent in the first 10 months of 2002.

So far the company has sold or reached agreements to sell its brokerages GNI and Old Mutual Securities, making its focus in this country asset management and private clients' advisory work.

Mr Roberts said the fall would have been far more if Old Mutual had not acted quickly to rationalise its UK business and sell off parts that it regarded as non-core.

He said a break-even at Gerrard by the year end was "good going". He added that if Old Mutual "hadn't taken all the actions it has, it would have been significantly harder".

Old Mutual's foray into the US in the form of its acquisition of United Asset Management has proved successful so far. The company achieved an inflow of funds under management of $3.7bn (£2.46bn) in the year to date at a time when most fund managers are seeing their customers withdraw their cash.

Old Mutual has been hit by the fluctuations of the rand, which has lost about a fifth of its value against the pound in the year to 30 September.

Edmond Warner, head of Old Mutual in the UK, last week said he would step down in March having overseen the restructuring of the division. The company is expected to announce a replacement soon.

Old Mutual, South Africa's largest insurance company, has been concentrating on expanding its presence in banking in its home market. Earlier this year it bought BoE, South Africa's sixth largest bank. The deal took Old Mutual's separately listed bank, Nedcor, into the rankings of the top two banks.