- Shares rise on encouraging first-half results
- Fund inflows vindicate changes implemented by management
- 2023 prospective dividend yield of over 9%
Shares in British insurer and asset management firm M&G (MNG) rose by 2% to 222p following the announcement of an encouraging set of first-half results.
Although both interim profits and assets under management declined there was a marked improvement in fund inflows.
John Foley, M&G’s chief executive, said: ‘Improved client flows underpinned a resilient operational and financial performance despite a period of volatility when many investors reduced their exposure to markets.
‘In only 12 months, we have reversed our position from being £2 billion in net client outflows, to achieving £1.2 billion in net client inflows excluding Heritage.’
Pre-tax profit fell 44% to £182 million in the first half, down from £327 million in the same period of 2021.
This was impacted by short-term fluctuation losses in the fair value of surplus assets in the group’s annuity portfolio and derivatives used to hedge its balance sheet.
Assets under management and administration decreased by £21.1 billion to £348.9 billion.
Interim operating capital generation increased by 40% year-on-year to £433.0 million.
The shareholder solvency II rating stood at 214%. This is significant because it is ahead of the group’s stated optimal range of 160% to 190%.
It enabled the group to announce a £500 million share buyback at its full-year results in March. The interim dividend was increased by 2% to 6.2p.
FAVOURABLE TRENDS
In the UK, the combination of an ageing population and the ongoing shift of responsibility for retirement income from corporates and the state to the individual should continue to fuel growth in the long-term savings market for years to come.
M&G is ideally positioned to benefit from these trends.
This backdrop has helped the group to facilitate a turnaround in fund flows.
IMPROVING FUND FLOWS
The wholesale asset management arm returned to net client inflows for the first time in four years with a total of £0.8 billion, compared to £3.4 billion of net client outflows in the same period last year.
The more encouraging outlook for fund flows extended to the institutional asset management business with net client inflows of £0.3 billion.
The reduction in fees in retail has undoubtedly made the offering more competitive.
Management remains confident the work done to improve fund performance will increasingly yield rewards.
Today’s results have vindicated these changes; within wholesale asset management, 62% of funds ranked in the upper two performance quartiles over one year (31 December 2021: 45%) and 61% over three years (31 December 2021: 36%).
VALUATION AND YIELD
M&G’s shares are trading on 8.3 times 2023 forecast earnings, with a 9.2% prospective dividend yield based on next year’s expected payment.
Berenberg forecasts M&G will pay 19.82p per share in dividends for 2022, 20.65p in 2023 and 21.68p in 2024.
