ii view: big dividend payer M&G details strategic progress

First-half results to 30 June 2023

• Adjusted operating profit up 31% to £390 million
• Assets Under Management and Administration (AUMA) of £333 billion, down from £349 billion a year ago
• Capital cushion or Solvency II coverage ratio of 199%, unchanged from late December
• Interim dividend up 5% to 6.5p per share

Chief executive Andrea Rossi said:

“Against the backdrop of ongoing market volatility and uncertainty we have made progress against all three pillars of the strategy that we launched in March – maintaining our financial strength through capital discipline; mobilising the Transformation programme to simplify our business and improve client outcomes; and delivering growth with positive net client inflows.

“As we look ahead, I remain confident we have the right ingredients for success that will enable us to continue to deliver attractive outcomes for our clients and shareholders. We are, however, not complacent and will continue to focus on ensuring that our balance sheet remains strong and we deliver on our purpose and strategic objectives.”

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ii round-up:

Previously separated out of Prudential, M&G Ordinary Shares (LSE:MNG) today manages money for around five million retail clients and more than 800 institutional clients in both the UK and Europe. 

Its brands include both M&G itself and Prudential brands. 

For a round-up of these latest results announced on 20 September, please click here. 

ii view:

M&G is a savings and investment business. It operates across the three divisions of Asset Management, Wealth and Savings including Prudential with-profit products and Heritage taking in historic Prudential (LSE:PRU) savings policies and annuities. Its updated strategy sees it targeting business growth, a simplification of its operations along with retaining financial strength and delivering stable or growing dividends. Competitors include Schroders (LSE:SDR), Man Group (LSE:EMG) and Ashmore Group (LSE:ASHM). 

For investors, a backdrop of elevated and potentially yet higher interest rates offers a tough backdrop for its investment markets. Assets Under Management and Administration (AUMA) have fallen from a year ago. Competition across the asset management industry remains intense, placing downward pressure on fees. Higher interest rates may be seeing some clients switching savings towards bank deposits, while a cost-of-living crisis could also be forcing some customers to sacrifice savings in order to pay higher energy and mortgage bills.

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More favourably, cost saving initiatives are expected to reduce the cost base by around £50 million in 2023, and new divisional heads have been appointed. Robust fund performance helped adjusted net flow inflows of £700 million during the period, while its focus on shareholder returns has seen over £2.5 billion returned to shareholders since its separation from Prudential in 2019.

M&G shares have traded a range about 25p either side of 200p for most of the past three years, and despite continued risks, income investors will likely continue to find an historic and estimated dividend yield of 10% attractive. 

Positives: 

• Cost cutting initiatives
• Attractive dividend payment (not guaranteed) 

Negatives:

• Uncertain economic and geopolitical outlook
• Intense industry competition

The average rating of stock market analysts:

Strong hold