ii view: M&G investors happy with management and big dividend

First-half results to 30 June

• Adjusted operating profit up 1% £378 million
• Assets Under Management and Administration up 2.5% to £354.6 billion
• Capital cushion or Solvency II coverage ratio of 230%, up from 223% a year ago
• Interim dividend up 1.5% to 6.7p per share

Guidance:

• Continues to target cost savings of £230 million by the end of 2025
• Continues to target growth in adjusted operating profit of 5% or more up to 2027

Chief executive Andrea Rossi said:

"I am pleased with our progress over the first six months of the year. A key highlight is the positive £2.1 billion net flows from open business, a £3.2 billion improvement from the same period last year. This is a strong result underpinned by £2.6 billion net inflows from external clients in Asset Management.

"The balanced and diversified nature of our business model, as well as the momentum across our Asset Management and Life businesses, gives me confidence for the future.”

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 ii round-up:

M&G Ordinary Shares (LSE:MNG) manages money for around 4.5 million retail clients and more than 900 institutional clients.  

Group brands include both M&G itself and Prudential. 

For a round-up of these latest results announced on 3 September, please click here. 

ii view:

Previously separated out of Prudential (LSE:PRU), M&G today employs around 6,000 people across 39 offices worldwide. Headquartered in London and a constituent of the FTSE 100 index, competitors include BlackRock Inc (NYSE:BLK), Vanguard, Man Group (LSE:EMG), Jupiter Fund Management (LSE:JUP) and Ashmore Group (LSE:ASHM).

For investors, intense competition across the asset management industry and including many providers of low-cost index tracking funds, has placed downward pressure on fees. Currency moves can impact profit performance. Competitors such as Schroders (LSE:SDR) are not standing still, with plans to launch lower cost active exchange-traded funds (ETFs), while the uncertain economic outlook could yet hinder consumers’ propensity to save.  

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More favourably, a focus on international clients has seen asset management mandates from overseas increasing over the last five years. An expansion of products offered sees a planned launch of a With-Profits Bulk Purchase Annuity service early next year. The previously announced partnership with Japan’s Dai-ichi Life is expected to generate at least $6 billion (£4.5 billion) of new business flows into M&G funds over the next five years, while almost 95% of the previously upgraded cost savings target of £230 million have been achieved so far.

On balance, and despite intense industry competition, ongoing management initiatives and a forecast dividend yield of over 8% are likely to keep attracting income seekers.

Positives: 

• Expanding product and geographical client base
• Targeting cost cuts

Negatives:

• Uncertain economic and geopolitical outlook
• Intense industry competition

The average rating of stock market analysts:

Buy