Financial services giant M&G leapt in midweek trading after reporting better-than-forecast profits for the six months to June.
At 206.9p per share, the FTSE 100 company was last trading 3.8% higher on Wednesday.
M&G said that first-half adjusted operating profit leapt to £390 million, beating analyst predictions by just over £100 million. It was also up from £298 million a year earlier.
Client inflows also beat City estimates, with net flows (excluding Heritage) clocking in at £700 million, though this was down from £1.2 billion in the same 2022 period. Assets under management and administration dropped to £332.8 million from £348.9 million previously.
Asset managers have largely had a tough time in 2023. Fears over soaring interest rates and patchy economic data has ramped up market volatility and dampened investor confidence.
M&G lifted the half-time dividend to 6.5p per share, an increase of 0.3p.
On Target
Discussing its streamlining efforts, M&G said that it had enjoyed “good momentum in the first phase of our Transformation programme, creating a leaner and more efficient organisation and improving our ability to serve clients, reduce costs and unlock growth.”
The business said it remains on track to achieve its goal of achieving operating capital generation of £2.5 billion by next year.
M&G is also making good progress in meeting its other financial targets, it said, including making £200 million worth of cost savings (excluding inflation), and increasing adjusted operating profit from its Asset Management and Wealth operations to more than 50% of the group total (excluding its Corporate Centre unit).
The company also announced that it had made two bulk annuity purchase this month, its first such move since the middle of the last decade.
It said that “re-entering this market formed a key component of our strategy,” adding that “in doing so, we have opened a third channel to bring growth into M&G alongside Asset Management and Wealth.”
“Underlying Strength”
Chief executive Andrea Rossi commented that its half-year results “demonstrate the underlying strength of our business model, the resilience of our balance sheet, the attractiveness of our propositions as well as the hard work and commitment of our colleagues to deliver for our clients and execute on our strategic ambitions.”
He added that “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.”
What The City Said
Commenting on M&G’s transformation programme, Matt Britzman, analyst at Hargreaves Lansdown, noted that “a clearer strategy makes sense, and some needed momentum looks to be building in [Asset Management and Wealth] despite what continues to be a tricky backdrop.”
He added that the company is looking to capitalise on favourable conditions in the annuities market following its bulk purchase this month.
Britzman said that “it’s becoming a hot spot for some of the big insurers so competition is likely to heat up, but nonetheless provides another string to M&G’s bow.”
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