M&G shares rose on Wednesday morning as the investments and savings group recorded another period of net client inflows and increased operating profit.
Stronger performance during the first half of 2023 resulted from progress in their transformation strategy to focus on wealth and investment management.
M&G shares were 3% higher at the time of writing on Wednesday as M&G said they would increase their dividend by 5% to 6.5p for the period.
The dividend increase makes M&G’s already healthy yield that little bit more attractive.
Positive inflows
The company saw positive net client flows of £0.7 billion, excluding Heritage, driven by strong inflows into its PruFund UK proposition. M&G also re-entered the defined benefit pension market through two deals worth £617 million in premiums.
M&G is heading for its third consecutive year of net client inflows despite weakness elsewhere in the sector. Assets under management fell in line with weaker asset prices.
Its wholesale asset management business attracted £1.3 billion in net inflows, with 70% of mutual funds ranking in the top two performance quartiles. Private markets saw £0.7 billion in net inflows, a core area accounting for 40% of revenues.
Inflows translated into profit growth with adjusted operating profit rising 31% to £390 million. Operating capital generation increased 17% to £505 million, already delivering 53% of its £2.5 billion target for 2024.
The company remains focused on transforming M&G, aiming to generate £200 million in cost savings by 2025.
“The transformation programme continues at M&G, with a renewed focus on the Asset Management and Wealth businesses. A clearer strategy makes sense, and some needed momentum looks to be building in those two areas despite what continues to be a tricky backdrop,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“Choppy markets are never an easy thing to navigate as an Asset Manager, made even more difficult when the government steps in and makes things worse – M&G’s still feeling the effects of the failed UK mini-budget as redemptions from institutional clients in the UK impacted results. Nonetheless, the slack was picked up elsewhere. Notably, the popularity of diversified investments through the PruFund range continues to grow.
“Annuities were the standout though, as higher rates made operations more profitable. M&G’s looking to capitalise on the more favourable conditions, back in the bulk purchase market with two deals closing after the half ended. This marks the first business it’s done in the area since closing the annuity book back in 2016 – 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.”