M&G raises dividend payout despite profit fall as the fund firm unveils its first set of results since demerging from Prudential
- Final dividend increased by 2.6%to 12.23p per share, from 11.92p in 2019
- The fund manager had some £367bn of assets under management last year
- Balance sheet ‘robust’ as group generated nearly £1bn in 2020
- Pre-tax profits fell 31% to £778m, mostly due to costs of going it alone
Shares in asset manager M&G have risen today after it raised dividend payments as it unveiled its first full set of results since demerging from Prudential in 2019.
The group increased the final dividend by 2.6 per cent to 12.23p per share, from 11.92p in 2019, as it said its balance sheet remained ‘robust’ after having generated nearly £1billion in 2020.
The hike in dividends comes despite the group reporting lower pre-tax profits of £788million in 2020 – although most of the 31.4 per cent fall is down to increased costs associated with becoming an independent business.
Dividend hike: Asset manager M&G increased the final dividend by 2.6 per cent to 12.23p
The M&G share price has fallen heavily since the start of the pandemic, but has recently shown signs of recovery and stood at 212.10p this afternoon, up 3.4 per cent.
After splitting from Prudential, M&G maintained responsibility for the retail funds, which carry the M&G name, as well as the actively managed Pru Fund and legacy life insurance and pensions assets.
Results were boosted by changes to longevity assumptions, which added £217million to profits this year.
‘Essentially holders of M&G annuities are no longer expected to live quite as long as they were previously, freeing up capital set aside to pay future pensions,’ explains Nicholas Hyett, an equity analyst at Hargreaves Lansdown.
‘That’s been a theme across the industry in recent years, and while it can’t continue forever it’s been a tailwind for profits.’
Meanwhile, total assets under management on behalf of institutional clients grew 11 per cent to £85.5billion, M&G said.
But that only partly offset big outflows of cash at its retail asset management arm, which was not helped by some lacklustre returns on investments.
M&G chief executive John Foley
‘Redemptions increased during the year due to weak investment performance of some of our larger funds,’ the company said.
In total, M&G’s asset management arm handled some £367.2billion in clients’ cash, up from £351.5billion in 2019.
Last month, M&G unveiled the launch of a £5billion fund to invest in private firms, mainly in this country, which are pioneers in creating new green and sustainable technologies and enterprises.
The project, code-named Catalyst, will sit inside M&G’s £50billion Pru Fund, which has 5million customers in Britain and across the globe.
The new fund forms part of a strategy by M&G chief executive John Foley to convert the fund manager’s £367billion of assets under management on to a more sustainable basis.
Last year, the company acquired the Ascentric platform from Royal London and its £15.5billion of assets held by 95,000 customers.
‘In our first year as an independent company, we have delivered a strong and resilient performance in one of the most challenging operating environments ever,’ Foley said.
And added: ‘We laid the foundations for M&G’s return to growth, including actions to fix Retail Asset Management and the creation of M&G Wealth following the acquisition of Ascentric.
‘As responsible stewards of £367.2billion in Assets Under Management and Administration (AUMA), we are also pivoting the entire company to sustainable investing – a shift which we believe will benefit customers, clients and shareholders, as well as wider society and the planet.’
Hyett said: ‘Management will hope better investment results in the second half of the year, a focus on sustainable investment going forwards and an improved retail platform following the acquisition of Royal London’s Ascentric can turn things around, but the proof will be in the pudding on that front.’