M&G continues road to recovery as net inflows rise
M&G reported a reserve to outflows in its latest annual results after a return to growth in its Life business and asset management gained momentum.
The investment manager reported net inflows of £7.8bn in the last financial year, up from net outflows of £1.9bn the prior year, which the company pinned on “challenging market conditions” at the time.
The jump marked a near £10bn year-on-year improvement.
Profit before tax remained broadly unchanged at £838m, after higher fee-based earnings in Asset Management offset lower performance fees and lower investment income.
Assets under management and administration jumped to £375.9bn from £345.9bn, a “touch ahead” of analyst expectations.
The group also set up a long-term partnership with Japanese financial services group Dai-ichi Life, who will take a 15 per cent stake in the business and see M&G become their preferred asset manager partner in Europe.
The partnership generated £0.4bn of net inflows, and is expected to generate £4.4bn of new business flows in the next five years.
The board proposed a final dividend of 20.5p per share, a slight increase from the prior year’s 20.1p.
Shares dipped 1.1 per cent in early morning trading to 297.1p.
Asset management and Life
Growth was primarily bolstered by the FTSE 100 group’s asset management arm, which attracted £7.0bn of external net inflows, off the back of rising demand for high-value public equities and private market allocations.
Its private market channel reported £3.9bn of inflows, of which £2.9bn came from private creidit, while public markets generated £3.1bn.
The arm also boosted its international presence, with 58 per cent of its AUMA having an overseas leaning, totalling £107bn.
The company’s traditional Life business also bounced back from its 2024 performance , delivering £0.8bn net inflows, following growth in the bulk purchase annuity (BPA) market, while also completing 11 BPA transactions, which added £1.5bn of new business volumes.
Its flagship Pru Fund also returned to consistent net inflows in the second half of the year, delivering £406m after earlier outflows of £585m.
Competition clouds and no share buyback
While analysts noted performance of the asset management business in particular should “cause some positive ripples” not only for the general view of the group but also the wider sector, concerns are ongoing.
Richard Hunter, head of markets at Interactive Investor, said: “There is of course a wider cloud which has hung over the group, relating to concerns over the ferocity of competition at the retail level, with the possibility that stubbornly high interest rates could entice savers to switch back to bank deposits.
“Wider consumer spending pressure could see savings sacrificed temporarily as increasing energy and mortgage payments bite.”
Abid Hussian, analyst at Panmure Liberum, also questioned why the group “cannot fund further growth or introduce a share buyback”.
But, Hunter noted the “appealing combination” of ongoing focus on costs, coupled with larger exposure to overseas markets via the Dai-ichi partnership, “should be enough to maintain the market consensus as a buy, albeit a cautious one”.