M&G shares surge more than 10% after investment firm reveals bumper £500m share buyback – even after profits fell
- M&G saw its post-tax profits plunge by more than £1bn to just £92m in 2021
- Only Russian steelmaker Evraz had a larger rise on the FTSE 100 this morning
- The firm hit cost savings and capital generation goals a year ahead of schedule
Asset manager M&G was one of the FTSE 100’s top risers on Monday after it announced a £500million share buyback programme.
Combined with an intended interim dividend payout of around £311million, it means the investment business will have returned £1.8billion of capital to shareholders since demerging from insurer Prudential in 2019.
M&G shares were 10.7 per cent higher at 197.45p by late morning, with only Russian steelmaker Evraz registering a larger increase.
Investor reward: Investment firm M&G has pledged to purchase £500million of its shares over the next 12 months and pay out interim dividends of around £311million
In 2019 M&G set a target of generating £2.2billion of capital and £145million in annual cost savings.
Both of these targets have now been surpassed – by £600million and £222million, respectively – and achieved a year ahead of schedule.
It now aims to achieve £2.5billion in operating capital generation by the end of 2024, even while paying out generous dividends.
But M&G saw post-tax profits plunge by more than £1billion to just £92million in 2021, following huge losses resulting from short-term fluctuations hitting investment returns and higher restructuring costs.
M&G said much of this loss derived from a lower annuity margin, while just over £100million was related to buying interest rate swaps to enhance its capital position.
Its assets under management also remained relatively flat at £370billion due to continued net client outflows from its retail asset management divisions, although this was offset by larger inflows from institutional investors.
Praise: M&G boss John Foley said the firm had delivered ‘another year of robust operational and financial performance, as we have delivered on all our demerger commitments
Operating profits declined by 9 per cent because of changes to longevity assumptions, but were still £35million ahead of expectations.
Chief executive John Foley said M&G had delivered ‘another year of robust operational and financial performance, as we have delivered on all our demerger commitments including total capital generation of £2.8billion over two years, well ahead of our original target.’
Richard Hunter, the head of markets at financial services company Interactive Investor, said: ”The increase in assets under management in the period may offset some of the disappointment of a decline in pre-tax profits, with the company clearly stating its intentions having emerged fully from the demerger from Prudential.
‘The share price has been unable to make progress since the demerger in October 2019, but given that it immediately flew into the pandemic and latterly the Russia/Ukraine crisis, supporters of the stock will unquestionably be taking the long-term view.
‘In the meantime, M&G’s prodigious cash generation should underpin the modernisation and digitalisation required in parts of its legacy business, with the warm market reaction to the numbers something of an oasis in the current landscape’