M&G profit crashes as retail investors pull funds
M&G today posted a sharp fall in first-half profit after retail investors rushed to withdraw funds during the coronavirus crisis and it counted the costs of its demerger.
The insurer and asset manager saw its adjusted pre-tax profit slump 59 per cent to £309m in the six months to the end of June, though this was slightly ahead of expectations.
M&G’s net outflows were £4.1bn for the period as £7.7bn of withdrawals in its retail asset management division were partially offset by inflows of £2.8bn into institutional asset management and £0.8bn into retail savings.
The firm’s assets under management slipped from £341bn to £339bn over the period, while fee-based revenue dropped from £637m to £580m.
The downbeat results come almost a year after M&G was spun out of Prudential to become an independent listed company.
In addition to market volatility, the asset manager’s profit was also dented by £157m in head office and debt interest costs linked to the demerger.
“Obviously, this is not the backdrop we would have wished as a newly independent company,” said chief executive John Foley.
However, the boss praised his company’s “resilient performance” and announced an interim dividend of 6p per share.
Shares in M&G rose almost six per cent in early trading, before settling at a rise of just under three per cent.
Richard Hunter, head of markets at Interactive Investor, said it had been “something of a baptism of fire” for M&G following its demerger and pointed to the sharp outflows in retail asset management.
“Although the pace declined in the second quarter, the half-year total of £7.7bn of outflows is a concerning figure, not only in terms of lost business but also in being reflective of how some retail investors traditionally react to market volatility, namely by heading for the exit, which is also something for the company to consider in light of future downturns,” he said.