Legal & General (LGEN.L): The
Nigel Wilson designed Legal & General just keeps sailing on. It has always
been about cash generation driving dividend growth in this new model. So it is
no surprise that today’s interims, to 30th June 2015, lead off with
the bullet point that net cash generation is up 11% to £629m. Operating profit
is up 18% to £750m, whilst adjusted eps are up 15% to 9.79p. On the back of
this there has been another big dividend increase, with the interim up 19% to
3.45p. Operational progress is on several fronts. On the asset side, AUM is up 12% to £714.6bn and external
net flows up 62% to £13.8bn. On the life side, annuity assets are up 13% to
£43.4bn, although the lumpy bulk purchase annuity premiums fell back from
£3,135m to £1,146m, whilst UK protection premiums were up 4% at 774m. The newer
direct investments line was up 35% to £6.2bn. The tidying up process continues
with the exit from venture capital, closure of the with-profits-fund, whilst
exiting Ireland, Egypt and the Gulf, with France and Germany on the block.
Their strategy going forward is based on five identified trends, as
follows. They are addressing ageing demographics through Liability Driven
Investment solutions, such as bulk annuities. As asset markets globalise, L&G are growing in the
US and Asia. UK pension and welfare reform is leading to an increased need for
self-provision and measures such as auto-enrollment are increasing
participation. The challenge is to keep pace with the rule changes, as seen in
the collapse of the individual annuity market and now the consultation on the
whole area of pension tax relief. The two final trends are to adapt to the
increasing use by customers of technology and to take advantage of the bank’s
loss of risk appetite to increase direct investments. All these trends look to
be multi-year and the group has built up good momentum in recent years. For
what its worth, consensus eps for 2015 are heading to 19p, for a PE of 14.1x at
268p. More significantly, the interim dividend is pointing to a total of 13.5p
for the year, being a yield of 5.0%. As with Standard Life, the shares have
been a bit dull this year, being off their highs of 296p, which were reached in
late March, before the election and the latest bunch of Osborne thought bombs.
Back at 268p, backed by a 5% yield and positive long-term market trends, the
shares look attractive at these levels. (Neil Cumming, 5th
August 2015)
These comments are not a personal
recommendation to deal. Any investments can fall as well as rise in value, so
you could get back less than you invest. I may have a financial interest in
some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk Twitter: @DividendPower
No comments:
Post a Comment