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Demerger this month

M&G prepares for ‘volatility’ when shares hit stock market

John Foley: ‘asset management is tight’ (pic: Terry Murden)

M&GPrudential chief executive John Foley says he expects some “volatility” when the divested company’s shares begin trading in London later this month.

Reaction to a roadshow in the UK and Europe had so far indicated a mixed response from Prudential shareholders.

Prudential announced in March last year its intention to demerge M&G Prudential, its UK and European savings and investments business, and to float it as an independent company. Trading in the shares is due to begin on 21 October.

M&G, as it will be known, will have a single corporate identity and will continue with two customer-facing brands. These will include Prudential for savings and insurance customers in the UK and Europe and for asset management in South Africa and M&G Investments for asset management clients globally.

At a briefing to Scottish media ahead of a tour of institutions in Scotland, Mr Foley said he had no reason to believe the issue would not proceed despite current market turmoil which has wiped billions of values, prompting some IPOs to be halted.

“We may see some changes in the register and we may see some volatility, not because of the wider market but because they [shareholders] have to make a decision on whether to stay or sell up.”

“Asset management is tight just now and most managers are in outflow, but we are in net inflow,” he said. The company intends to pay out £465m in dividends. He dismissed any prospect of M&G embarking on acquisitions, saying: “I struggle to see where they add value”.

M&GPrudential generated £716m of operating profit, down 8% from last year, as lower earnings from insurance commission, and a drop in asset management earnings from net outflows more than offset a rise in life business.

The DC pension scheme-focused ‘PruFund’, with £8.5bn of net inflows last year, could provide an avenue for future growth. There are also meaningful cost savings proposed.

The company has already announced a reduction in the number of offices from seven to three, of which two are Craigforth (Stirling) and Edinburgh. By 2022 the 1,700 staff across the Scottish sites will be more evenly split.

Craigforth focuses on administration and customer interface, while Edinburgh is developing new digital processes.

“When I go to the Gyle office it does not feel like the Pru of old. There are lots of young people and it’s slightly mad. There is a vibrancy there,” he said.

Edinburgh is expanding into an additional office, while he said the Craigforth staff may at some stage be relocated to a new office in the area.

See October 21 update: M&G floats on hopes of strong debut

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