Wednesday, 5 August 2015

Legal & General - Interim Results

L&G is a large FTSE 100 company with a market cap of around £16bn employing over 8,000 people serving 10 million customers. It is responsible for investing over £500bn worldwide with operations in USA, France, The Netherlands, Egypt, India and the Gulf. However the UK still accounts for the majority of its business.

They are the UK’s leading provider of individual life insurance as well as a market leader in group protection, annuities and workplace pensions. L&G are a top 20 global asset manager and one of Europe’s largest institutional asset managers as well as being the UK’s largest investment manager for UK pension schemes.

Legal & General has a diversified business model with  ~33% of the firm’s operating profit came from UK insurance, 23% from retirement products, 23% from investment management, 13% from investing its own capital and 7% from the company’s American operations.

Results

The Company has today announced its half year results for 2015 (link via Investegate). At the half way point last August, earning and profits were up 9% and the interim dividend was hiked by 21% to 2.9p.

There has been a sharp 62% fall in the sale of annuities in the first half to £1.32bn (2014 £3.5bn). This follows radical changes to pension rules in the UK however this has failed to dent the overall group progress.

Today’s results show adjusted earnings up 15% and pre-tax profits up 18% to £750m. Unfortunately, they were unable to repeat the dividend hike of last year - the interim figure is lifted by a paltry 19% to 3.45p (2014 2.9p).

Nigel Wilson, Group Chief Executive, said:
"Legal & General continues to deliver strong organic growth in the UK and the US from both our developing and established, market leading businesses. In addition we are disposing of, or closing non-core businesses and reducing costs in real and nominal terms.

The actions that we are taking allow us to focus on our chosen markets, enable us to continue to deliver low prices and better value for our increasing customer base and deliver attractive returns for our shareholders.

This financial and strategic discipline is driving our sixth year of double digit growth in net cash, operating profit and dividends…"

Last year, LGEN adopted a policy of reducing dividend cover to 1.5x earnings - this should be achieved over the coming year so I expect the current payout to be lifted in excess of 10% and have now increased my full year dividend figure to 13.5p for 2015.

It looks like the results have been well received and at the close, the share price is up 2.7% at 271p. The shares are currently trading on a prospective P/E of 14 and yield of 4.3%. For more analysis, see today’s write up by Dividend Drive.

I am happy with my acquisition and although some individual shares have left my portfolio this past year, I feel comfortable holding for the foreseeable .

As always, please DYOR

4 comments:

  1. Ciao DIY,
    Got into L&G two days ago, after some long study trying to look for a good entry point... Turns out that I was quite lucky. I believe that they are a solid group, they work in an environment that if managed carefully can be quite "stable", and that's good for dividend investors. Happy to be a fellow shareholder!

    Stal

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    Replies
    1. Stal,

      Thanks for stopping by and I hope the purchase works out OK.

      Delete
  2. Thanks for the link, DIY.

    Now they have pretty much reached their targeted payout ratio we will definitely see a slowing in dividend growth. But then again, if organic growth is c.10% with a parallel dividend growth I would not be upset at all!

    Great company for the long-term I think!

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    Replies
    1. DD,

      No problem.

      Agreed, the divi increases cannot continue at the rate we have seen over recent years but I think it will remain healthy and, of course, hopefully more sp appreciation.

      Delete