Legal & General Group Plc

Legal & General Group Plc (LGEN) is primarily engaged in providing products and services related to insurance and investment management (British holding company). It is one of the world’s largest insurance and investment management groups and operates worldwide through its subsidiaries and associates, with the United States and the United Kingdom being the primary markets.

Recent News
On 2nd September 2019, Legal & General Group announced the selection of Michelle Scrimgeour to the company’s board. Mark Zinkula had left the board on August 31st, 2019.

Financial Highlights - H1 Financial Year 2019 (£, million)

(Source: Interim Report, Company Website)

For the first half of the financial year 2019, the company’s operating profit surged by 11 per cent to £1,005 million as against £909 million in the first half of the financial year 2018. The company’s PBT (Profit before tax) attributable to shareholders was £1,053 million in H1 FY2019 as against £942 million in H1 FY2018, up by 12 per cent. The company’s PAT (Profit after tax) attributable to shareholders was £874 million in H1 FY2019 as against £771 million in H1 FY2018, up by 13 per cent. The company’s total basic EPS (Earnings per share) surged by 13 per cent to 14.74 pence in H1 FY19 as against 13 pence in H1 FY18. The company’s total diluted EPS (Earnings per share) surged by 13.29 per cent to 14.66 pence in H1 FY19 as against 12.94 pence in H1 FY18. Return on Equity was recorded at 20.2 per cent in H1 FY19. The company (LGEN) announced an interim dividend per share of 4.93 pence in H1 FY19 as against 4.6 pence in H1 FY18.

Share Price Performance

Daily Chart as at 17^th September 19, before the market close (Source: Thomson Reuters)

On 17^th September 2019, Legal & General Group Plc shares were trading at GBX 249.20 at the time of writing before the market close (at 8:51 AM GMT) and down by 1.42 against the previous day closing price. Stock's 52 weeks High and Low are GBX 292.30/GBX 214.90. The group’s stock is reflecting slightly higher volatility as against the benchmark index based on the company’s beta of 1.09.

Valuation Methodology

*Peers: Standard Life Aberdeen Plc, Hansard Global PLc, Prudential Plc, Aviva Plc and Just Group Plc.

Conclusion
The company had shown decent growth in the first half of the financial year 2019. Despite political uncertainty, a decline in the asset market and slowing economic growth, the company was able to deliver good results to post eight years of compounded annual profit growth of over ten per cent.

The company has an internationally diversified asset portfolio with negligible exposure to the United Kingdom and a credit default reserve of £3.2 billion. The second half of the year 2019 has started well, building on the success of the first half transactions including the Rolls-Royce PRT of £4.6 billion, Oxford University Future Cities deal of £4 billion and Japanese global index win of $50 billion.
The company is largely unaffected by on-going political and economic uncertainty and is well placed to continue to grow and take advantage of organic growth opportunities. The company continues to invest in technology, and its balance sheet remains strong, with a steady increase in surplus regulatory capital.

Over the course of 4 years (FY14 - FY18), the company’s operating income surged from £1,413 million in FY14 to £2,129 million in FY18. Compound annual growth rate (CAGR) stood at 10.79 per cent.
 
Based on the decent prospects and supported by valuation done using the above method, we have given a "Hold" recommendation at the closing price of GBX 252.80 (as on 16th September 2019), based on 8.40x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Man Group Plc

Man Group Plc (EMG) is a financial services company providing portfolio solutions to clients. The company is an investment management company and actively deploys the latest technologies to keep it in a leading position in the growing industry. The company provides long-term, private and alternative market products on multi and single manager basis. The company invests heavily on talent, research, and technology to deliver the best outcome for its clients. The company provides customized solutions related to hedge fund services using its expertise, infrastructure and advanced technologies.

Recent News
On 16^th September 2019, Man Group announced that Chairman of the Company, Ian Livingston has decided to step down from his position on December 31^st, 2019. John Cryan will overtake the position of Chairman effective from January 1^st, 2020.

Financial Highlights - H1 Financial Year 2019 ($ million)

(Source: Interim Result, Company Website)
 
In the first half of the financial year 2019, the company’s net revenue surged by 7.81 per cent to $524 million from $486 million in the first half of the financial year 2018. The company’s net management fee revenue was at $382 million in H1 FY2019 versus $401 million in H1 FY2018. The group’s performance fee revenue was at $142 million in H1 FY2019 versus $85 million in H1 FY2018. The company’s adjusted PBT (Profit Before Tax) surged by 3 per cent to $157 million in the first half of the financial year 2019 from $153 million in the first half of the financial year 2018. The company’s statutory profit attributable to the shareholders stood at $90 million in the H1 FY2019 versus $74 million in the H1 FY2018. The company’s statutory basic earnings per share stood at 5.9 cents in H1 FY2019 as against 4.6 cents in the H1 FY2018. The company’s Statutory diluted earnings per share stood at 5.8 cents in H1 FY2019 as against 4.6 cents in the H1 FY2018.
 
Share Price Performance
 
 
Daily Chart as at 17^th September 19, before the market close (Source: Thomson Reuters)
On 17^th September 2019, Man Group Plc shares were trading at GBX 163.00 at the time of writing before the market close (at 10:38 AM GMT) and down by 0.15 against the previous day closing price. Stock's 52 weeks High and Low are GBX 183.65/GBX 124.08. The group’s stock is reflecting higher volatility as against the benchmark index based on the company’s beta of 1.26.

Valuation Methodology

*Peers: Brooks Macdonald Group Plc, Brewin Dolphin Holdings Plc, Jupiter Fund Management Plc, Premier Asset Management Group Plc and Burford Capital Ltd.

Conclusion
The company had shown decent financial performance for the first half of the financial year 2019. The company’s top-line performance has improved for the current period. The company had recently undergone a corporate reorganisation which will provide greater flexibility in terms of financing the business.

In the first half of the financial year 2019, the central bank growth accelerated, which resulted in an equity markets growth and has provided the company with growth opportunities and the necessary momentum to increase its business operations. The company operates in the multiple geographies, which will help it to mitigate the risks faced in a particular location with the profits generated from other locations.

The company might be impacted because of the uncertainty created due to Brexit, as it would result in customer loss and may negatively impact the financial performance of the company.
Based on the decent prospects and supported by valuation done using the above method, we have given a "Hold" recommendation at the closing price of GBX 163.25 (as on 16th September 2019), based on 11.50x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.80613 GBP.

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