Phoenix (PHNX), which operates closed life funds in run-off, is throwing off impressive levels of cash. Indeed, it generated £817m in cash in 2013, significantly beating its £650m-£750m target.
Management now expects cumulative cash flow from operations for 2014-19 to reach £2.8bn, and it will also receive £390m from selling its Ignis fund manager to Standard Life (SL.). Those proceeds will be used to bring the gearing ratio to below 40 per cent - a level with which management feels sufficiently comfortable to push ahead with further acquisitions. With around £200bn of assets within closed life funds in the UK, acquisition targets shouldn't be in short supply, although talks in November regarding Swiss Re's closed-life business came to nothing.
The Budget day decision to axe compulsory annuity purchases has little impact on Phoenix. It sells some annuities to existing maturing customers, but analysts at Deutsche think that generates a mere 1 per cent of profit.
The earnings performance last year, meanwhile, was better than the reported figures suggest. The fall in statutory profits reflected investment book variance, but operating profit actually grew 4 per cent to £414m. Upgrades to forecasts are possible but, at present, JP Morgan Cazenove expects adjusted EPS for 2014 of 51.6p, embedded value of 933p and a dividend of 56.7p.
PHOENIX (PHNX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 738p | MARKET VALUE: | £1.66bn | |
| TOUCH: | 738-739p | 12-MONTH HIGH: | 810p | LOW: 618p |
| DIVIDEND YIELD: | 7.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 849p | EMBEDDED VALUE: | 1,057p | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 0.55 | 11 | 103 | nil |
| 2010 | 1.53 | 91 | 20 | 42 |
| 2011 | 1.47 | -4 | -76 | 42 |
| 2012 | 1.61 | 342 | 235 | 47.7 |
| 2013 | 1.33 | 190 | 68 | 53.4 |
| % change | -17 | -44 | -71 | +12 |
Ex-div: 2 Apr Payment: 2 May | ||||
