Headline half-year figures from closed life run-off specialist Phoenix don't reflect its strong underlying performance. In fact, after adding back amortisation costs and a negative £82m investment return, operating profit rose 52 per cent year on year to £207m. That leaves the shares, trading at less than half embedded value and with a hefty dividend yield, looking too cheap.
Part of that discount reflects debt covenant restrictions that are currently capping dividend payments. And while gearing was unchanged at 46 per cent, management expects to meet a year-end target of 43 per cent. Moreover, cash generation targets for the current year have been increased by £100m to £600m-£700m, and for the five-year period to 2016 by £100m to £3.3bn. This would be enough to repay the current £3.1bn gross debt pile. Phoenix also succeeded in transferring around £5bn of annuity in-payment liabilities to Guardian Financial Services, which released £252m of capital reserves.
The group's asset management arm, Ignis, also performed well, increasing operating profits by 6 per cent to £19m and attracting net third-party asset inflows of £927m. Total assets under management were down marginally, however, from £72.1bn to £71.6bn.
| PHOENIX (PHNX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 488p | MARKET VALUE: | £852m | |
| TOUCH: | 488-490p | 12-MONTH HIGH: | 604p | LOW: 405p |
| DIVIDEND YIELD: | 8.6% | PE RATIO: | na | |
| NET ASSET VALUE: | 890p | EMBEDDED VALUE: | 1,223p* | |
| Half-year to 30 Jun | Net premiums (£m) | Pretax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 668 | 94.0 | 52.3 | 21.0 |
| 2012 | 771 | -13.0 | 1.10 | 21.0 |
| % change | +15 | - | -98 | - |
Ex-div: 5 Sep Payment: 4 Oct *Calculated on a market consistent embedded value basis | ||||
