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Phoenix raises cash-generation targets

The life assurer has integrated two previous acquisitions ahead of target and schedule
August 24, 2018

Phoenix’s (PHNX) acquisition of Standard Life Aberdeen’s (SLA) open-book insurance business may make it less reliant on making acquisitions to boost the dividend, but sweating closed books of business is still an important cash generator. The integration of Abbey Life and Axa Wealth was completed ahead of plan and target during the first half, generating an aggregate £27m in annual synergies and a cumulative £768m cash generation since acquisition.

IC TIP: Buy at 708.5p

The life assurer generated £349m in cash, 17 per cent ahead of consensus expectations, with management now expecting cash generation in the current year to exceed the previous £1bn-£1.2bn guided range, although the target for 2018-22 has been kept at £2.5bn. However, after the group completed its first bulk annuity transaction with Marks and Spencer’s pension scheme – increasing long-term cash generation by £0.2bn – management expects to generate £4bn in cash from 2022. That’s not including the contribution from the SLA acquisition – scheduled for completion on 31 August – or any further management actions.

Analysts at Investec expect adjusted EPS of 54.4p a share for the year to December 2018, from 54.2p in the previous year.

PHOENIX GROUP HOLDINGS (PHNX)   
ORD PRICE:708.5pMARKET VALUE:£4.09bn
TOUCH:708.5-709p12-MONTH HIGH:737pLOW: 647p
DIVIDEND YIELD:6.4%PE RATIO:na
NET ASSET VALUE: 544pSOLVENCY II RATIO:180%
Half-year to 30 JunGross premiums (£bn)Pre-tax profit (£m)Earnings per share (p)*Dividend per share (p)*
20170.56-69-24.522.6
20181.09-42-6.122.6
% change+94---
Ex-div:6 Sep   
Payment:1 Oct   
*Adjusted for 7:15 rights issue on 26 June