Direct Line’s (DLG) latest results presentation was overshadowed by news that well-regarded chief executive Paul Geddes will step down next summer. Chairman Mike Biggs confirmed that succession plans were under way to find an adequate replacement for Mr Geddes, who oversaw the insurer’s separation from Royal Bank of Scotland and flotation on the London Stock Exchange.
Mr Geddes has his work cut out to ensure he ends his 10-year reign with a bang. Direct Line’s top-line contracted by 5 per cent in the six months to June 2018, while operating profit fell 16 per cent to £303m. Put these figures into perspective, however, and management was well within its rights to label this a “good set of results”.
Strip out the impact of £75m of weather claims, caused by an unusually long and icy winter, and profits were “slightly up”, despite a non-repeat of £49m of Ogden-related reserve releases. Moreover, eliminate the fallout of Nationwide and Sainsbury’s previously announced decisions to stop selling Direct Line insurance packages and gross written premiums, against a difficult trading backdrop, grew 0.5 per cent.
Bloomberg consensus forecasts gives adjusted trading profits of £521m for the December year-end, leading to EPS of 29.9p, rising to £560m and 31.4p in 2019.
| DIRECT LINE (DLG) | ||||
| ORD PRICE: | 335p | MARKET VALUE: | £4.58bn | |
| TOUCH: | 335-336p | 12-MONTH HIGH: | 395p | LOW: 327p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 181p* | COMBINED RATIO: | 93.0% | |
| Half-year to 30 June | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (p) | Dividend per share (p) |
| 2017 | 1.65 | 341 | 93.0 | 6.8 |
| 2018 | 1.67 | 294 | 95.4 | 7.0 |
| % change | +1 | -14 | +3 | +3 |
| Ex-div: | 09 Aug | |||
| Payment: | 07 Sep | |||
| *Includes intangible assets of £500m, or 36p a share | ||||
