News Column

Phoenix Group Ready For Acquisitions After Financial Restructuring

August 21, 2014

Samuel Agini

LONDON (Alliance News) - Phoenix Group Holdings PLC, the closed life fund consolidator, Thursday reported a 43% increase in first IFRS operating profit, which is stated before adjusting items and includes discontinued operations, bolstered by GBP114.0 million of management actions within Phoenix Life.

In a statement, Phoenix Group said it made a GBP266.0 million IFRS operating profit in the six months ended June 30, compared with GBP186.0 million in the corresponding period last year. Phoenix Life's contribution increased by GBP78.0 million to GBP256.0 million, while that of the discontinued Ignis Asset Management fell by GBP2.0 million to GBP17.0 million. Phoenix said the group's GBP80.0 million increase was mainly due to actuarial modelling enhancements and balance sheet reviews of GBP114.0 million compared with the corresponding period's GBP24.0 million.

After investment return variances and economic assumption changes on long-term business, variance on owners' funds, amortisation of acquired in-force business and other intangibles, non-recurring items, tax and finance costs, Phoenix swung to a GBP191.0 million profit attributable to owners from a GBP8.0 million loss.

The group reported GBP332.0 million of cash generation in the first half, a lower figure than the GBP416.0 million reported for the first half of last year. A further GBP390.0 million was received on completion of the divestment of Ignis to Standard Life Investments on July 1. Phoenix said it remains on track to achieve its cash generation targets of GBP500-550 million in 2014, excluding the Ignis divestment, and GBP2.8 billion between 2014 and 2019.

Since the end of the half year, Phoenix Group, which has been restructuring in order to reduce its level of borrowing and to simplify its debt structure, completed the sale of Ignis for GBP390.0 million, returned to the debt capital markets with a GBP300.0 million senior unsecured bond, and unified legacy debt silos Pearl and Impala into a single GBP900.0 million unsecured bank facility and repaid GBP206.0 million of bank debt from internal resources.

Together, Phoenix Group said, these actions have reduced gearing to 35% from 44% on a pro forma basis over the course of the first half, as it looks to achieve an investment grade credit rating. The group said it expects to begin "formal engagement" with the rating agencies over its credit rating in the second half.

"The balance sheet has been transformed, our structure has been simplified and our reliance upon bank financing has been reduced. We have created a sound platform for Phoenix to consider potential acquisition opportunities, enabling us to grow the business and strengthen our existing position as the UK's largest specialist consolidator of closed life funds," Chief Executive Clive Bannister said in a statement.

Phoenix also maintained its interim dividend at 26.7 pence per share.

"Given the run-off nature of the group's business, the board believes it is prudent to maintain a stable, sustainable dividend whilst the group builds its financial flexibility to execute its growth strategy and will keep the dividend under review," Bannister said of the dividend.

Phoenix Group shares were early Thursday quoted down 0.5% at 711.50p.

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Source: Alliance News

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