26th Mar 2014 09:08
LONDON (Alliance News) - Phoenix Group Holdings PLC Wednesday said it has agreed to sell Ignis Asset Management Ltd to Standard Life PLC in a GBP390 million cash deal, with the two life companies also agreeing to a long-term strategic asset management deal.
Shares in FTSE 100-constituent Standard Life were quoted at 392.56 pence early Wednesday, up 5.0%, while FTSE 250-member Phoenix was up 3.7% at 736.05 pence.
The strategic deal will result in Standard Life managing assets for Phoenix's Life subsidiaries, including the potential to manage future books of assets that Phoenix may acquire. It also means that Phoenix is now solely focused on the management of closed life funds.
"The acquisition of Ignis continues the delivery of our group strategy to grow assets under management through enhancing our investment capabilities and expanding our offering to meet the changing needs of our customers. It will deliver enhanced earnings and cash generation and support future growth in revenues," Standard Life Chief Executive David Nish said in a statement.
Reporting the disposal alongside 2013 earnings, closed life fund consolidator Phoenix said the deal will accelerate its plans to reduce its gearing levels and to diversify its financing structure.
It said the proceeds will be used to repay about GBP250 million of its Impala debt facility and reduce gearing to 39% from 44%.
Reporting Wednesday a GBP2.38 billion market consistent embedded value for 2013, an increase from GBP2.33 billion in 2012, Phoenix said the deal with Standard Life will further increase the 2013 figure to GBP2.62 billion.
Phoenix said its 2013 operating profit increased by GBP10.0 million to GBP439.0 million, while it generated GBP817.0 million in cash flows from its operating subsidiaries, including cash flows of GBP332.0 million from management actions. In 2012, cash flows from operating subsidiaries totalled GBP690.0 million. However, pretax profit fell to GBP420.0 million from GBP557.0 million after operating expenses spiralled to GBP3.83 billion from GBP649.0 million.
Phoenix also outlined new financial targets within its earnings statement, now looking to generate GBP500 million to GBP550 million in cash in 2014, on top of the proceeds of the divestment. Phoenix set a long-term cash generation target for 2014-19 of GBP2.8 billion, including the proceeds of the sale of Ignis.
It also reiterated its long-term gearing target of 40% by the end of 2016.
"We have delivered GBP817 million of cash generation in 2013, exceeding our 2013 target, and have generated GBP502 million of incremental embedded value in 3 years, beating our GBP400 million target a year early. We have also significantly strengthened our balance sheet with an 11 percentage point reduction in gearing to 44% at the end of 2013," Clive Bannister, chief executive, said in a statement.
"Today we have set stretching new targets for 2014 and beyond. I am confident that we will continue to deliver value for all our stakeholders through the efficient management of our existing business and our renewed focus on growth," he added.
"We believe that we will be well placed to benefit from future acquisitions through the consolidation of closed life funds and our long term strategic alliance with Standard Life Investments."
By Samuel Agini; [email protected]; @samuelagini
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Phoenix Group HoldingsSL..L