Phoenix ups cash targets as profit rises

LIFE insurance and pensions consolidator Phoenix Group posted a 16 per cent rise in underlying operating profit yesterday and set ambitious targets for cash generation in 2011.

Phoenix made £373m operating profit in 2010, up from £318m in 2009 on a like-for-like International Financial Reporting Standards (IFRS) basis and generated £734m cash, beating its internally-set £625m goal.

Phoenix, the UK’s largest buyer and integrator of life policies with more than six million customers, also announced stretching new financial targets for 2011, including generating £750-850m of cash in 2011 and £3bn between 2010 and 2014.

“We are confident in the prospects for 2011 and beyond and have set challenging new targets to reflect this,” said group chief executive Clive Bannister. FTSE 250-listed Phoenix also returned £122m to its lenders to reduce its £2.7bn total debt, which includes £2.3bn of bank loans at low interest rates but with strict covenants.

Phoenix, which writes no new business, reduced its gearing level to 52 per cent in 2010, from 58 per cent in 2009, and is planning to push it below 50 per cent by the end of 2011. It is also in discussions with lenders to restructure its debt to make it less restrictive.

“Our present facilities feature favourable interest margins and we will only agree to new arrangements if an opportunity arises that we consider to be in the best interests of our shareholders,” Bannister said.

JP Morgan and Deutche Bank said cash generation information was a positive.

“The message appears to be that the group has ample cash flow to handle the debt repayments,” JP Morgan analyst Duncan Russell said in a note.

Phoenix had £67.5bn of assets under management at the end of 2010.