Phoenix Share Discussion Threads

[fengzhongmengar] 24/8/2012 15:10

it would have been shrewd for me to sell out completely, given that the ex-div fall was ultimately far more than 10p but I wasn't entirely convinced by my own arguments!

[hyden] 24/8/2012 15:02

Yes, indeed. Effectively we are giving up our capital in exchange for the variable income and that suits me just fine. Especially when buying at 40p in the pound which helps offset a lot of the risk imo. And, of course, the income forms part of a very well diversified portfolio so I can afford to take the hit if thing's don't turn out as well as I hope.

[jonwig] 24/8/2012 14:53

yes, interesting - I haven't seen the transcript till now.

if I can state the challenge it's not a credit issue as we've said many times before....

That's not quite true as I recall!

Hyden - as things stand, there won't be many policies left in 15 years, and the cumulative payouts should reflect that. (I hope so, as I might not be around myself!)

[hyden] 24/8/2012 14:43

Thanks scburbs, that's really helpful. And I think management are exactly right to take the time to secure the best outcome, even if it takes another 12-18 months. I believe management's longer term intentions are to use the cash to acquire other businesses so they will likely prefer to refinance as much of the debt as possible, and this is possibly another feature of the discussions?

I'm still struggling to understand why the company is trading as low as 40% of EEV though. Makes me wonder if there is something else worrying shareholders? Maybe some of the cash balances, say in the LifeCo's, are perhaps slightly less liquid that what others would usually regard as cash hence the company is not as strong as it seems upon first glance? Otherwise this seems an absolute steal at this price, especially if you are planning to stay invested for the next 10 - 15 years.

[scburbs] 24/8/2012 14:04

Not a huge amount of further light shed in the webcast transcript. The important bit is the clear statement that it is not a credit issue.

"At the time of our 2011 results we talked about how the financial strength of the business has improved through that year and the economic conditions had become more benign which gave us increased confidence in our ability to agree a re-terming of our bank debt. However the more benign markets that we saw in the first few months of this year have deteriorated and unfortunately the trajectory of the global economic conditions have not been as we would have wished. We have always said that it is important to agree a re-terming on terms that are sensible for all of our stakeholders. The desire to complete a re-terming remains at the forefront of our minds and there is certainly no management complacency on this objective. However we remain cognisant of the ongoing market volatility and economic headwinds which make it prudent to preserve cash and capital within the business at this time.

We continue to debate with our banks and I would like to thank them publicly for their willingness to engage in and support our re-terming discussions. We are determined to ensure that any new agreement makes sense for all of our stakeholders and are confident that we will successfully accomplish this in due course. In the meantime we should never forget that the Group's debt is competitively priced and serves all of our shareholders very well."

...

From Q&A

"Thank you for the question on re-terming. It is our number one management objective and if I can state the challenge it's not a credit issue as we've said many times before. It is the issue of getting better symmetry between the long nature of our cashflows and balancing that against the bullet payments that we have in '14, '15 and '16. That challenge is one which is subject to being solved in a number of ways and therefore when we talk with our banks, and as I said I want to publicly thank them for their good engagement and the discussions we've had on re-terming, there are a range of options, but our principle challenge is re-terming the £2.4 billion of bank debt that we have outstanding.

And I think I would just say in that context that this, I know for many people it's a 'when', I'm glad it's a when and not an 'if', and that's how we feel, we are confident that this will be done, and we want to do something which is right and fair for all of our stakeholders. And it's worth reminding everyone the value of the debt and the structure that the debt provides in our capital structure because of its competitive pricing at the moment. So it's a journey which we travel on, confident in its successful outcome."

[scburbs] 24/8/2012 11:48

I need to listen to the webcast as I expect this is covered, but I thought the two clues to the delay were on P7.

"Debt is competitively priced." - new debt will probably be more expensive than LIBOR + 2-3%. Given the first facility doesn't expire until November 2014 is it wise to refinance 2 years in advance just because the market is worried?

"Focus is on preserving capital within the business ..." - PHNX has £700m of cash in the holding company (and £500-600m surplus in Phoenix Life). I expect that the banks will be looking to offer a much smaller facility taking a big chunk of that cash. PHNX will be less keen on giving it to them preferring to retain flexibility. This question around the size of the new facility could well be the key sticking point.

[jonwig] 24/8/2012 09:49

Thanks - yes, it's also on p60 of the report.

You haven't refuted my basic point though, and it may be that the debt negotiations are based on some such factor: is the maturity profile of profits going to deliver as promised? If that's the case, it goes some way to explain why these talks drag on.

[scburbs] 24/8/2012 08:58

Jonwig,

I have been wondering about that difference for a while. The £2.594bn is the MCEV of future profits. This presumably mean it excludes capital release. The IGD capital number is £1.2bn, which gets you to £3.8bn which is the gross MCEV (appendix VIII). Whether this rec is correct or not ...

[jonwig] 24/8/2012 08:50

I've only just read through the presentation.

On p38 is something I haven't seen before - Maturity profile of business.
On an MCEV basis £1,037m of polcies mature in 1-5 years, far higher than succeeding years (eg. £638m in 6-10 years).
On a money basis that could be something like £1,200m.
Not only does this make their annual cashflow projections more secure, but it suggests accelerated debt repayments are feasible.

What I haven't understood is how the total of £2,594m squares with the stated MCEV of £2,135m.
Central costs in aggregate?

[scburbs] 23/8/2012 10:24

dangersimpson2,

Yes that's exactly right on timing of release. The surplus in Phoenix Life is the key to the cashflow targets. That is why H1 was weak because the cupboard was bare (i.e. the surplus had been extracted to meet last years cashflow target).

Remember it is not an upgrade because there is a one-off £200m benefit from the Guardian transaction.

[dangersimpson2] 23/8/2012 09:58

Not sure cashflow is that poor given the upgrade of the range for the full year. I think the upgraded range puts to bed the idea that the H2 weighting of cashflow was not really there and they were going to miss for the full year.

Not an expert in these things but I wonder when they state:

This target is supported by the £566 million of free surplus in the Group's life companies as at 30 June 2012 and further management actions that are planned to accelerate cash flows during the remainder of the year.

Whether the cashflow is available in the subsiduries but it's about timing any release to the parent.

[jonwig] 23/8/2012 09:45

I think Saif is unavailable, ursus.

Anyway, Howard Davies is kitted out for his new job here:

[ursus] 23/8/2012 09:40

And perhaps Howard Davies will bring in Saif Gaddafi to help with the finances

[scburbs] 23/8/2012 08:47

Looks good to me. Cashflow poor as expected and the full year cashflow has been effectively downgraded, but good to see Phoenix Life surplus rebuilding (albeit the one-off transaction helped). Nothing in here to suggest such a distressed valuation.

[jonwig] 23/8/2012 07:36

It's quite a slog, but what they put right at the start might be very significant:

Increase in target range for operating companies' cash generation for 2012 of £100 million to £600 million - £700 million and increase in 2011-2016 cash generation target of £0.1 billion to £3.3 billion

With net debt at £2.1bn and dividends (at 42p) totalling under £0.4bn to 2016 any fears about indebtedness seem to be well overstated.
In fact, but for the covenants on dividend payment, they could double it.

MCEV and capital surplus look OK but I haven't got that far.

FTSE futures are up a bit this morning. PHNX should be up 25p if it matches the index, but I'd expect more than that.

EDIT: well, that was a bit premature!

[jonwig] 23/8/2012 07:07

Phoenix Group Holdings is pleased to announce the appointment of Sir Howard Davies as Chairman of the Phoenix Group, succeeding Ron Sandler with effect from 1 October 2012.

It's unlikely he would have taken the job if he'd harboured any doubts about the outlook for debt restructuring - he can't have been short of job opportunities, whatever one may have thought of the FSA in the last decade.

H1 results out, too.

[aleman] 21/8/2012 16:34

That was odd. 104 shares sold and offer drops 3p and bid 11p about 30 seconds before the close. Somebody playing games?

[aleman] 21/8/2012 15:30

There she goes.

[aleman] 21/8/2012 15:18

Ridiculously tight now. Market strong today and been left behind lately as well so looking positive.

[zcaprd7] 21/8/2012 15:07

Still winding up - £5 a struggle though?

[aleman] 17/8/2012 15:00

This share is quite volatile and is compressed to the end of a triagulation pattern. It looks to suggest a move of nearly £1 in either direction when it breaks. It's running out of time to break upwards today but it looks to be having a late go.

[scburbs] 15/8/2012 15:33

Resolution MCEV held up surprisingly well (small increase), which bodes well for PHNX's MCEV/share number next week. The Phoenix Life surplus and how little has gone up to the holding company will be key (although the holding company is already awash with cash meaning there is less pressure from a hiatus). The disposal transaction effective 1 July should help for the FY cashflow.

[jonwig] 20/7/2012 11:21

There might be a read across from RSL's announcement this morning:

[zcaprd7] 20/7/2012 10:54

Hmm, bit droopy today though?