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By late afternoon today (8 September), the Phoenix Group Holdings (LSE:PHNX) share price was the biggest faller on the FTSE 100.
Despite reporting a “strong first half performance with progress against all key financial metrics” investors weren’t impressed. They wiped over £400m off the market cap of the group.
The financial services group also announced that it’s going to change its name to ‘Standard Life’ in March 2026. Personally, I think this is a good idea. The brand has been around since 1825.
A confusing picture
The problem with assessing the financial performance of groups like these is that accounting standards require certain key items to be presented differently to the way in which management teams prefer to report things.
The upshot is that there’s often a large differential between statutory (accounting) and management numbers.
For example, during the six months ended 30 June (H1 25), diluted operating earnings (net of financing costs) per share were 25.1p. In contrast, the group’s income statement is showing a loss of 18.2p a share.
Cash is king
Fortunately, cash is less affected by the vagaries of the accountancy profession. After all, it either exists or it doesn’t.
The group claims that operating cash generation (OCG) is “the metric which best demonstrates the long-term underlying value generation from our business”.
During H1 25, its OCG increased by 9% to £705m. The consensus of analysts was for £690m. And the group anticipates “mid-single digit percentage” growth in this number for the foreseeable future. At this level, it says its dividend is “well covered”. Also, it means there’s cash left over to help further reduce its debt.
However, when it comes to total cash generation, it was £22m short of expectations, which appears to have disappointed investors.
But I think there’s good news for income hunters. Even before today’s share price fall, the stock was in the top three of FTSE 100 yielders. As part of its results announcement, it declared a 2.6% increase in its interim dividend. Add this to last year’s final payout and the stock’s currently yielding 8.7%. Of course, there are no guarantees when it comes to dividends.
However, as long as it can grow its OCG in line with expectations, this should help secure a rise in its payout.
Some challenges
But just like the rest of us who invest in stocks and shares, the group’s vulnerable to wider market uncertainty. At 30 June, it had equities of £98.2bn and debt securities of £91.6bn on its balance sheet.
It also operates in a competitive industry. Some of the smaller players have lower operating costs, which gives them a competitive advantage.
However, Phoenix Group appears to be in good shape to me. It has a Solvency II ratio of 175%, which means it’s holding 75% more reserves than it’s obliged to.
And during H1 25, it saw a 3.1% increase in assets under administration to £295.1bn.
To be honest, I think today’s share price fall is a bit of an over-reaction to a relatively small miss on one cash measure. Based on its latest results, the group’s doing better than I thought it was at this time last week, and yet its shares are now 7% cheaper. On this basis, I think it’s a stock to consider, not least for its above-average dividend.
