Chesnara plc (LON:CSN) is the topic of conversation when Hardman & Co’s Financial Analyst Dr Brian Moretta caught up with DirectorsTalk for an exclusive interview.
Q1: Chesnara recently announced its 2024 interim results, what were the main features?
A1: Chesnara’s 2024 interim results showed a steady performance, despite a backdrop of mixed market conditions.
The headline Economic Value profit was £20.2m, down from £32.6m in 2023, largely due to adverse lapse experience in Sweden. Economic Value fell slightly to £508m, from £525m at the 2023 year-end.
The interim dividend increased by 3% to 8.61p, marking 20 consecutive years of growth, highlighting the group’s commitment to shareholder returns.
Q2: What were the main factors driving the changes in Economic Value?
A2: The main factors driving the changes in Economic Value were the impact of positive equity market movements and interest rates, which supported gains in investment returns. However, these were offset by higher lapses in the Swedish division and the adverse effects of foreign exchange fluctuations. The dividend payment also reduced the Economic Value, contributing to the decline from £525m at the 2023 year-end to £508m.
Q3: Can you tell me more about the operational environment in the first half?
A3: The operational environment in the first half was mixed, with positive developments in market returns offset by challenges in the Swedish division. Movestic faced ongoing pressures from high lapse rates due to a competitive market and the continued ease of policy transfers.
In the Netherlands, Scildon continued its focus on IT upgrades, while Waard experienced some asset mix changes. The UK business was stable, but it incurred some one-off costs as part of transitioning to the new SS&C platform, which will deliver long-term efficiencies.
Q4: Chesnara has placed a greater emphasis on acquisitions recently, what news is there in that area?
A4: Chesnara has been active in the acquisitions space, with a recent focus on completing ongoing deals. The acquisition of Canada Life’s UK protection business is progressing as planned, with completion expected in early 2025.
While no new deals were announced in the first half, management indicated that it is exploring several opportunities. Two deals did progress to diligence, one of which fell through due to valuation issues. We find it reassuring that management is retaining discipline.
Q5: Many investors hold this for the yield, can you tell us more about cash generation and the dividend?
A5: The interim dividend was increased by 3% to 8.61p per share, marking 20 consecutive years of growth. Base cash generation of £19.6m was good support for support the dividend payment.
The group’s capital position remains robust, and management continues to prioritise maintaining a sustainable and growing dividend, with future increases expected to remain in line with past trends.
