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Resolution says financial discipline and timetables are stalling further deals

Resolution says its “financial discipline” and vendors’ timetables have stalled further acquisition deals.

But Clive Cowdery’s consolidation vehicle insists it is confident it will make a second acquisition shortly.

In its preliminary results, the firm says it has had “many conversations” with potential vendors and have conducted due diligence on a number of assets.

It says: “Our financial discipline and vendors’ timetables have prevented us from recommending a subsequent transaction. We continue to be in close dialogue with potential vendors and these reaffirm our confidence about the successful execution of the Company’s consolidation strategy.

“We continue to believe that the 18 month period post the first deal will be the acquisition period of the restructuring project and that the subsequent two years will be the period during which the enlarged business will be created and then repositioned to be directly owned by the public markets.”

Resolution says it will make acquisitions only where it considers them capable of generating returns consistent with a mid-teens percentage gross internal rate of return over the medium term.

Chairman Michael Biggs says: “We see 2010 as a decisive year for many financial services groups as they redefine their business models in the aftermath of the global financial crisis and in the face of increasing regulatory burdens.

“Resolution is in dialogue with a number of the owners of UK life assurance and asset management businesses whilst, at the same time, remaining highly disciplined on delivering the mid-teens return we seek on behalf of public market investors.

“Our priority is to build on the inherent value we see in Friends Provident by bringing to it the synergies and the benefits of scale which will arise from our future acquisitions.”

Meanwhile, Friends Provident made a profit before tax of £604m compared with a loss before tax of £435m for 2008, on a market consistent embedded value basis. Operating profit on an MCEV basis fell to £206m in 2009 from £364m the previous year.

Friends Provident made an IFRS operating profit before tax of £272m in 2009 compared with a loss of £246m for the previous year.

Over 2009, Resolution Limited made a loss before tax of £29m compared with a loss before tax of £1m in 2008.

Resolution is paying annual dividends of 4.08 pence per share from 2010, with one-third being paid as an interim dividend and two-thirds as a final dividend. The board is proposing a final dividend of 2.72 pence per share for 2009.


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