Pru’s battle aided by one-off tax saving

Pru's battle aided by one-off tax saving

Prudential helps to fight off initial takeover bid with solid results

Analysts believe that the solid results delivered by Prudential last week,
presented as a defence against a takeover by rival Aviva, were boosted by
one-off tax benefits which are unlikely to recur.

Prudential reported a 33% increase in 2005 operating profits, which climbed
from £1.2bn to £1.7bn and came in ahead of expectations.

The results were seen as crucial to fending off an initial approach from
Aviva, which the Prudential board, led by chief executive Mark Tucker, and
Hundred Group chairman Philip Broadley, the group’s FD, rejected at the
beginning of the week. ‘Prudential’s future is as an independent company’, a
company statement read.

Citigroup analysts, however, said that a slashed tax and a ‘raft of one offs’
had helped to boost the Pru’s results, which enabled it to mount a defence
against the Aviva offer and the rumoured interest of other rivals Legal &
General and Friend’s Provident.

In a research note entitled ‘Good but not as good as first appears’,
Citigroup said the lower tax and one-off items, related to the company’s
economic assumptions, had given Prudential’s figures an approximate £230m boost.

‘Without these one-offs repeating and with a normal tax rate, 2006 is likely
to see flat earnings per share on a European embedded value basis and a slight
fall on IFRS,’ the note said.

For its 2005 results, Prudential’s effective tax rate on operating profit was
down 6% from 27% in 2004, saving the group approximately £170m.

The FTSE100 group said the drop in the rate was a result of resolving
outstanding issues with the HM Revenue & Customs, believed to be related to
City bonuses, and a European Court of Justice’s ruling on the Marks &
Spencer GLO case last year.

Read Accountancy Age’s
interview with Prudential’s group finance director Philip Broadley.

Prudential’s
2005 results

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource