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Aviva and Aggreko march to top of buoyant FTSE
by Chris Marshall on Mar 06, 2014 at 10:05
‘The turnaround at Aviva is intensifying,’ said Mark Wilson, the insurer’s chief executive – and investors believed him, pushing shares up nearly 9% to the top a rising FTSE 100.
After reporting a 6% rise in operating profits for 2013 to £2 billion, the restructuring insurer led a trio of crowd-pleasing blue chips at the top of the UK’s main index on Thursday morning.
Investors also welcomed the news that Aviva’s final dividend had been raised by 4% to 9.4p per share, while the company had cut the size of an internal loan almost in two to £2.2 billion. Aviva added that it had saved a total of £360 million at the end of 2013 putting it ahead of its cost savings plan to reach £400 million by the end of 2014.
Panmure Gordon upgraded the shares to buy from hold. ‘The huge reduction in the internal loan planned for 2015 represents a major step in removing a concern of ours,’ explained analyst Mike Mitchell.
The stock has rallied 30% over the past year after a rocky ride in 2012, but some analysts remain wary over the task still facing the company. ‘There is no doubting the progress delivered by the new CEO at Aviva to date,’ said Shore Capital’s Eamonn Flanagan, ‘but some considerable issues remain (such as the external debt level which remains at 50% of tangible capital, with 40% targeted over time) which require addressing before shareholders reap the benefits.’
Aggreko wasn’t far behind, with shares up 8.2% to £17.03 after the temporary power generation company, softened the blow of an 8% decline in full-year profits to £338 million, partly hurt by currency movements, with a 10% dividend rise and £200 million capital return.
Andrew Nussey, analyst at Peel Hunt, said to hold the stock after last week’s news that chief executive Rupert Soames was absconding to Serco: ‘The shares, trading on 19x Dec 2014E, look up with events for now, not least given the uncertainty over a new CEO.’
Schroders meanwhile reaped the rewards of its Cazenove buy with a 24% rise in pre-tax profit in 2013. The asset manager upped its dividend by 35% on the back of the promising full-year results.
Numis analysts are upbeat on the outlook for Schroders: ‘If we had to own one stock in the sector on a five year plus view… it would be Schroders because of the diversity of the business… and downside protection from the balance sheet.’
The corporate news helped Britain’s FTSE 100 to a 0.1% rise to 6,784. Most European stock markets were trading higher ahead of monetary policy decisions from both the European Central Bank and Bank of England today. Both the euro and British pound were unmoved ahead of the meetings, even as bets grow that the ECB will announce new stimulus.
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