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FTSE falters as Hargreaves hit but RSA races on Hester news

by David Campbell, Gavin Lumsden on Feb 05, 2014 at 16:02

FTSE falters as Hargreaves hit but RSA races on Hester news

(Update) US stocks opened lower today, knocking back an earlier recovery in the UK and Europe.

After three days of falls the FTSE 100 had advanced 33 points to 6,482 but the weaker-than expected ADP report on the US jobs market saw the S&P 500 fall nearly 1% to 1,738 in early trading. The FTSE 100 retreated to 6,457, up just eight points on the day.

RSA Insurance Group (RSA.L) raced 4% or 4p higher to 103p as investors in the troubled car and home insurer celebrated the appointment of Stephen Hester, former RBS chief executive (pictured), as its new boss. The hope is that Hester, who turned round the state bailed-out bank will do the same to RSA which has suffered a series of profits warnings and an accounting scandal in its Ireland division.

By contrast also in the financial sector Hargreaves Lansdown (HRGV.L) plunged over 10% or 158p to £13.39 after strong half-year results were marred by a dip in the profit margin and a decision to repeal a proposed charge for customers with investment trusts. This comes at a sensitive time for the stock, one of the best performers last year as analyst scrutinise its valuation following the recent regulatory intervention in the retail funds market.

Despite describing Hargreave’s as demonstrating ‘impressive momentum’, Canaccord Genuity said it remained ‘sceptical’ over the company's assurance that the next wave of consumer finance regulation would have little impact, adding that its forecasts remained under review.

Even disregarding any impact to revenue from regulatory changes, Canaccord said that a share price at 40 times earnings held little current value.

‘This is a high valuation even if regulators had not forced a change in revenue generation. Despite the management guidance, in our opinion, there remains considerable uncertainty over FY15 revenues,’ Canaccord noted.

Daily Mail and General Trust (DMGT.L) soared nearly 6% or 57p to £10.25, a 13-year high, after the newspaper publisher reported a surge in online advertising.

Among smaller companies Aeorema Communications (AEO.L) jumped 12.6% on a 97% increase in pre-tax profits, followed by Richland Resources (RLDR.L), which struck a joint management arrangement with Kiraban Resources.

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