Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Aviva. We currently have 23 research reports from 4 professional analysts.
Aviva has reported a good set of interim results with headline IFRS Operating profit at £1465m (+11%) which was just ahead of our close to consensus forecast at £1451m. There is an FX benefit of 5% but the underlying performance is still good at 6%. The interim dividend was well ahead at 8.4p/share (+13%) compared to expectations of 8.28p/share whilst the Solvency II capital surplus at 193% (H1 2016: 174%, FY2016: 189%) was in line but also supporting of the current share buy-back programme. The only real area of disappointment was in Canada where the General insurance business was impacted by poor weather but the overall impact on the Group was relatively limited. The share price is up 39% in the last 12 months but we think that there is much further to go. The valuation remains attractive with the shares trading on 2018/19F PE multiples of 9.3x and 8.7x respectively along with an attractive current year dividend yield of 4.8%. Buy.
Aviva has announced the sale of Friends Provident International (FPI) to RL360 Holding Co (a subsidiary of International Financial Group) for £340m in cash plus other minor adjustments. FPI didn’t sit comfortably within Aviva and so it is no surprise that it is being sold. In 2016 it made a £2m pre-tax loss and didn’t remit any cash to Group. We view this disposal positively and have anticipated such a move almost from the moment Aviva acquired Friends Life. Separately we highlight our H1 2017 forecast where we are forecasting Operating profit at £1451m (+10%). Additionally we take this opportunity to roll forward our valuation of Aviva and increase our target price to 635p/share from 592p/share previously.pan
Aviva has announced the sale of its 50% shareholdings in two of its Spanish life and pensions JV’s as well as its retail life business. Total consideration of c£403m represents c1.5x 2016 NAV and 12x 2016 earnings and will result in a gain of c£120m in IFRS NAV and increase its SII surplus by c£130m. The disposal reflects the strategy of allocating capital only to those markets where it can deliver good returns and in our view should be welcomed by shareholders. We believe that the combination of Aviva’s self-help programme, current valuation and attractive dividend yield should see the share price rise in the short to medium term. Buy.
The IFRS Operating profit (ex Ogden) at £3010m (+12%) was 5.2% ahead of consensus at £2,860m and ahead of our £2,905m forecast. The key drivers were Life at £2642m (+8%) and GI/Health at £833m (+9%) with Fund Management at £138m (+30%). The full year dividend was 23.3p/share (+12%) which was in line with expectations whilst the IFRS NAV at 31 December 2016 was 414p/share (2015: 389p) which was ahead of consensus at 409p. The company has announced that it is planning an additional capital return to shareholders in 2017 to reflect the Solvency capital ratio at 189% being ahead of target (150- 180%) range by 9% equivalent to c£1bn. The shares have rallied strongly post Brexit and even a large IFRS Ogden impact of £385m post tax has failed to slow Aviva’s performance. We increase our target price from 525p to 592p/share today to reflect the good performance, capital return and roll forward of our valuation. We maintain our Buy recommendation.
H1 16 operating EPS increased by 1.3% to 22.4p and IFRS operating profit improved to £1,325m (up 13.2% yoy). Life insurance has posted improvements in profits to £1,021m (+20% yoy) but the General insurance & Health showed a downturn trend to £334m (-20.8% yoy). The combined operating ratio increased by 3.1% to 96.2%. Fund Management’s earnings increased by 48% to £49m. IFRS profit after tax stood at £201m (-63.1% yoy). VNB increased 9% (7% at constant FX) to £583m. Progress was recorded in the UK & Ireland (+8% to £280m), Italy (+82% at £71m), Spain (+29% at £16m) and France (+6% to £103m) while a decrease was observed in Asia (-20% to £61m), Poland (-9% to £27m) and Turkey (-6% to £12m). Operating expenses increased by 13% to £1,696m and the integration of Friends Life and Solvency II costs reached £105m (£172m in H1 15), leading to an operating expense ratio of 53.4% (52.8% in H1 15). At the moment, the integration of Friends Life is delivering £201m in run-rate synergies. Management confirmed its £225m synergy target. Cash remittances from business units to the group amounted to £752m vs. £495m in H1 15. The Solvency II capital surplus is £9.5bn and the coverage ratio has remained broadly constant at 174%. The interim dividend per share increased to 7.42p, +10% relative to H1 15.
London equities were begrudgingly impressed with the Bank of England's decision to unleash a package of historic stimulus measures in the wake of the EU referendum. While the MPC voted unanimously in favour of cutting the base rate to an all-time low of 0.25%, the real surprise was the huge expansion of quantitative easing along with a new package of cheap loans for banks which could pump an extra £170bn into the economy despite opposition from a minority of the ninemember committee who considered that the UK macro background does not yet support such drastic action. Despite this Governor Mark Carney then went even further, indicating a willingness to cut rates even further 'close to, but a little above' zero before the year-end together with additional rounds of QE should the economy not respond adequately. Sterling bonds hit record lows, with 10-year Gilts yesterday paying just 0.66%. Equities moved sharply and broadly ahead on the news, with positive sentiment being carried into this morning seen likely to push the FTSE-100 up a further 30 points in early trading. One thing that could potentially spoil the party, however, is the all-important US non-farm employment report for July, with current estimates suggesting an advance of 195k, due this afternoon. Ahead of this release the US markets closed quietly mixed, with tech stocks leading the upside once again while the energy sector rallied with oil remains remaining firmly above the US$40 mark during the session. Asian shares, by comparison, picked up London's positive mood, will all but the Shanghai Composite making reasonable gains. William Hill (WMH.L)and the Royal Bank of Scotland (RBS.L) are amongst corporates due to report today, followed by release of the Halifax house price index mid-morning.
Companies: SAVP AV/ EZJ RSA
Aviva has reported a good set of interim results with headline IFRS Operating profit at £1325m (+13%) which compared to our close to consensus forecast at £1330m. The interim dividend was 7.42p/share (+10%) in-line with expectations of 7.43p/share whilst the Solvency II capital surplus at 174% (180% at YE 2015) was also ahead of expectations at 171%. We view Aviva as a recovery play with potential for material returns of surplus capital to shareholders in the medium term. The valuation remains attractive with the shares trading on 2016/17F PE multiples of 7.8x and 7.2x respectively along with a current year dividend yield of 6.1%. Buy.
Aviva will report its H1 2016 results on Thursday 4 August (same day as RSA). We are forecasting headline IFRS Operating profit at £1330m (+14%), IFRS NTAV (excluding goodwill) at 318p/share and an interim dividend at 7.43p/share (+10%). On the 27 June, post the Brexit vote, Aviva announced that its solvency II coverage ratio remained close to the top of its working range of 150-180%. We believe that it will be 173% at 30 June. The share price has recovered somewhat following the vote to leave the EU but is only trading on 2016/17F PE multiples of 7.8 and 7.2x. In addition we would highlight the 2016/7F dividend yield of 6.1% and 7.0% respectively as further reinforcing our view that the shares are stunningly good value.
We have repositioned the portfolio, price targets and ratings to allow for accentuated regulatory risk from on-going capital market volatility.
Companies: AGN ALV AV/ CS G LGEN PHNX PRU SL/ ZURN
Aviva will host a CMD today and in advance it has announced a number of objectives. These include mid-single digit IFRS Operating profit in the medium term which represents a slowdown on what we were previously forecasting. In addition it expects to generate £7bn of cumulative remittances over 2016/18 with a dividend payout ratio of 50% of Operating EPS (2015: 42%). There is talk of a share buy-back in the medium term if markets allow. The valuation on most metrics looks cheap but we will need to cut our 2017 IFRS Operating EPS forecast and as such we cut our target price to 525p/share from 660p previously but maintain our Buy recommendation.
AVIVA (AV/ LN), EASYJET (EZJ LN) | FOXTONS GROUP PLC (FOXT LN) | easyJet (EZJ.L, 1,020.0p)
Companies: AV/ EZJ FOXT
In 2015, Aviva’s operating profit increased 20% compared to 2014 to £2,665m, thanks to the contribution from Friends Life (£554m) and underlying growth (£103m). Adverse forex movement cost it £117m. The Life business performed well with operating profits at £2,419m (up 20% yoy) and a VNB at £1,192m (up 24% yoy but only 14% excluding the impact of Friends Life). The General Insurance & Health operating profit recorded a 5% decline relative to FY 14 at £765m. The group’s combined operating ratio improved by 1.1% to 94.6%. Aviva Investors delivered fund management operating profits of £105m, up 33% yoy. AIMS had accumulated £3bn of AuM. Total cash remittances amounted to £1,507m vs. £1,431m in 2014 and excess centre cash flow was £699m, stable relative to 2014. Both the remittance and excess centre cash figures in 2015 exclude £230m of planned dividends that were retained by the Canadian business to fund part of the acquisition of RBC General Insurance and £150m of remittances paid by Friends UK to its parent company prior to acquisition. The integration of Friends Life is on the right track to achieve £225m of synergies in 2016, a year ahead of schedule. In 2015, Aviva has achieved run-rate synergies of £168m and expects £1.2bn of capital benefits, of which £400m was realised in 2015. The insurer expects that the UK Life business will be able to make £1bn of additional remittances over the next three years, enhancing the liquidity profile of the group and facilitating the reallocation of capital towards the high returning or fast growing businesses. The IFRS profit after tax (continuing operations) reached £621m, and the proposed final dividend is £14.05 per share, up 15% relative to 2014. The Solvency ratio II ratio stood at 180%.
Aviva has reported a better than anticipated set of 2015 results. The key points are Solvency II ratio at a very healthy 180% and Friends Life Capital synergies of £1.2bn which translates into £1bn of cash dividended up to Group. The key question now is what will Aviva do with the additional cash – we think it will in part be used to hike future dividends. The IFRS Operating profit at £2665m (+20%) was 7%% ahead of consensus at £2,489m within a tight range and ahead of our £2,510m forecast. The full year dividend was 20.8p/share (+15%) just 2% behind expectations. The IFRS NAV at 31 December 2015 at 389p/share (2014: 340p) which was bang in line with expectations at 389p/share or 315p/share (2014: 274p) excluding goodwill. Following the great figures and the capital synergy benefits from Friends Life, the question now is what is CEO Mark Wilson going to do with the cash? We maintain our Buy recommendation and 660p/share target price.
Headline numbers will be flattered by the inclusion of Friends Life, although we expect significant progress on integration cost-savings. The benefits of what is primarily a cash driven acquisition should be evident in a re-based dividend with expectations of further re-basing in 2016-7.
Following the UK floods in December and the more recent announcement of the acquisition of the RBC Insurance business in Canada we have adjusted our 2015 and 2017 earnings leaving 2016 unchanged. We have assumed that there will be a £100m net impact from the floods reducing 2015F Operating EPS from 49.2p/share to 47.0p/share. We have increased out 2017F Operating EPS to 57.2p/share from 56.9p/share as a result of the acquisition of RBC Insurance due to complete Q3 2016. These are minor changes that do not impact our view that the shares are materially undervalued and Aviva remains in our conviction list as the top large cap insurance pick for 2016. As an aside, it has no exposure to the UnionPay credit/debit card issue that impacted Pru shares yesterday. Buy, target price 660p.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Aviva. We currently have 23 research reports from 4 professional analysts.
|20Sep17 08:49||RNS||Aviva Completes Share Buyback Programme|
|19Sep17 17:01||RNS||Transaction in Own Shares|
|19Sep17 07:50||RNS||Holding(s) in Company|
|18Sep17 17:18||RNS||Holding(s) in Company|
|18Sep17 16:54||RNS||Transaction in Own Shares|
|18Sep17 14:19||RNS||Notification of Major Holdings|
|15Sep17 17:33||RNS||Notification of Major Interest in Shares|
Amino Technologies (AMO LN) German contract win | City of London Investment Group (CLIG LN) In line with Q4 update: earnings grow, small increase in dividend | Ergomed (ERGO LN) Strong H1 growth; PeproStat™ Phase IIb data expected in October | Itaconix (ITX LN) A period of meaningful commercial progress | Retail Recovering sector indicators for 2018 likely to trigger outperformance
Companies: CLIG FDL HFD BWNG AMO ERGO ITX
FinLab’s results combine relatively stable income from management fees and dividends received from the asset management subsidiaries, Heliad and Patriarch (total income at €1.76m vs €1.88m in H116), and sizeable revaluation gains (Kapilendo, Heliad) of €2.52m (vs -€0.3m in H116). The recent share issue and improved operating cash flow increased the company’s net cash position to €4.28m from €0.97m at end-2016. This puts FinLab in a strong position to execute further fintech investments. Following the recent positive share price performance, FinLab’s shares trade at an 18.9% premium to last reported NAV.
Fidelity China Special Situations (FCSS) invests in a diversified portfolio of Chinese equities, seeking exposure to higher-quality companies, primarily in faster growing, consumer-orientated areas of the economy. FCSS provides actively managed exposure to the Chinese market, following a bottom-up investment approach, unconstrained by index weightings, and currently has no holdings in banks or property, which are considered to be higher-risk sectors. FCSS has achieved a 14.5% pa NAV total return since its launch in April 2010, and its performance is considerably ahead of the MSCI China index and the world market over three and five years.
Companies: Fidelity China Special Situations
In the September edition of the Hardman Monthly Newsletter, Dr Martin Hall - based partly on his personal experiences as a long-standing investment analyst - addresses various accounting issues that are highly relevant to today's investors. In particular, he concludes that measuring company cash flow - and especially projecting future cash flows - is pivotal to undertaking rigorous financial analysis, irrespective of how individual companies may present it.
Companies: ABZA AVO AGY APH ARBB AVCT BUR CMH COS DNL EVG MCL MUR NSF OBT ODX OXB PPH NIPT PHP PURP RE/ RGD SCLP SCE TRX VAL
Springfield Properties—Scottish housebuilder. Intention to float. Offer TBA “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” | Warehouse REIT - The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 percent. for the year ending 31 March 2019. Issue price 100p. Offer TBA. Due 20 Sep | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. | People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance. | Charter Court Financial Services Group—Intention to float. Specialist lender serving the UK residential mortgage market. The net mortgage loan book stood at £4.4 billion as at 30 June 2017 growing at a compound annual growth rate of 92 percent since 31 December 2014. Part vendor sale and £20m primary raise. | ContourGlobal LP—Report on Bloomberg that the thermal energy power generator is considering a London listing. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
Companies: ALM CNS STX ACSO AMO PANR TXP NAUT ONC RBD
CLIG has issued final results in line with the detailed preview provided at the Q4 trading update (19/7). We note strong FuM growth yoy driven by underlying benchmark performance, but continued net outflows in the core EM closed end funds strategies (90% group FuM). The earnings performance is in line with earlier indications, as is the modest +1p increase in the final dividend to 17p which brings the FY17 payout to 25p (FY16 24p). We will review our forecasts and remain cautious on account of net outflows, but note the dividend policy provides a 6%+ yield at the current price.
Companies: City Of London Investment Group
Avon Rubber (AVON LN) FY17 PBT in line with expectations | BCA Marketplace (BCA LN) Further strong growth + bright prospects. H1 preview | Gym Group (GYM LN) Consolidation becoming part of the investment thesis | N Brown Group (BWNG LN) Curve Catwalk singles Simply Be out as key power brand | River and Mercantile Group (RIV LN) FCA refers industry to CMA, reiterate BUY
Companies: BWNG AVON BCA RIV
City of London Group (COLG) - Sch 1—RTO of Milton Homes Limited, an equity release provider which has a UK residential property portfolio of 586 properties with a market value of approximately £77 million as at 30 June 2017. Offer TBA. Due 5 Oct | Springfield Properties—Scottish housebuilder. Intention to float. Offer TBA “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” | Warehouse REIT - The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 percent. for the year ending 31 March 2019. Issue price 100p. Offer raising £150m at £1 with market cap of £166m. Due 20 Sep | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. |People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance. | Charter Court Financial Services Group—Intention to float. Specialist lender serving the UK residential mortgage market. The net mortgage loan book stood at £4.4 billion as at 30 June 2017 growing at a compound annual growth rate of 92 percent since 31 December 2014. Part vendor sale and £20m primary raise. | ContourGlobal LP—Report on Bloomberg that the thermal energy power generator is considering a London listing. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 Sep.
Companies: EEP SCE JDG EKT BGO SWL EYE PCA IEH RBW
Lloyds Banking Group PLC (LLOY) reported continuing strong operating progress in its Interim (H1-17) results back on 27 July, with all key business metrics continuing to improve. Guidance for the full year Net Interest Margin (NIM) was raised to 2.85% (2.7% in FY-16) and LLOY expects 2017’s Tier One Capital generation (CET1) to be at the top end of the 170-200 bps improvement range. Importantly, LLOY is positively geared into a gently rising UK interest rate environment (perhaps 25 bps in Nov-17 followed by 25 bps in May-18) as the economy warms. This is a profile we like and should provide near-term upside potential. Buy
Companies: Lloyds Banking Group
1H17 PBT of £78.1m (up 32% YoY) is 9% ahead of consensus forecasts (PG £70.1m) with good underlying trends across the board. Loans grew by 19% YoY to £8.1bn, with NIM broadly stable at 3.48% (consensus 3.47%). Loan origination was up 10% to £1.6bn with £0.8bn pipeline (up 8% YoY) going into 2H17. Costs increased by £7.8m YoY, in line with management’s guidance of £15-20m increase for FY2017. Despite this the cost income ratio fell by 140ppt to 44.1% with the group aiming for <40% in the medium term. Cost of risk was down 6bp to 14bp and now management expect FY2017 CoR to be below 25- 35bp medium term guidance. Group underlying RoE at 18.8% was 240ppt better than our and consensus forecasts. Balance sheet was strong with TNAV increasing by 9.5% HoH to 167p and CET1 ratio of 11.8% (Cf. cons. 11.7%) with management anticipating to deliver above 12% for FY2017 enabling possible dividend payment. Overall these are a solid set of results. We maintain our BUY rating with the stock trading on reported P/TBV of 1.3.
Companies: Aldermore Group
The group has announced final results in line with our forecasts, reflecting another strong year of growth. The group has very high revenue visibility and a predictable cash flow profile, and we believe that its organic and acquisitive expansion model is capable of sustaining double-digit annual growth in a large and fragmented market. Our recently upgraded forecast and target price remain unchanged, the latter implying potential share price upside of 17%.
CyanConnode* (CYAN): New $10m contract lifts the order book to £28m (CORP) | H&T Group (HAT): Interims best in a milestone year (BUY)
Companies: Cyanconnode H&T Group
The ongoing results season is giving investors a better idea of how companies are faring as well as an indication of the prospects for the rest of the year. So far, the majority of announcements have been as anticipated, with some surprises. The various market indices have regained their positive momentum over the last fortnight. Brexit negotiations continue (to progress?). Add to this, the major party conferences are only three-four weeks away! In Share News & Views, we comment on recent results/news from Braemar*, Churchill China, EU Supply*,James Fisher, Goodwin* and ProPhotonix*.
Companies: CRPR ECSC EUSP FDM GETB PCF PPIX SNX SPRP SQS TCN W7L
AFC Energy (AFC.L) | Touchstone Innovations (IVO.L) | 4D Pharma (DDDD.L) | FairFX (FFX.L) | Versarien (VRS.L) | Abzena (ABZA.L) | MetalNRG (NEX:MNRG) | Valiant Investments ( N E X : V A L P ) | Vernalis (VER.L) | Satellite Solutions (SAT.L)
Companies: AFC IVO DDDD FFX VRS ABZA VER SAT
In light of the UK election, we highlight our favoured overseas earners, operators in defensive markets and those capable of taking market share, but our main topic is the structure of the UK employment market. The UK has the lowest unemployment rate since 1975 at 4.6%, and there are, consequently, fewer and fewer candidates to fill vacancies. This suggests recruitment companies may struggle to grow, but there are structural changes in the UK labour force that offer growth opportunities. Temporary labour continues to expand relative to the point in the economic cycle, its importance accelerating since 2008, and part-time labour has grown at twice the rate of full-time labour throughout both the last cycle and over the long term. There are, of course, specialist temporary recruiters, but the part-time market appears relatively untapped (at least by the quoted companies) despite being c.5x the size of the temporary segment in terms of numbers.
Companies: FOUR ACL BOOT CLL CMS CNCT FCRM LOK PPH RNWH SVCA STAF UTW WATR