Market Report: Aviva lifted by swift job on Delta Lloyd
Bosses at Aviva aren't hanging around. After the insurer on Thursday announced plans to exit 16 businesses in an attempt to slim down and revive its share price, investors were yesterday cheering its willingness to get on with the job.
The group finished close to the top of the Footsie, advancing 3.4p to 288p, following its decision to cut its stake in Dutch rival Delta Lloyd in half. Aviva had already announced the night before it was going to sell as many as 25 million shares, but high demand meant it ended up getting rid of a further 12 million, netting itself £318m.
The fact that the amount sold was greater than originally expected was important, said Panmure Gordon's Barrie Cornes, because it lowered the company's stake to below 20 per cent, "at which point [Delta Lloyd's] volatility will have a much lesser impact on Aviva's IGD surplus", a regulatory measure of surplus cash, and therefore its share price.
Saying its disposal programme was "off to a flying start", the analyst kept his buy rating and praised the chairman, John McFarlane, who has taken the reins until a replacement for the former chief executive Andrew Moss is found, as a "plain speaking, no-nonsense man".
At the same time, Investec's Kevin Ryan argued that Aviva's cost-cutting plans "should help the dividend to be maintained". He also claimed that its shares could be in line for a re-rating if the disposals were successful, although the scribe conceded that this could be "challenging in the current environment".
It was that time of the month again when the Square Mile eagerly awaited the non-farm payroll figures from the States, and the news that 80,000 jobs were added in June instead of the 100,000 expected saw the FTSE 100 close 30 points lower at 5,662.63. With CRH particularly exposed to the US, the building materials group was knocked back 63p to 1,151p by the disappointing data.
Another on the slide was Marks & Spencer, down 11.2p to 318p, ahead of the release next week of its first-quarter numbers. With the recent gloomy weather likely to have put shoppers off buying a new summer wardrobe, the City has been pretty downbeat, and analysts from Seymour Pierce and JPMorgan Cazenove cut their estimates yesterday. Meanwhile, Espirito Santo's Richard Cathcart said M&S, which is expected to reveal it has suffered its worst three months of trading for three years, would not be able to put all the blame on the weather, adding that there was "an element of poor execution at play".
Having lost 17 per cent since the start of the week to fall to a 12-year low, Man Group finally managed to find some buyers, creeping up 0.4p to 63.65p. Bank of America Merrill Lynch's Philip Middleton reiterated his buy advice, saying that, after its share price has lost three quarters of its value since September, it was "seriously undervalued".
Aveva powered up 48p to 1,745p as Berenberg's Daud Khan turned into a buyer on the group, while the analyst also argued there was a risk the software and IT services sector is "entering into a phase of frenzied M&A activity".
Elsewhere, Invensys could only creep up 1.1p to 236.5p following a report from China claiming CSR was "in contact with a British railway signalling company" among other groups over potential acquisitions. CSR has often been linked with a possible move for the engineer, which earlier in the week denied it was in any bid talks.
Punters in Aga Rangemaster were left rather cold by the small-cap group's latest update. Although sales of its ever-so-middle-class Aga cookers were up 4 per cent over the first half of the year, the news that profits for the period had slipped back saw it retreat by 5.12p to 66.5p.
Down on Aim, Africa-focused oil explorer Bowleven powered up 12.25p to 70.75p after becoming the subject of reheated takeover rumours, although many were treating the whispers with a large dose of salt.
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