Market Report: Standard Life is well set for regulatory revamp
Thursday 28 April 2011
Standard Life was in demand last night after the insurer was picked out as the best placed in the sector to cope with major new regulations set to be introduced in 2013. Shares in the Edinburgh-based company finished 4p ahead at 219.1p, their highest level for more than a month, following a bullish note from Investec which reiterated its "buy" advice on the stock.
The broker's analyst Kevin Ryan said a key reason for his positive stance was the forthcoming introduction of recommendations made the Financial Services Authority's Retail Distribution Review (RDR), specifically the ban on insurers paying commission to independent advisers.
Noting that the group had not done this since it floated in 2006, Mr Ryan said it was therefore "already wellestablished to cope in a post-RDR world". He said Standard Life's competitors had underestimated the changes that would be required.
The company is set to announce its first-quarter figures today – the firstupdate since its final results in March prompted a slide of nearly 20 per cent in just five sessions. Traders saidinvestors were wary of a similarresponse, but Mr Ryan said last month's fall came about because of "overdone" concerns for the group's "investment plans and how this fits in with paying a progressive dividend". The analyst also said the fact that Standard Life shares were trading below 230p – the price of its IPO – was "too harsh... given the transformation of the business that has occurred since flotation".
The news that Britain's GDP grew by just 0.5 per cent in the first three months of the year was no help to the FTSE 100, which edged down 1.2 points to 6,068.16. Many in the market were watching the US, where the latest interest rate announcement saw monetary policy kept on hold.
The move by Johnson & Johnson (J&J) to buy the Swiss company Synthes for $21.6bn did not surprise many, given that talks between the two emerged last week, but it still helped Smith & Nephew to retreat 11.5p to 658.5p. Speculation that the medical devices manufacturer, which also traded ex-dividend ahead of today's first-quarter results, could be a target for J&J has been persistent and it was reported to have knocked back a £7bn approach at the end of last year.
ITV was another business among the fallers, shedding 2.95p to 72.75p after Barclays Capital reduced its rating to "equalweight". The broadcaster also revealed it had settled a legal dispute with STV dating back to 2009, with the latter paying £18m. The settlement was less than expected, and helped the Scottish television company's stock to rise by 24.5p to 161p on the fledgling index.
Elsewhere, Shire – 22p stronger at 1,901p – had its potential highlighted by Goldman Sachs, which said the pharmaceuticals company was "one of the most attractive assets in its peer group".
It was a hectic day for results, withAggreko one of a number of blue-chip companies updating the market. The power generator supplier took the top spot after advancing 76p to 1,786p as it predicted its full-year trading profit would beat 2010's performance.
BP was another riser, although to a much more modest extent, despite missing forecasts with a dip in profits of 2 per cent. The oil giant was lifted 1.8p to 466p, while Royal Dutch Shell – which announces its figures today – also rose by 18p to 2,308.5p.
At the other end, Associated British Foods slipped back 61p to 984p after it warned of a drop in Primark's margins. The discount clothing chain has been hit by the increased cost of cotton, and the news that it would minimise passing this on to its customers meant that many market analysts reduced their full-year expectations.
Just one place better was Barclays Bank, after its first-quarter profit fell nearly 10 per cent. Its shares fell 14.35p to 287.5p, and signalled a retreat for the rest of the sector, with Lloyds Banking Group and Royal Bank of Scotland sliding by 0.6p to 59.79p and 0.39p to 41.45p, respectively.
On the FTSE 250 index of medium-sized companies, there was a burst of enthusiasm for Bodycote, which shot up 43.6p to 380p after the engineer predicted strong full-year profits following sales rise of nearly 20 per cent.
Meanwhile, investors were certainly hungry for Domino's Pizza, pushing it forwards 49.4p to 443.3p. The company said it had agreed to buy 75 per cent of the Domino's franchise owner in Germany, but Panmure Gordon warned that the international move provided "additional execution risk to what has hitherto been a UK and Ireland focused rollout strategy".
Down among the small-caps, the software company Anite jumped up 1.25p to 64p in the wake of signing a contract with the tour operator TUI Travel, which itself climbed 3.4p to 239.5p.
Elsewhere, the car distributor and retailer Lookers ended 6p higher at 61p off the back of vague bid speculation, played down by traders. According to market gossips, three groups – including its mid-tier index rival Inchcape, up 1.9p to 360.8 – could be interested in an approach, with the chitter-chatter mentioning a price of 90p a share.
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