UK share prices watch: Aviva shines on Thursday
Blue-chip insurer Aviva (LON:AV) has stayed in this week’s UK share prices to watch after announcing a major shake-up which will see it target £300-million cost savings per year and shed 1,800 jobs. In smaller London-listed companies, Peppa Pig owner Entertainment One (LON:ETO) is rallying as it moved to refute rumours about the departure of president Mark Gordon.
Aviva and Entertainment One rise
Aviva has advanced in today’s session after the blue-chip insurer announced that its life and general insurance businesses in the UK will be managed separately, with the digital direct business integrated into UK General Insurance. The company further plans to reduce expenses by £300 million per annum by 2022, which will see it trim about 1,800 roles across the group over the next three years. The update follows this week’s news that Aviva’s chief financial officer is stepping down.
Proactive Investors quoted Shore Capital as commenting that returning the UK business to two separate divisions of Life and Non-life “makes sense to us as the ability to cross sell to retail customers has proved difficult to achieve for Aviva, and many more before them,” while the aim to reduce costs “is not unexpected as Mr Tulloch has spoken about reducing complexity and increasing pace, reducing costs is a natural step to take in this process”.
“We will need to wait for the presentations to see more on the timing of the cost savings, but this could potentially add around 5% to pre-tax earnings in 2022F if it can be delivered,” the broker continued, adding that it already factored in £170 million of cost reductions out to 2021F in its forecasts, as well as “additional restructuring costs, the level of which have not yet been disclosed”. Aviva’s share price has added about 1.3 percent in early afternoon trade, as compared with about a 0.7-percent gain in the benchmark FTSE 100 index.
Rolls-Royce Holdings (LON:RR) is also outperforming the market after announcing that it had completed a deal transfer some pension liabilities to Legal & General (LON:LGEN), which will see it make an exceptional cash contribution of around £30 million. The company, however, reassured investors that its free cash flow guidance for the current year remained unchanged. Rolls-Royce’s shares have gained about 1.7 percent so far today, while shares in Legal & General are changing hands about one percent higher.
Auto Trader (LON:AUTO) meanwhile is in the doldrums today despite reporting an eight-percent rise in full-year revenue and a 10-percent gain in operating profit.
“Brexit is not expected to affect the company’s operations but it does foresee a low to mid-single digit [percentage] increase in its costs in 2019; however, the company’s confidence was underlined by a 14% rise in the dividend,” commented Ian Forrest at The Share Centre, as quoted by Proactive Investors, adding that “with the shares trading on 26 times prospective earnings and a fairly modest dividend yield of around one percent the shares look to be fairly valued and we would suggest no more than a hold rating”. Auto Trader’s share price is a little more than one percent lower in early afternoon trade.
Peppa Pig owner Entertainment One is rallying after issuing a short statement to the London Stock Exchange, saying that its “Mark Gordon continues to be a part of the eOne team both now and into the future”. The move followed reports that Gordon would leave the company because of creative differences. Entertainment One’s shares are rallying more than 16 percent.
Tomorrow’s UK share prices to watch
With little going on on the corporate front tomorrow, investors will focus on this week central bank comments, which are likely to impact shares of London-listed lenders. AIM-quoted Circassia (LON:CIR) meanwhile is likely to be among tomorrow’s UK share prices to watch, on account of its annual general meeting. The shareholder meeting will come after last month, the company posted a five-percent gain in sales for the year ended December 31, and a 38-percent surge in first-quarter unaudited revenues.
The US non-farm payrolls are set to provide some excitement in markets around the world, set to come amid this year’s expectations for a rate cut by the Federal Reserve. IG reports that the world’s biggest economy is expected to have added 190,000 new jobs last month, from 263,000 in April. The unemployment rate is expected to have climbed to 3.7 percent from 3.6 percent.
For information about this week’s stock to watch on the other side of the Atlantic, check out our Day Trading Stock Picks – US and Canadian Lists. If you are more interested in forex trading, check out our Forex Strategies Guide for Day and Swing Traders.