Convatec still wounded, Standard Life Aberdeen shock and RELX reassures

“The FTSE 100 soldiers on, rising 40 points to 7,253 in a market led by miners and banks,” says AJ Bell Investment Director Russ Mould.

Convatec

“The fanfare that surrounded Convatec’s IPO was short-lived and the wound care company is still nursing a slight cold today.

“The business quickly joined the FTSE 100 index soon after floating on the stock market in October 2016. Sadly a major profit warning a year after listing saw its share price slump due to supply issues and lower sales than expected from new products.

“It now says supply issues have been resolved but the impact from backorders and lost orders will persist in the first half of 2018.

“It’s a good reminder that even large companies can experience problems and that size doesn’t always equal success.

“Chief executive Paul Moraviec had to address shareholders last year with his tail between his legs and he still comes across as slightly embarrassed at today’s full year results.

“His saving grace is that organic revenue growth of 2.3% to $1.76bn was better than the previous guidance of 1% to 2% (downgraded from the original target of 4%), hence why the share price is up.”

Standard Life Aberdeen

“The combination of Aberdeen Asset Management and Standard Life which completed in August 2017 is not off to the best of starts as its biggest client Lloyds Banking walks away less than six months in.

“Lloyds has terminated the contract for Standard Life Aberdeen to manage £109bn of assets for its Scottish Widows insurance arm.

“The move follows talks aimed at addressing competition concerns. Aberdeen had won the business back in 2014 but Lloyds had the right to end the contract if, as transpired, Aberdeen was to merge with a rival.

“The business accounted for 17% of Standard Life Aberdeen’s assets under management but only around 5% of revenue as it was low margin work.

“The tie-up between Standard Life and Aberdeen was seen as creating a business with the scale and breadth of exposure to take on the US asset management giants. It was also meant to reduce costs in the face of the challenge posed by the growth of low-cost passive investing.

“The Lloyds news shows there are risks as well as benefits to scaling up.”

RELX

“Professional information, data analytics and events firm RELX has posted a typically solid set of full year results, reflecting a very consistent track record of low-to-mid digit revenue growth.

“The shares have been sold off fairly heavily in 2018 as investors react to dollar weakness (it is seen as a beneficiary of a strong US currency) and a dispute with German universities over the pricing of scientific journals.

“Revenue growth of 4% for 2017 and guidance for more of the same in the current financial year could help reassure the market.

“A change from a dual share structure to one single PLC share listed in London and Amsterdam arguably makes the company easier to understand and potentially more attractive to investors.”

These articles are for information purposes only and are not a personal recommendation or advice.