Standard Life Aberdeen and Morrisons

Wednesday, March 13, 2019 - 12:21

“UK markets have shrugged off the latest Brexit setback with only a small dip in the domestic-focused FTSE 250 index. Sterling moved 0.5% higher against the euro and the US dollar. Investors remain relatively calm as they await the next vote in parliament.

“The flagship FTSE 100 slipped 0.1% with strength among oil producers and insurers offset by weakness in banks and miners,” says Russ Mould, Investment Director at AJ Bell.

Standard Life Aberdeen

Standard Life Aberdeen's full year results are quite shocking with a decline in profit from continuing operations, another huge net outflow of money from its funds and no increase in the final dividend. That’s hardly the result Standard Life and Aberdeen were expecting when they got married in 2017.

“It quashes the idea that there is strength in numbers simply by parking two companies together.

“At the moment the focus still appears to be on cost cutting rather than driving the business forward. That needs to change.

“The decision to stop having two chief executives is definitely a good start as it should bring a tighter focus at the top of the company.

“Keith Skeoch can run the business while former co-CEO Martin Gilbert has been relegated to maintaining strategic relationships and winning new business. The latter job description will drive speculation that Mr Gilbert’s days are numbered at the company.”

Morrisons

“First things first these numbers from supermarket Morrisons show the excellent job chief executive Dave Potts is doing at the group.

“Revenue growth is the best seen in a decade and while statutory profit is hit by one-off items, the resilient cash flow performance delivered by the group is probably more relevant. After all it allows the company to deliver a healthy increase in dividends for shareholders.

“The wholesale business, distributing goods under the Safeway brand, is a real star performer and plans for fresh diversification into convenience stores look a logical step.

“There is plenty for Potts to think about, with German discounters Aldi and Lidl still snapping at the heels of the big four operators, Tesco in recovery mode and an uncertain fall-out from the likely collapse of the tie-up between Sainsbury’s and Asda.

“However, what Morrisons needs to continue to focus on, and reassuringly Potts references this in his comments accompanying the results, is delivering the best possible shopping experience for its customers.

“It sounds simple but, at a time when the retail sector and groceries face substantial upheaval, getting the basics right is more important than ever.

“Historically there may have been a bit of slack for a retailer which was not at the top of its game, that is definitely no longer the case.”

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


The daily market comment is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.