ITV can’t make audience growth pay, and new Aviva CEO gets stuck in

“The FTSE 100 gave up a good portion of its recent gains on Thursday morning as investors weighed the latest decision on interest rates from the Bank of England,” says AJ Bell Investment Director Russ Mould.

“The Bank unsurprisingly keeps its powder dry, probably eyeing the end of the furlough scheme as a good point to reassess given the impact this might have on household finances.

“Concern over the global economic outlook hit shares in resources firms with Glencore the top FTSE 100 faller as it scrapped a previously deferred dividend to bolster its balance sheet amid a slump in commodities.

“One commodity which continues to shine is gold which remained firmly above the recently breached $2,000 per ounce mark.”

ITV

“While more people may have engaged with the medium through lockdown, ITV’s results reveal there were limited ways for broadcasters to make this pay as advertising revenue slowed to a trickle.

“The big drop in earnings reflected both the collapse in ad revenue and the impact of Covid-19 restrictions on TV productions.

“Advertising revenue was always likely to suffer as companies will typically increase spending on ads when they are feeling positive and scale back during tougher times. Few times have been as tough as we have seen in recent months.

“Traditional summer advertisers, notably the travel sector, have been particularly exposed to coronavirus and ITV was also starved of a big sporting event after the Euro 2020 football championships were postponed by a year.

“ITV chief executive Carolyn McCall and her team will hope the large audiences drawn to the network since the pandemic took hold will support advertising in the longer term.

“The company may talk about nascent signs of recovery and the restarting of productions will draw some revenue but the decision to cancel the first half dividend and the lack of any forward guidance say more about how ITV perceives the outlook.”

Aviva

“The new CEO of insurance firm Aviva is not hanging about. A month after taking charge Amanda Blanc uses today’s first half results to announce a plan to focus on its core businesses in UK, Ireland and Canada.

“Speculation that the company might split its life and general insurance units seems to have been quashed for now but it looks like there will be retrenchment overseas.

“The European and Asian arms will be ‘managed for value’ – corporate speak for potential asset sales and withdrawals from certain markets.

“The decision to maintain an approach which sees Aviva offer everything from life policies to pet insurance is interesting as her predecessor Maurice Tulloch attracted ire from shareholders over his failure to consider a break up of these different lines of business.

“Some confidence is also signalled in the future as Aviva resumes dividends – albeit on a modest scale ahead of a decision at the end of the year which it seems is likely to involve rebasing the dividend.

“This could make the payout more sustainable in the long term and if the company does end up selling off assets there could even be the prospect of special dividends funded by the proceeds.”

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


The daily market update 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.