Aviva slims down in rapid time, and B&M upgrades guidance but its purple patch could soon end

“The FTSE 100 surrendered its gains from Wednesday as the sell-off in the bond market resumed with grim familiarity as inflation fears continue to stalk the markets,” says AJ Bell Investment Director Russ Mould.

“Investors can take some comfort from the fact European markets aren’t as weak as their counterparts in Asia and the US overnight.

“However, the mood was clearly cautious, with the increase in corporation tax announced by Rishi Sunak in his Budget likely contributing to the downbeat mood, albeit not coming into force for two years.

“Oil prices were strong, adding to inflationary pressures, ahead of today’s meeting of producers’ cartel OPEC which may see an increase in supply agreed.”

Aviva

“If Aviva was to present itself at a Slimming World meeting it would be getting a standing ovation. It has sold off seven separate businesses since August and netted more than £5 billion in proceeds – the latest deal seeing the company exit Italy.

“This is now a much more streamlined company with a clear strategic focus on UK, Ireland and Canada – where today’s results reveal it delivered resilient performance in 2020 despite the pandemic with, somewhat remarkably, record sales posted in several areas amid a notably strong showing from its asset management arm.

“In some respects chief executive Amanda Blanc, who took over a little over six months ago, had some low-hanging fruit to go after.

“Aviva had several non-core markets where the business just wasn’t sufficiently competitive but Blanc is still to be applauded for the speed with which she has reshaped the firm. Its Polish operation is now the last remaining obvious disposal candidate.

“Blanc is not just making progress on selling off bits of the group but, using the proceeds derived from these transactions, is also rapidly paying down debt.

“This should allow Aviva to begin returning a lot of capital to shareholders, potentially as soon as next year.

“Aviva has seemingly been in a state of turnaround for years with previous CEOs unable to really revive its fortunes – if Blanc can match the progress of the first part of her tenure during the rest of her time at the helm then she might well succeed where her predecessors failed.”

B&M

“Value retailer B&M continues to deliver the goods by upgrading its earnings guidance once again. It has likely benefited from being one of the few shops still allowed to open during the latest lockdown, so it has attracted customers who may have traditionally gone elsewhere for their shopping or simply like the in-store experience.

“It’s been in a sweet spot for the past 12 months and this purple patch looks like it will come to end from mid-April when non-essential shops are permitted to open again. B&M therefore only has a matter of weeks left to convince its newly acquired customers they should continue visiting its shops and not return to old habits.

“A lot of people think the pandemic will have changed shopping habits permanently and that people will view shops that were able to serve them through difficult times in a positive light. B&M’s management team will certainly hope that it is true, but they are also realistic that the business is about to lap an extremely strong year for sales, so the comparative figures will be very hard to beat.

“Fortunately B&M is very competitive on price and despite the OBR forecasting the UK economic recovery will be stronger than previously expected, there are still a lot of people out of work or worried about the security of their jobs that price really matters when they’re doing their shopping.

“We face a divided nation where those who remained in work throughout the pandemic could have extra spare cash to fuel a big spending spree versus those are even worse off and it’s the latter group that may well make B&M one of their retailers of choice.”

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