LONDON MARKET PRE-OPEN: Aviva Dividend To Return Amid Simplification

(Alliance News) - Stock prices in London are seen opening slightly higher on Thursday, rebounding ...

Alliance News 26 November, 2020 | 8:01AM
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(Alliance News) - Stock prices in London are seen opening slightly higher on Thursday, rebounding from a lower close on Wednesday.

In early company news, water company Severn Trent reported a fall in interim earnings but raised its dividend. Insurer Aviva said it will resume dividend payments, which had been put on hold during the Covid-19 crisis.

IG futures indicate the FTSE 100 index is to open 8.01 points higher at 6,399.10. The blue-chip index closed down 41.08 points, or 0.6%, to close at 6,391.09 on Wednesday.

Severn Trent reported a fall in earnings amid lower consumption from non-household customers as a result the coronavirus pandemic.

For the half-year ended September 30, revenue was down 2.5% to GBP887.6 million from GBP910 million last year, and pretax profit was GBP126.5 million, down 30% from GBP180.7 million.

Severn Trent declared an interim dividend of 40.63 pence, up 1.5% from 40.03p last year.

The utility, which serves the English Midlands and parts of Wales, said the profit fall reflected lower revenue and an increase in bad debt provisions due to the expected hit from the rise in UK unemployment.

Chief Financial Officer James Bowling said: "We have been encouraged by household customer cash collections that are slightly ahead of the same period a year ago with no significant increase in direct debit cancellations. However, we continue to anticipate bad debt increases in line with the guidance previously given, as recent redundancies and the future increases in unemployment included in consensus economic forecasts impact our region.

"In the first half of the year we, therefore, recorded an additional GBP8.2 million in the bad debt charge in our Regulated Water and Waste Water business for the expected impact on our customers' ability to pay in full amounts already billed."

Aviva said it was making progress on its simplification strategy and announced a new sustainable dividend policy, based on its core markets of the UK, Ireland and Canada.

The company said it was "exploring options across our manage-for-value portfolio", meaning non-core, including in France, Poland, the remainder of Italy and other joint ventures.

Aviva declared a 7.0 pence per share interim dividend. The insurer currently expects to recommend a final 2020 dividend of 14 pence per share, subject to a decision to be taken in March 2021. The expected 2020 total dividend of 21.0 pence per share is then expected to grow by low to mid-single digits, it said.

The London-based insurance, savings and investments firm said its trading performance so far in 2020 has been robust and financial position is strong with a capital surplus of GBP11.8 billion. The first nine months of the year has demonstrated its 0ability to grow in core markets where it has long-term growth prospects.

Further, bulk purchase annuities sales increased to GBP5 billion, which is a record, and commercial insurance premiums are up 9% across the UK, Canada and Ireland, it noted.

Aviva said as its portfolio simplifies it will deliver further value to shareholders by returning excess capital above 180% solvency cover ratio, once the debt leverage target ratio has been reached.

Looking ahead, Aviva said trading from fourth-quarter lockdowns remains uncertain but expects no significant increase in net business interruption claims.

SSE said that together with its Norweigan equal joint venture partner, Equinor, it has reached financial close on the first two phases of what will be the "world's biggest offshore wind farm".

SSE said the two companies are proceeding with the first two phases of Dogger Bank Wind Farm, a project off the north east coast of England which, once all three phases are complete in March 2026, will be the largest in the world.

SSE said Dogger Bank will produce enough clean, renewable electricity to supply 5% of the UK's demand, equivalent to powering six million UK homes.

Total investment in the first two phases of the project will be around GBP6 billion and has already created hundreds of UK jobs, with more to come as project construction ramps up, SSE added.

"We are proud to be leading on the construction and development of Dogger Bank Wind Farm, which has been 10 years in the making. We are putting our money where our mouth is on delivering net zero and reinforcing the UK's position as a world leader. This investment will help drive a green recovery from coronavirus through the project's construction over the next five years, creating jobs and boosting the local economy," said SSE CEO Alistair Philips-Davies.

In equity markets, the coronavirus vaccine-inspired rally continues to pause for breath, and stock trading is likely to lack impetus with the US closed for a holiday.

With at least three inoculations in the pipeline and possibly rolled out within weeks, the general mood among investors remains generally upbeat for 2021, but notes from the Federal Reserve's latest policy meeting on Wednesday warned that the US's recovery would be tougher without a new government stimulus package.

But with the coronavirus infection rate slowing down in Europe, investors are eyeing a relaxation of restrictions.

The Japanese Nikkei 225 index ended up 0.9%. In China, the Shanghai Composite is up 0.2%, while the Hang Seng index in Hong Kong is up 0.4%.

In the US on Wednesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average down 0.6% and S&P 500 down 0.2%, but the Nasdaq Composite finished up 0.5%. Financial markets in the US are closed on Thursday for Thanksgiving. They reopen on Friday for a half day.

"The US stock market will remain closed today as the country celebrates Thanksgiving. Some US-based traders and investors will be taking Friday off too. Yesterday, there was a sense that some dealers were winding down for the week, even though the NYSE will be open for limited trading on Friday. Any of the financial markets that are open today will probably experience low volatility... Equity markets in Asia are showing small gains and European indices are tipped to open a little higher," said CMC Markets analyst David Madden.

The US Federal Reserve's asset purchases have "helped foster accommodative financial conditions", minutes from the latest Federal Open Market Committee meeting showed on Wednesday.

According to the minutes, participants said an immediate change to the size and pace of asset purchases by the Fed was not needed yet but "circumstances could shift to warrant such adjustments".

The dollar continued to trade lower against major counterparts. The pound was quoted at USD1.3384 early Thursday, higher from USD1.3382 at the London equities close on Wednesday.

The euro was priced at USD1.1938, up from USD1.1909. Against the Japanese yen, the dollar was trading at JPY104.30, down from JPY104.38.

Brent oil fetched USD48.70 a barrel Thursday morning, up sharply from USD48.04 at the London equities close on Wednesday. Gold was quoted at USD1,814.70 an ounce, up from USD1,811.61 late Wednesday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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