Eyes Down For Aviva plc’s Results

What will interim results from Aviva plc (LON: AV) tell us?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

AvivaAviva (LSE: AV) (NYSE:AV.US) suffered a cathartic moment in 2012 when it was forced to slash its dividends.

But after years of falling earnings, the only real surprise was that anyone was surprised — the dividend was nowhere near covered by earnings per share (EPS) and was clearly unsustainable.

Since then, things have been looking up, and Aviva was able to lift its final dividend in 2013 to 9.4p per share from the rebased 9p paid in the second half of the crunch year.

At the time, profits were up, costs were down, new business was booming, and growth in developing markets was storming ahead. Chief executive Mark Wilson was both optimistic and guarded, talking of an “intensifying” turnaround while warning that there were still issues to address. He said “Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Aviva? Not yet.

Halftime

We’re past the halfway stage this year, and first-half results should be with us on Thursday 7 August. What should we expect?

In May, Mr Wilson famously described Aviva’s first-quarter performance as “reassuringly calm and stable“, which is pretty much what investors in a high-risk business like insurance dream of. New business was still on the up, rising 13% in vale to provide the sixth consecutive quarter of year-on-year growth.

Cash flow was steady, expenses were still falling, and external debt was reduced by £240m.

Restructuring was going according to plan, with non-core business in Turkey, the US, Korea and Italy having been disposed of. Mr Wilson again warned us that there is still a lot to do, telling us that “we remain focused on cash flow, expense efficiency and the clinical allocation of capital to areas where we can maximise returns“.

Full year

Analysts are forecasting a doubling of EPS for the full year, admittedly from a low post-crisis level. With the shares back up to 507p now, that would suggest a forward P/E of 11 with 2015 predictions dropping it to 10.

The City is also expecting further dividend progress, with a yield of 3.3% pencilled in for this year followed by a rise to 3.7% next. That’s a reasonable income, but more importantly it would be covered 2.8 times by earnings — so it’s going to be sustainable.

What’s the key thing to look for on 7 August? I’ll be happy with “reassuringly calm and stable” again.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »