While Aviva’s share price shot up 7.69% on Thursday, Schroder’s lost 5.16%, while Standard Life and Henderson made marginal gains, 1.88% and 1.35% respectively. Is it time to buy into the hype, or should you cut and run from your holding? We heard what the groups themselves have to say, now its the turn of the experts.
Aviva
The Aviva group has pulled itself out of the doldrums, posting a profit of around £750m following losses in the same period last year of around £630m. The investment management arm has also turned its fortunes around, with a 128% increase in profits in the first half of the year.
Despite the apparent success, group CEO Mark Wilson made a rather modest statement to the stock exchange, outlining the work that remains ahead of the group, and Euan Munro as new chief executive of Aviva Investors. The share price has increased 27.17% year to date.
Nicolas Ziegelasch, head of global equity at Killik & Co, said: “Aviva performed better than expected and the jump in share price is likely to be a result of the market anticipating a worse performance.
“The new CEO has made a lot of progress, costs have been brought down and the value of new business is up.
“The stock is still a buy for us, it has performed well, but isn’t as cheap as it used to be.”
Standard Life Investments
Standard Life Investments posted a 37% increase in pre-tax profit, and saw inflows of £7.1bn in the first part of 2012, results which were described as an "outstanding" start to the year by chief executive David Nish. Since posting its results, the share price has gone up 1.88%, having increased 49.59% over the course of the year.
Financials aside, the group announced the departure of Euan Munro during the period, one of the founders of its flagship GARS fund which is one of the biggest sources of inflows.
Ziegelasch was less impressed by the firm’s performance. He said: “Standard Life’s performance was ok, and in line with expectations. The UK business showed good performance and a growth in the investment division with an increase in both inflows and fees.
“The Canadian business was weak and this is the main cause of disappointment for the market. The stock isn’t cheaply rated, and as such the news has not been taken well by the market. We are rating the stock neutral.”
Henderson
Henderson reported a record half-year profit of £101m, a 23% increase on last year’s total, and £2bn of inflows. Its share price has increased 65.30% year to date and went up 1.35% on the news.
The first half of the year has seen the group join forces with Teachers Insurance and Annuity Association – College Retirement Equities Fund, to form a combined real estate business with around £13bn in AUM.
Ben Yearsley, a Charles Stanely spokesperson, said: “It’s a good business but having completed several acquisitions a few years ago I’m not sure whether it is now overstaffed. It certainly seems like there could be a lot of costs stripped out.
“That said, it is well diversified and has strong businesses in property, European equities and fixed income, although it’s a little lacking in the UK and Far East.”
Schroders
Last but not least, Schroders results showed a 25% increase in pre-tax profit, and inflows of £4.5bn despite the departure of star fund manager Richard Buxton and subsequent outflows from the UK Alpha Plus Fund. The asset manager also announced and completed its acquisition of Cazenove during the period.
Schroder’s share price dropped 5.16% on the results, but over the course of the year has increased 71.5%, so perhaps it was a case of investors taking profits.
Yearsley said: “The company is generally strong, it has a lot of cash on the balance sheet and is well diversified. It’s too soon to say whether the Cazenove deal will pay dividends, but it certainly looks like a quality purchase.
“It does have a tendency to lose star managers, Richard Buxton being the latest of course, but otherwise it is a solid, well-financed business.”
Yearsley went on to say he is relatively bullish on financials and asset management stocks in general, as they are perfectly placed to take advantage of the increased emphasis on self-provision for pensions.
“It’s certainly a good sector to be invested in over the long term, as asset managers are the ones that will be called upon to assist in financial planning for the future.
“The sector should be throwing off good money, and the likelihood is these stocks are actually holding onto cash which could be paid out in higher shareholder dividends.”
