nk1999
08 Mar 2018
HL view "Under Mark Wilson, Aviva has been transformed into a leaner, more coherent operation, with a focus on cash generation and financial strength. Shareholders are being compensated for the pain suffered in the past by a rapid rebuilding of the dividend - with a prospective yield of 5.8% in 2018.Fringe businesses have been sold or closed, while larger units have been bulked up with the acquisitions of Friends Life and RBC's general insurance unit. The life and general insurance businesses are now generating steady growth - although the Canadian motor business has tripped up recently.The slimming process has helped the group generate plenty of capital, with a Solvency II ratio of 198% exceeding its 150-180% target. Aviva is returning some of that surplus through a share buyback, but there's still plenty of firepower for more bolt-on acquisitions should management find the right opportunity.Away from the more established insurance activities, Aviva Investors looks like it's functioning as the group's growth engine at the moment, albeit from a very low base. The flagship 'AIMS' multi-asset fund is going toe-to-toe with Standard Life Aberdeen's 'GARS' and is coming off the better. Low capital requirements mean profits here should drop quickly through to the bottom line.In the medium term, the group is looking for digital solutions to tie together its disparate business lines. The MyAviva App allows users to see all their Aviva products in one place. The group is hoping to use its rapidly increasing customer base (users rose 28% in the first 6 months of the year to 6m) to cross sell its various products as well as increase engagement among its 4m Friends Life customers.Mark Wilson has built up a solid set of foundations at Aviva. Steady profit growth and plenty of capital generation should mean the group can start funnelling cash back to investors or fund expansion as management sees fit."
cavebear
08 Mar 2018
Re: Preference Shares As far as the cumulative irredeemable preference shares are concerned, you could be forgiven for believing that the term irredeemable means just that. You would certainly not expect that the value of a share class of a major FTSE 100 company to be slashed by 40+% on a whim.If you look at the Articles of Association, there appear to be three issues of preference shares - the two tranches of cumulative irredeemable prefs (Existing Preference Shares), and a tranche of so-called "New Preference Shares" issued in May 2006. The Articles go to some lengths to describe how the latter can be redeemed - which may indeed be at par although with a "Redemption Premium" if approved by the Board. There is no reference that I can see to redemption of the Existing Preference Shares - as you would expect as they are irredeemable. I can find no immediate record of the New Preference Shares so it is unclear if they are still even in issue.Assuming the New Preference Shares are indeed still in issue, I would think that the reference buried in the results published today about redeeming preference shares at par related to this class of shares. If this is the case, the Company needs to issue a clarifying statement immediately.If they do in fact want to redeem the irredeemables, surely they must pay appropriate compensation being the market price prior to the announcement plus some. Anything less would be unethical.
Serious Moonlight
08 Mar 2018
Re: Preference Shares Many thanks all for your responses. I've put the question to Prefinvestor. C
Bill1703
08 Mar 2018
Re: Preference Shares "I can understand the company no longer wishing yo pay the 8.75% coupon but it seems a little inequitable for us holders at £1.75!"I meant to add - the last company I can remember cancelling pref shares (Unilever, late last year) ended up offering a very chunky premium to the prevailing market prices for the various pref issues. But I don't know if these situations are directly comparable... nonetheless, if they want to buy them back to cancel them, I don't see how they can force you to sell them unless they offer adequate compensation (at least)?
Bill1703
08 Mar 2018
Re: Preference Shares "Serious, I don't know the answer but if you don't get a reply try Prefinvestor over on HSBA he deals with Preference shares and might know the answer."Yes, Prefinvestor is definitely your man for all things prefs.... in advance of that, and looking at the wording in today's report (copied below, including the relevant note), my reading is that you would get paid back the full redemption value, ie. par value plus all outstanding dividends to original maturity - which presumably is broadly equivalent to the current market price?But I agree, not entirely clear... "... we have the ability to cancel preference shares at par value* through a reduction of capital, subject to shareholder vote and court approval. The preference shares carry high coupons that are not tax-deductible and they will not count as regulatory capital from 2026. As we evaluate the alternatives, one of the things we are considering is how to balance the interests of ordinary and preferred shareholders. (* Par value includes accrued interest, arrears and in the case of the General Accident plc preference shares, issue premium.)"
Kool Keith
08 Mar 2018
Re: Preference Shares Serious, I don't know the answer but if you don't get a reply try Prefinvestor over on HSBA he deals with Preference shares and might know the answer.Looks like I was too slow moving funds in order to purchase today, limit order left in place in hope.
cautiousjon
08 Mar 2018
preference shares My understanding is that they are perpetual/irredeemable , need somebody with a legal background familiar with the terms of issue to clarify the situation.
Serious Moonlight
08 Mar 2018
Preference Shares Does anyone else on here hold these? I have a few and they’ve taken a dip today as a result of the CEO suggesting they maybe paid down. Does this mean they’ll be cancelled/bought back at par value (£1.00)? I can understand the company no longer wishing yo pay the 8.75% coupon but it seems a little inequitable for us holders at £1.75!Any guidance would be much appreciated.
II Editor
08 Mar 2018
NEW ARTICLE: High-yielding Aviva grows divi 20% "Back in 2013, one of Mark Wilson's first acts at struggling LSE:AV.:Aviva was to slash the insurer's final dividend by 44% to 9p in order to reallocate capital where it was needed most after £3 billion in full-year losses.Five years later, the ..."[link]
Bill1703
08 Mar 2018
Re: Dividend "no special dividend was disappointing..."It wouldn't be a "special" if you had already assumed you would get it!FWIW redeeming the (high coupon) preference shares looks like a sensible alternative use of cash in the near term... but beyond that, no reason why we won't see either faster ordinary divi growth, or specials, or a bit of both, in due course.
contrarianstyle
08 Mar 2018
Re: Dividend no special dividend was dissapointing
Bill1703
08 Mar 2018
Re: Dividend "Does that mean they will not be paying the standard Interim and Final Dividend now ?"Confused - no, not at all... such capital "returns" will be over and above the ordinary divi payments, which should rise at least in line with earnings from here (probably slightly faster, as they are signalling an increase in the payout ratio).
Bill1703
08 Mar 2018
Broker soundbites on FY figures Edited highlights below... Overall, reaction seems to be: combining these results plus updated guidance, at least "in line" and probably slightly "better" vs expectations. The valuation should offer considerable support, but don't get too excited.FWIW... @499p the metrics are just a tad better than these snippets suggest. Actual divi yield 5.5% (prosp FY18 c.5.8%), underlying P/E ~9x (and <9x prosp FY18)... compare this with LGEN, which offers a slightly better yield (5.9% act, 6.2% prosp) but trades on higher P/Es (over 11x for both FY17 act and FY18 prosp). IMHO not much between AV and LGEN (as closest comparator) - slightly better yield at LGEN, but lower cover level - but the valuation doesn't feel at all demanding. All else equal, I think stock performance should broadly mirror forward EPS growth, so ~5% pa... with the divi you're looking at a prospective total return at least 10% pa, possibly a tad better. Not shooting out any lights, but still relatively attractive. BARCLAYS"Aviva reported operating earnings growth of +2% YoY to £3,068 (ahead of consensus of £3,040), and EPS growth of 7% to 54.8p (consensus 53.0p). The higher EPS growth is driven by a lower tax rate, lower minority interest and impact of £300m FY2017 buyback... The dividend has increased 18% to 27.4p (consensus 26.4p), a 50% payout and equivalent to 5.2% yield. The company has not announced a buyback as hoped, but reiterated its target of returning £2bn of capital in 2018 (£900m repaying debt) – the delay in announcing details of a capital return is because the company is considering paying down £450m of preference shares (7.85% to 8.75% coupon), which won’t impact EPS but will free up cash for underlying ordinary dividend increases.Aviva reiterated its aim to grow EPS by 5% per annum, but it has effectively brought forward the base... This is effectively an upgrade on 2018 EPS guidance.... While 2017 earnings themselves were mixed (higher management actions / longevity release offsetting weaker Canada), we think the guidance.. is positive – suggest EPS of at least c57.5p and c60.4p in 2018 and 2019... versus our current estimates of 56.8p for FY18 and 60.4p for FY19. The fact the company is considering paying down the preference shares, instead of debt or share buybacks is also a positive.... Only when a company is on the front foot can it make these decisions. We reiterate our Overweight recommendation, the stock is trading on 10x FY18 estimate and a 5% yield."SOC GEN"We see Aviva's target upgrades (at its Investor Day in November) as steps in the right direction and believe in management's ability to deliver on them. However, while Aviva may look cheap vs the UK life sector, trading on 2018e P/E of 10.1x (vs UK life at 11.6x), it trades broadly in line with European Composites (at 10.5x), and offers an in-line dividend yield of c.5%. We prefer AXA and Generali, which trade on 8.4x and 9.5x respectively despite offering better growth potential. Hold rating reiterated."
ConfusedInvesta
08 Mar 2018
Re: Dividend I read this in a post below"Capital returns will be delivered either through buybacks, special dividends or liability management."Does that mean they will not be paying the standard Interim and Final Dividend now ?
b-n-p
08 Mar 2018
Re: Dividend Some people expect too much. A 20% increase in divi, good growth prospects and 5% plus yield is OK for me.I just added 10% to my holdingsDYOR
