Hard work starts now for Aviva boss, moment of truth for Cineworld

“The FTSE 100 was modestly lower in early trading as weakness in the mining sector overshadowed some decent UK economic data,” says AJ Bell financial analyst Danni Hewson.

“However, the index remains above the 7,200 mark and is in touching distance of yesterday’s post-pandemic highs. Rio Tinto shares slumped heavily as they traded without entitlement to a pretty generous dividend.

“For now there appear few big catalysts to shift the index in either direction amid a lull in major corporate and economic updates – however that’s often when something emerges from leftfield to upset the apple cart.”

Aviva

“The hard work starts here for Aviva CEO Amanda Blanc. The latest in a series of chief executives to attempt to turn around the insurance firm – she has impressed so far by very rapidly jettisoning Aviva’s non-core operations.

“However, this was low hanging fruit and now this process is pretty much complete – and the cash returns to shareholders have been more or less confirmed – attention is likely to switch to the performance of the remaining core business.

“This makes worse than expected first-half profits a bit of a problem. For now investors seem relatively forgiving of the misstep, but if Aviva were to start making a habit of it, they might not be quite so forgiving.

“The reason behind the weaker than forecast showing is weakness in the bulk annuity market – where pension schemes buy an insurance policy to cover future pensions and benefits due to be paid to its members.

“It helps when this bitter pill on profit is sweetened by a very chunky return of capital, though still short of what activist investor Cevian had been pushing for since it joined the register of shareholders in June.

“The presence of Cevian means there is little chance of Blanc resting on her laurels and they are likely to keep her feet to the fire as they look for progress on driving down costs.”

Cineworld

“Cinema operator Cineworld and its wider industry are approaching a moment of truth as restrictions are being eased.

“Will audiences return in greater numbers or will the changes in film distribution brought about by the pandemic and people’s concerns about sitting with lots of other movie-goers inside for two hours mean a permanent reduction in numbers?

“In this context Cineworld may have its eyes fixed on Los Angeles Superior Court where Scarlett Johansson is suing Disney over the release of Marvel film Black Widow. She argues they went back on an agreement for the film to have an exclusive cinematic release rather than launching it on their Disney+ platform at the same time.

“She is taking this action for self-interested reasons as her salary is linked to box office receipts, which dropped dramatically after the opening weekend as many people opted to watch at home.

“However, cinemas too will be nervous if the major studios – many of which like Disney now have their own streaming platforms – decide to pursue this policy as a matter of course as we emerge from the pandemic.

“Historically, cinema has proved pretty resilient, seen as an affordable form of escapism through the ups and downs of the economy since its inception and eventually batting off the threat posed by the emergence of home video in the 1980s

“Cineworld is predicting a strong recovery in its fourth quarter, having seen a gradual return of audiences since covid rules were relaxed or removed in its core UK and US markets in late July. However, the company is still burdened with an extremely large debt pile and it will be hoping that the crisis it has endured over the past 18 months doesn’t have a sequel.”

Intended for use by journalists only, not to be relied on by consumers.

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