UK Markets closed

What to Watch: Shake-up at Aviva, high cheer at Mitchells & Butlers, and Fevertree sales warning

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
The Aviva logo sits outside the company head office in the city of London, Britain March 7, 2019. Photo: REUTERS/Simon Dawson

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Shake-up at Aviva

Aviva (AV.L) has announced plans to split the business into five divisions and sell-off its Hong Kong operation.

The insurer said Wednesday the company would be divided into five operating divisions: investments, savings, and retirement; UK life; general insurance; Europe life; and Asia life.

Aviva’s Hong Kong joint venture, Blue, will also be sold to Hillhouse Capital. Its businesses in Vietnam and Indonesia could also be sold off.

The restructuring forms part of Aviva’s turnaround under new chief executive Maurice Tulloch, who also announced plans to cut costs by £300m by 2022.

“I am committed to running Aviva better,” Tulloch said. “We will be more commercially focused, manage costs rigorously and be more disciplined in how we invest.

“We will excel at the basics, giving customers a simpler, faster and more convenient service.

“Getting these fundamentals right will result in a simpler, stronger, better Aviva, while also improving returns for shareholders.”

Citi analysts James Shuck and Andrew Baker said: “There is a lot of underlying detail to work through but fundamentally Aviva strategy calls for a slow burn story that requires consistent execution vs. the more aggressive action regarding the shape of the group that some were hoping.”

Shares were down 3.9% in early trade.

High cheer at Mitchells & Butlers

Shares in Mitchells & Butlers (MAB.L) surged 6.8% after the pub and restaurant group bucked a wider dining downturn to post strong sales.

The owner of All Bar One and Harvester saw like-for-like sales jump 3.5% in the year to September, despite “challenging market conditions” impacting the pub sector.

Pre-tax profit for the year rose by 36% to £177m for the 12-month period.

Phil Urban, chief executive of Mitchells & Butlers, said: “These strong results reflect the work we have done over the last few years, first to build sustained sales growth and then to convert that into profit growth.

“It has been extremely encouraging to see an improvement in like-for-like sales growth across the portfolio during the year, fuelled by our Ignite programme of work.

“This puts us in a stronger position as we move forward into the next financial year, in what we expect to remain challenging market conditions.”

Fevertree sales warning

Fevertree (FEVR.L) investors ignored warning about slower sales in supermarkets and focused on encouraging signs in the US after an update on Wednesday.

The tonic maker warned full-year sales are set to be lower than previously expected, blaming poor supermarket and off-licence sales.

However, the company said it has continued to “perform well” in UK bars, pubs and restaurants, after gaining a number of new accounts. CEO Tim Warrillow also flagged promising signs in the US.

“We continue to see growth across all four regions,” Warrillow said. “Indeed, sales accelerated in our key growth markets of the US and Europe.

“Fever-Tree’s progress in the US is particularly encouraging and the signing of a US bottling partner is a further step in building our operations in this exciting market.”

Shares in Fevertree were up 5.3%.

Kingfisher sales slide

Stock in B&Q-owner Kingfisher (KGF.L) crashed over 7% after reporting sliding sales and warning of a painful turnaround ahead.

New CEO of B&Q Thierry Garnier said there was “much to do” to turn around the group’s fortunes as he reported “disappointing” third quarter sales figures.

B&Q’s UK and Ireland like-for-like sales down 3.4% in the quarter to October 31. Sales in France also remained under pressure, falling 6.1%, with a 5.2% drop for its other international operations.

“We are suffering from organisational complexity, and we are trying to do too much at once with multiple large-scale initiatives running in parallel,” Garnier said.

“Altogether, this has brought disruption to sales and has distracted the business from focusing on customers.”

The group warned trading would remain tough for the final quarter across all its operations.

Markets slide

European markets slid into the red on Wednesday after a buoyant day of trade on Tuesday.

“Donald Trump seems to have gone back on the offensive overnight – threatening to raise tariffs even higher if a trade deal with China cannot be agreed,” AJ Bell investment director Russ Mould said. 

“This spooked investors in Asia and fed through to performance on Wednesday morning, with the FTSE 100 taking a step back in early trading.”

The FTSE 100 (^FTSE) was down 0.8%, Germany’s DAX (^GDAXI) was down 0.9%, France’s CAC 40 (^FCHI) was down 0.7%, and the Euronext 100 (^N100) was down 0.6%.

Overnight in Asia, Japan’s Nikkei (^N225) closed down by 0.6%, the Hong Kong Hang Seng Index (^HSI) was down by 0.7%, and China’s Shanghai Composite (000001.SS) closed down by 0.7%.

What to expect in the US

US stocks futures are pointing to a lower open amid threats of a trade war escalation. S&P500 futures (ES=F) were down by 0.2%, Dow Jones futures (YM=F) were down 0.3%, and Nasdaq futures (NQ=F) were down 0.4%.

38 companies are reporting in the US later today.