More earnings season numbers dropping into the hopper, so a quick move through three I have given views and opinions on over recent months… Back in March, I completely geeked out on Aviva (AV.), concluding that 'Plus points: below book and a 7% dividend it appears to have the cash flow to sustain. The negative points: analytical complexity and a range of unknown scenarios. Perhaps the better way to view it is as a geared play on the UK market'. As a call, the latter point was the all-critical one, with the share lurking down akin to the broader market in the last few weeks.
The first half numbers are very much a work-in-progress for the newish CEO who still fancies his chances of turning this one around. So cue the 'performance is mixed' comment as operating EPS rose only 2% and if you look at the life insurance and asset management divisions then operating profits declined. Still - as I noted at the last link - the balance sheet remains strong and Aviva feels able to hike the interim dividend by 3% whilst also observing a 'capital surplus of £11.8bn and £2.3bn of cash at group'. Now insurance accounting is complex as aforementioned but the point is reasonable that Aviva has some resources to fall back on. And change continues apace. Supplementing the previously announced UK business evolutions, the company said that it is reviewing strategic options for its Asian operations. Aviva is - unsurprisingly - never going to be a big name in these regional markets and a bit more focus is value-enhancing. More details on all this in an upcoming investor day in November but my previous call remains firm: so much better than buying FTSE-100 units.
I see that Cineworld (CINE) is still frothing about the potential of its big US push/expansion. I remain a long-term bear - inline with my views on the stock last shared in March - and the stock has declined since. The numbers here are a rum mixture of hope and excitable 'adjusted' statistics. The big problem remains debt which, despite being apparently 'ahead of schedule', is still a cool x3.3 'adjusted' ebitda. And it is the 'adjusted ebitda' number which struck me as most interesting in the numbers with an 11% year-on-year fall in this metric apparently due to a shabby film release schedule. Nevertheless apparently there is a 'compelling slate' for H2 and the hope of a big refurbishment push over the next year. Well good luck with that boys. I was listening to the Disney conference call a couple of days ago and its November launch of its streaming channel - with all sorts of cinema-alternative content on there - is indicative of the evolving world in this space. I also note that the debt reduction was nicely funded by an equivalent sized sale of property. I still do not mind going now and again (aka about twice a year) to my local Cineworld...but I am still not all over the shares. Sell/avoid.
And finally my old pal Funding Circle (FCH), which I last wrote on in early July. I had to smile at the line in the release which noted 'Group segment adjusted EBITDA of £1.2m (H1 2018: £3.3m) with margin of 1% (H1 2018: 5%)'. Yes, life is getting tougher as the building lunacy of its business model becomes more and more obvious. The share might have fallen from 4 quid earlier this year to a Poundland-friendly share price now but you do not need to get involved...unless you are a desperate business who really, really needs finance and the mainstream banks have prudently turned you down already. For the rest of us, grab some popcorn and watch the ongoing post-IPO car crash.
Filed under: Aviva, Cineworld, Funding Circle, Quindell fraud, Rob Terry, Mark Ford, Woodford, G4S
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