Aviva’s rise as strong results fuel optimism

Aviva’s (AV.) full-year results came in ahead of expectations, with operating profit rising 20% to £1.8bn, surpassing the £1.7bn forecast.

The insurer continues to reward shareholders, announcing a final dividend of 23.8p, lifting the full-year payout by 7% to 35.7p. While the Solvency II ratio edged lower to 203% from 207%, the group remains well-capitalised. Aviva has also reaffirmed its commitment to dividend growth, targeting mid-single-digit increases going forward. This stability, combined with strong business momentum, reinforces the stock’s appeal as a reliable income play.

With an ambitious £2bn operating profit target set for 2026, Aviva is positioning itself for further growth. The combination of strong financial performance, a clear strategy, and shareholder returns has supported recent share price strength. Investors welcomed the results, with shares rising 2.3% in early trading, reflecting confidence in the company’s outlook.

Babcock upgraded to ‘Buy’ as defence boom gains momentum

Berenberg has raised Babcock’s (BAB) rating from ‘Hold’ to ‘Buy’, citing a decade-long rearmament cycle set to drive earnings growth at an “incomparable” level to the past 30 years. A projected $686 billion increase in European defence budgets by 2035, alongside a shift toward European-made equipment, could significantly boost order intake.

Despite recent gains, Babcock remains attractively valued relative to its peers. With consensus estimates seen as too low and long-term defence spending momentum building, the company looks well-placed to benefit from a structural shift in European military investment.

Balfour Beatty shares drop as CEO transition unsettles investors

Balfour Beatty (BBY) has named Philip Hoare as its next CEO, succeeding Leo Quinn, who will step down later this year after more than a decade leading the company. Quinn’s tenure saw a dramatic turnaround, with Balfour Beatty shifting from financial struggles to a strong cash position, returning £755 million to shareholders since 2021.

Hoare, currently COO at AtkinsRéalis, brings extensive experience in engineering, project management, and infrastructure. His leadership at Atkins drove significant growth, making him a logical choice to steer Balfour Beatty forward. Investors will now watch closely to see how he builds on Quinn’s legacy, particularly in maintaining financial strength and securing major projects.

Despite the short-term market reaction, Balfour Beatty remains well-positioned, backed by a strong order book and a balance sheet that has shifted from heavy net debt to substantial net cash. With infrastructure demand rising, the company’s next chapter under Hoare’s leadership will be one to watch.

Costain reports strong performance and record future project pipeline

Costain (COST) has delivered a strong financial performance for FY 2024, reporting a slight decline in revenue to £1,251 million, down 6.1% from £1,332 million in FY 2023. This drop was largely due to the timing of contract starts and completions in the transportation sector, though the company saw growth in its natural resources sectors.

Looking ahead, Costain is optimistic about the years to come, with expectations of continued growth in FY 2025 and 2026, and a potential step change in performance in FY 2027. The company remains on track to deliver its target adjusted operating margin of 4.5% in FY 2025, aiming for over 5.0% in the longer term. Costain’s strong cash position, robust order book, and strategic market positioning leave it well-placed to navigate macroeconomic uncertainties while delivering value for shareholders.

ITV’s strong results propel share price higher

ITV’s (ITV) share price surged last week following impressive full-year results for 2024, which showcased significant growth across the business.

The broadcaster also announced that ITVX’s cumulative investment will be recouped by the end of 2025, earlier than expected, signalling continued success in its streaming venture. ITV’s ongoing efficiency programme has also delivered £60 million in savings, helping maintain profitability and margin expansion. The strong performance of ITV Studios, despite external challenges like the US writers’ and actors’ strikes, further contributed to the company’s solid results. Popular content like Mr Bates and The Voice helped sustain growth in high-margin format and catalogue sales.

Looking ahead, ITV’s outlook remains robust, with further growth expected in ITV Studios and digital revenues. The company remains on track to hit £750 million in digital revenues by 2026, supported by strong content pipelines for platforms like Disney+ and Netflix. With a £190 million dividend proposed and continued cash generation, ITV’s strong financial health and successful transformation have positioned it well for future growth, driving confidence and a positive share price reaction.

Kier shares drop despite revenue and profit growth

Kier Group (KIE) delivered solid half-year results, reporting revenue growth of 5% to £2.0bn and an adjusted operating profit increase of 3% to £66.6m.

Despite these positives, the shares plunged, raising concerns among investors. A key issue may be the £49.8m free cash outflow, a sharp deterioration from the prior period’s £7.9m outflow, reflecting a return to normal seasonal working capital movements. Additionally, while the order book grew, Kier operates in an industry where cost pressures and contract risks can erode profitability, especially with 40% of projects on fixed-price contracts. The market may also be questioning the sustainability of Kier’s growth given broader economic uncertainty and potential shifts in UK government spending post-election.

With 98% of FY25 revenue secured, Kier remains well-positioned, but investors appear to be focusing on cash flow concerns rather than headline growth. The company’s reliance on public sector contracts could also be weighing on sentiment, particularly given the ongoing pressures on government budgets. While management remains optimistic, the share price reaction suggests the market wants to see more than just order book growth—it needs confidence that profits will translate into strong, sustainable cash flows.

Morgan Advanced Materials shares drop as tariffs weigh on outlook

Morgan Advanced Materials (MGAM) reported a mixed set of full-year results, with revenue slipping 1.3% on a reported basis but showing 3.7% organic growth at constant currency.

Adding to the pressure, new tariff implications have introduced further uncertainty, particularly for Morgan’s global supply chain. While the company’s simplification programme aims to drive cost savings and return margins to 12.5% in 2025, management acknowledged that demand in several end markets remains uncertain. The guidance for 2025 reflects caution, with a mid-single-digit organic revenue decline expected. Despite the challenges, free cash flow improved slightly to £15 million, and a share buyback programme is progressing, offering some reassurance to investors.

The weaker demand outlook weighed on the stock, which fell as investors reassessed growth prospects in a tougher macroeconomic environment. Morgan remains committed to its long-term strategy of targeting high-growth markets such as aerospace, fire protection, and clean energy, but near-term headwinds—including tariffs and semiconductor market softness—pose significant challenges. The company continues to focus on innovation and efficiency to support profitability, but with geopolitical factors adding to uncertainty, investors will be looking for clearer signs of recovery in the coming quarters.