Home Estate Planning The week that was: St James’s Place and Reckitt lead painful few days for the City

The week that was: St James’s Place and Reckitt lead painful few days for the City

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A week in which 50 firms posted their final results was always going to produce some news. And news there certainly was as St James’s Place, Reckitt and Halfords shed billions in value and a fresh crop of firms fell into the sights of private buyers.

The trio were forced to issue profit warnings to the market and sparked a mass sell-off in shares, while others took investors off guard by revealing unexpected success.

All the while, the worrying trend in which bargain-hunting buyers look to London’s lowly valued firms accelerated, with three British businesses falling into the sights of private suitors.

Here is a breakdown of the moments that matter from a week of noise in the Square Mile.

Bad news comes in threes:

Wednesday 28 February will either be remembered as an omen of a grim future for UK plc, or stick out as an anomalous blip. Three very different blue chips—St James’s Place (SJP), Halfords, and Reckitt—all posted dismal results on ‘hump day’, and all for very different reasons.

An eye-watering £1bn was wiped off St James’s Place’s valuation in a day of trading after the wealth manager announced it had ringfenced £426m to deal with the mounting cost of a spate of customer complaints.

Investors felt the pain as new CEO Mark Fitzpatrick warned that efforts to deal with complaints and an overhaul in its fees would weigh on growth in the years ahead.

Bosses were finding life equally difficult at Durex-owner Reckitt, as inflationary pressures dragged its full-year numbers below analyst’s expectations.

Revenue and profit were both substantially down on 2022, triggering a 12 per cent fall in its share price. The condom maker’s customers might be able to empathise with the “unsatisfactory performance” alluded to by chief Kris Licht. But the more pertinent question is whether its shareholders will.

Another firm to turn heads last week was Halfords. The high-street cycling and car retailer posted an unexpected profit warning after lower-than-expected sales.

Excuses given by bosses ranged from an uptick in consumer credit delaying sales to the “unusually mild but very wet weather” meaning no one was washing their cars or buying winter products. Some analysts have pointed to this being the inevitable fall after the firm’s impressive performance over Covid, however.

The purple patch was in part the result of free-spending consumers being overly optimistic about the prospects of their new–and, in hindsight, short-lived–cycling hobby.

The winners:

No such COVID hangover was evident at British Airways owners IAG, however, after it posted record results on Thursday (29) thanks to the alacrity with which holidaymakers have returned to the skies. Profit at the group more than doubled to €3.5bn last year, with the UK’s national carrier doing the brunt of the heavy lifting for its parent company.

Footasylum was also able to point to a record-breaking 2023 in its results. The Rochdale headquartered shoe-seller, which is owned by German private equity firm Aurelius, saw its sales exceed £300m for the first time last year, thanks in part to a major roll-out of new UK and international stores.

Cheap as Brits:

Much has been said and written about the languid position in which UK equities find themselves. Barely a week goes by without another UK-based private company mulling a US listing, or a London-listed company mooting a switch to Frankfurt or the US.

A lack of liquidity in the market and a gloomy mood have weighed on valuations in the City. And, as night follows day, acquisitive, bargain-hunting firms have been on the hunt for cut-price deals.

However, boards were not in the mood to accept the first bid this week. A £3.1bn bid for Direct Line from Ageas was rejected by the company’s board despite valuing the company at 50 per cent higher than the market,

Logistics specialists Wincanton has also changed horses after initially backing a bid from French firm CMA CGM. Clipper Logistics owner GXO has swooped in with a higher bid and won the hearts and minds of the board.

And the battle to take over Currys unfolded further as Elliott Advisors had another bid rejected. Elliott’s latest offer values the high street electronics firm at up to 70p-a-share. 

The price at which shares were changing hands before any bids were made public? A lowly 46p.

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