On Wednesday, the FTSE 100 was firmly in the red as concerns about the UK and Chinese property markets dragged on the index. Sharp declines for St James’s Place and Reckitt Benckiser compounded negative sentiment.

The FTSE 100 was down 0.65% at the time of writing.

“Housing woes are front and centre today as investors reflect on the difficulties of UK housebuilders and a deepening property crisis in China. The FTSE 100 has been on the back foot in early trade, with little to ignite a wave of buying, as investors also await a key inflation report stateside,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown

“Housebuilder Taylor Wimpey has underlined the pressure high borrowing costs have put on sales rates, while inflationary winds have whipped up costs.  Shares fell in early trade as investors digested the 49% plunge in annual profits but also the prospect of clouds staying low over the housing sector in the coming months. The outlook has disappointed with the company expecting a further fall in completed home sales and the squeeze on profit margins continuing.”

Taylor Wimpey shares were down 2.2%, dragging Persimmon 1.4% lower with them.

However, the major weight on the index was China’s property market. Miners fell as further bad news from the world’s second-largest economy cast doubt over the demand for natural resources.

“China’s property house of cards has wobbled again as the woes of another huge real estate developer Country Garden come into sharp focus. A liquidation petition has been filed against it in Hong Kong by one of its creditors, Ever Credit Limited. The development threatens to reignite concerns about the fragility of the sector and cast doubt on efforts made by authorities to shore it up and stop contagion,” Streeter said.

Anglo American was down 2% and Rio Tinto dropped 0.8%.

St James’s Place and Reckitt Benckiser

Following the release of full-year results, St James’s Place and Reckitt Benckiser were the biggest fallers on Wednesday.

St James’s Place cut its dividend after recording a £426m provision for increasing complaints. The wealth manager’s assets under management grew, but investors were clearly distraught with the dividend slashing. St James’s Place shares were down 28% at the time of writing.

Reckitt Benckiser shares fell 11% after announcing revenue that missed expectations. Higher costs and lower sales resulted in materially lower operating margins. Volumes fell as customers shunned the group’s premium brands in favour of budget options amid the cost of living crisis.

St. James’s Place is a shell of its former self. The business model that enriched the company with high fees for managing individuals’ wealth has come crashing down around them, culminating in a dividend cut and a loss for 2023.

Today, the company issued its results for the year ending 31 December 2023, highlighting the impact of £426m redress provisions, which have entirely wiped out profits after tax.

St. James’s Place shares were down 28% at the time of writing and, at 442p, are worth around 25% of the stock’s all-time highs.

The company has set aside a substantial amount for customer complaints as regulatory pressure increases on high fees and the quality of advice services.

In the context of the FCA’s push to improve outcomes for retail investors, St. James’s Place’s struggles as a business represent a fairer and better value wealth management market for UK savers.

St. James’s Place has been criticised for unfair charges, including prohibitive exit fees.

Wealth firms have been found to fail customers in terms of ongoing customer service, and this accounts for a large proportion of the redress set aside by the company today.

“The Cash result for the year of £68.7 million (2022: £410.1 million) has been significantly impacted by an assessment into the evidencing and delivery of historic ongoing servicing and the provision we have established for potential client refunds,” said Mark FitzPatrick, Chief Executive Officer.

“This work was undertaken following a significant increase in complaints, particularly in the latter part of 2023, mostly linked to the delivery of ongoing servicing.”

The post-tax Cash result of just £68.7 million was significantly impacted by a one-off £426.0 million pre-tax provision for potential client refunds related to historical service evidencing and delivery.

Net inflows fell to £5.1bn as assets under management grew to £168bn compared to £148bn in 2022 due to higher asset prices. The problem for St. James’s Place is the level of fees they will able to generate from assets under management in the future.

A major blow for investors is the slashing of dividends.

SJP has declared a final dividend of 8p per share, bringing the total dividend for 2023 to 23.83p per share. This is down from 52.78p in 2023.

In the future, SJP has revised its dividend policy to set total annual shareholder distributions at 50% of the full-year Underlying cash result. Such a policy will likely lead to much lower dividends on an ongoing basis.

Reckitt Benckiser’s 2023 full-year results are a blow to investors. Expectations were conservative, yet the company missed revenue guidance, and shares fell accordingly.

The company was expected to generate £14.75bn revenue in 2023. However, the impact of the cost-of-living crisis meant the owner of brands including Strepsils, Nurofen, Durex, and Dettol, only brought in £14.61bn.

In percentage terms, the miss wasn’t amazingly drastic, but this is a low-margin business reliant on high volumes.

The impact of higher input costs and lower-than-expected revenues devastated operating margins which fell by 5.2% to 17.3%. Diluted EPS fell 29.6%.

“Shareholders of Reckitt Benckiser will be disappointed with this morning’s Q4 earnings update, as the consumer goods retailer missed net sales expectations for the period, citing weakness in cold and flu season products, managing only minimal net revenue growth of 3.5%,” said Mark Crouch, analyst at investment platform eToro.

Reckitt Benckiser shares were 10% lower at the time of writing and were approaching the lows of the pandemic.

The company has been seen as a safe haven traditionally but Reckitt’s is rapidly losing this categorisation as consumers shun expensive brands in the face of rising prices.

The pricing gap between budget options and Reckitt’s premium offering is growing while the perception of quality is narrowing. This is a big problem for a company that needs growing sales to support profitability.

“So much for the idea that big brand owners are bulletproof during periods of higher inflation. It’s clear from industry trends that cash-strapped consumers have shifted to cheaper alternatives including supermarket own-brand items,” said Russ Mould, investment director at AJ Bell.

“As the owner of a large portfolio of well-known brands, Reckitt has found life a lot tougher and its latest results suggest its pricing power isn’t as strong as some people thought. The idea that it can keep pushing up prices without damaging demand has gone out the window as its fourth quarter numbers are truly miserable. It looks like people are voting with their feet and going for the cheaper option.

“Reckitt’s results are plagued by a multitude of problems. Sales volumes fell 4.3% in the fourth quarter which is a worrying sign for the company. It reported declining health sales, a big drop in nutrition revenue and revealed that some employees had been up to no good with regards to accounting issues in the Middle East. For a company that was once seen as an industry leader, Reckitt has been a big disappointment in recent years and the latest results keep that theme going.”

Taylor Wimpey shares were firmly lower on Tuesday after the housebuilder announced 2023FY results and said the first half of the current year would see lower margins due to pricing pressure.

Against the backdrop of rising mortgage rates and a cost of living crisis, Taylor Wimpey’s revenue fell 20% to £3.5bn, and operating profit sank 49% to £70m.

“Taylor Wimpey’s put in a relatively resilient showing given the difficult market conditions of 2023. Full-year operating profits came in at the top end of group guidance, but this still represents a roughly 50% fall from the prior year’s levels,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

Taylor Wimpey shares were down 3.5% at the time of writing.

Investors will hope the worst conditions of the current UK housing market cycle are behind us, with mortgage rates showing signs of improvement and early signs of buyer interest picking up.

Indeed, the company is confident 2024 will generate a similar level of completions as 2023. Taylor Wimpey is targeting the completion of 9.5k to 10k homes in 2024 which is only marginally lower than the 10,766 homes completed in 2023.

“A combination of real house price declines and lower mortgage rates have helped to ease some of the affordability pressures for buyers since the beginning of 2023, and these trends appear to have carried into the new year. According to Rightmove, the first six weeks of 2024 saw a 7% increase in buyer enquiries year-on-year,” Chiekrie said.

Although there are some indications of improvement, the slowdown in the UK housing market last year was material, and we are not entirely out of the woods in terms of higher mortgage rates, with many lenders increasing rates in recent days.

The drop in the share price today will reflect not only the cloudy outlook for the market but uncertainties around a CMA investigation announced within a week, which could curtail margins further.

Despite the gloomy reaction in shares today, there may be positive developments for Taylor Wimpey at next week’s budget. Reports suggest the UK government could be looking at 99% mortgages – a measure that will surely fire up demand for new homes.

“The potential introduction of a 99% mortgage is a significant boom for the housing market, particularly since many of Taylor Wimpey’s buyers are first-time buyers,” said Yanmei Tang, Analyst at Third Bridge.

The FTSE 100 lacked direction on Tuesday as positive sounds from China helped support mining companies, but a disappointing update from Croda and weakness in Imperial Brands acted as a counterweight.

London’s leading index traded in a remarkably tight range of around 20 points on Tuesday, with little fresh news to fire traders up.

“The FTSE 100 ticked higher on Tuesday, despite modest losses on Wall Street overnight, as markets found a moment of calm after a series of big macro-economic and corporate announcements,” said AJ Bell head of financial analysis Danni Hewson.

“Mining companies did a lot of heavy lifting for the index, as leading commodities consumer China took steps to bolster confidence in its currency and economy ahead of a big leadership summit which kicks off in Beijing in early March.”

Anglo American was the top gainer, with a rise of 2.5%, while Antofagasta added 1.7%. The promise of measures by China to support its economy is starting to wear thin, and the gains in miners failed to spark a substantial FTSE 100 rally.

The benign trading conditions may not last long. Big US economic data points due for release later this week may provide insight into how the Federal Reserve approaches its next interest rate decisions and spur positioning in equity markets.

“Later tonight a reading of US consumer confidence starts the gun on some big releases across the Atlantic. These could offer insight on whether a soft landing can be engineered for the US economy,” said Danni Hewson.

“The latest estimate of fourth quarter GDP follows on Wednesday, and on Thursday the core PCE reading of inflation is published. This metric is closely followed by the Federal Reserve when it comes to making decisions on interest rates.”

Imperial Brands

Threats of a vaping tax hit, reported by the Times, hit Imperial Brands on Tuesday, sending the shares 3.5% lower. Vapes are taxed differently from tobacco products, and reports suggest this could change in next week’s budget.

Imperial Brands has made a big push in vaping products and is much more exposed than peer British American Tobacco, whose shares fell only 0.25%.

“Although the industry is jostling for position in the vaping market, given the volumes declines in tobacco, these products are still a relatively small part of the picture. Investors had also been expecting greater regulation in the sector, so a potential increase in tax isn’t a wild surprise and given they are global companies a change in UK fiscal policy won’t move the dial too much,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Croda was the FTSE 100’s biggest casualty after reporting an 18% decline in sales in 2023. Croda was down 5% at the time of writing.

SaaS-based retail technology platform developer itim Group (LON: ITIM) has won a five-year, multi-million pound contract with fashion retailer QUIZ Clothing. This deal provides an opportunity to attract other fashion retailers. The Retail Suite product will be rebranded as UNIFY. The share price jumped 62.8% to 35p.

Plant-based polymers supplier Itaconix (LON: ITX) generated revenues of $7.9m in 2023, up from $5.6m, with Europe growing strongest as new detergent customers were gained. Cleaning sector ingredients achieved revenues of $7.2m due to their performance and sustainability. Net cash was $10m at the end of 2023. The share price recovered 25.5% to 160p. This is the highest the shares have been since September.

Silver Bullet Data Services (LON: SBDS) has extended its contract with Mars Petcare and the deal is worth $2.3m. The original deal was three years ago. Additional services include customer experience activation, data management and data insights. The share price rose 14.1% to 182.5p.

Microbiome-based treatments developer OptiBiotix Health (LON: OPTI) continues to increase its number of partners and is actively managing the existing key accounts. Investment in e-commerce meant that sales from this area were 287% higher in 2023. The overall product range is being rationalised and new products added, including SlimBiome soup. Sweetener SweetBiotix has been included in its first product which is about to be launched. DSM-Firmenich has forecast potential demand for SweetBiotix of more than 100,000 metric tonne/year. That is a suggestion of the opportunity. The share price increased 11.1% to 25p.

FALLERS

United Oil and Gas (LON: UOG) has raised £1m at 0.2p/share, having originally sought £900,000. A subdivision of the shares is required to reduce the par value so that the shares can be issued at this price. The cash will be spent on developing the exploration licence in Jamaica and fund costs while a farm-out partner is secured. There is interest from several interested parties. The share price is 38.6% lower at 0.215p.

Shares in electric drivetrain developer Saietta Group (LON: SED) continue to decline as it seeks to secure additional finance before the end of March. Having failed to secure an electrical steering pump contract manufacturing opportunity and it may sell the relevant production line for £600,000. That would help its short-term financial position. The share price dived 38.3% to 0.5p.

Bricks and construction products supplier Brickability (LON: BRCK) has been hit by weak demand. That is in line with other companies in the sector. This weakness is likely to continue into the year to March 2025, but January acquisition TSL Assets will make a full contribution. Brickability remains highly profitable in tough times. Cavendish has reduced its 2023-24 revenues expectations by 7% to £585m, while the pre-tax profit estimate is 8% lower at £35.2m. The 2024-25 pre-tax profit figure is reduced by 4.5% to £37m. The share price had been on an improving trend, but it fell back 11.7% to 67.5p.

Poor weather conditions in the US hampered trading in the autumn at online betting company Webis Holdings (LON: WEB). Interim turnover declined from $6.23m to $5.9m, while the loss increased from $330,000 to $540,000. Management is hopeful that trading will improve in the spring, helped by investment in marketing. There could be partnership or merger opportunities. The share price declined 3.85% to 1.25p.

Premier African Minerals shares were trading water at the time of writing on Tuesday as investors attempted to make sense of an announcement released yesterday that raised questions about the company’s Zulu lithium project.

The lithium miner announced a brief and bizarre update on their Zulu project yesterday, which cast doubt over whether the company would meet production targets in February. Given the plant is not yet fully operational, it seems unlikely targets will be met.

The Premier African Minerals saga has unfolded over many months and the end of February lithium production target has been eagerly anticipated. 

“Premier is both encouraged and simultaneously frustrated as much by the fact that the newly installed mill exceeds expectations and by a number of system and control issues that are interrupting operations right now,” said George Roach, CEO.

“Premier expects the plant to operate continuously, as previously announced, before the end of February 2024.”

Premier African Minerals shares were down 2.5% at the time of writing but had been positive earlier in the session.

Under the terms of an offtake agreement with partners Canmax, Premier is required to produce 1,000t of 6% lithium offtake per month.

This target is yet to be met and the agreement stipulates penalty payments to Canmax, and even the issue of equity in the Zulu project, should Premier not meet the targets. 

Canmax has so far been supportive. Whether they continue to be so remains to be seen.

Premier said they will release another update before the end of February which could be explosive.

HSBC has reiterated its ‘reduce’ rating on the recently rebranded Spirax Group. Equity analysts at HSBC reiterated their view on Spirax Group, previously known as Spirax- Sarco Engineering, ahead of full year results due 7th March.

HSBC Global Research sees little growth for the engineering group over the last year as Spirax’s Steam Specialities business falters and FX headwinds impact income.

HSBC analysts have an 8,400p price target on Spirax, significantly below the current 10,380p share price.

Although analysts see low single-digit revenue growth in the year ahead, they feel the stock is too expensive at 32x 2024 PE estimates.

In a trading statement released in November, Spirax said they were experiencing weak demand from Semiconductor Wafer Fabrication Equipment and Pharmaceutical & Biotechnology sectors.

Smith & Nephew reported robust revenue growth in 2023, driven by the company’s innovation strategy and early progress on its strategic 12-Point Plan.

Full year revenue was $5,549 million, up 7.2% on an underlying basis from 2022. This growth exceeded the company’s initial guidance and was led by double-digit gains in Sports Medicine & ENT and a strong performance in Advanced Wound Management.

Smith & Nephew shares were 4% higher at the time of writing.

The growth reflects the strength of Smith & Nephew’s portfolio, with new product introductions driving gains across all three business units. In particular, the company’s investments in innovation have yielded a strong pipeline of new products that are expected to sustain growth momentum going forward.

“British medtech Smith & Nephew hasn’t delivered any curveballs in full-year results today. There was broad based growth across all business units and geographies and it was pleasing to see a strong performance from the cutting edge CORI robotic surgery platform,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

For 2024, Smith & Nephew expects to deliver underlying revenue growth in the range of 5-6%, driven by the ongoing benefits of its strategic initiatives. The 12-Point Plan, announced in 2022, aims to accelerate growth by prioritising investment in key areas such as advanced technologies and productivity improvements.

Investors will be encouraged by early progress on the 12-point plan has started to translate into improved financial results, according to management. Combined with Smith & Nephew’s robust new product pipeline, the strategic actions position the company to achieve sustainable higher growth over the long term.

“Following an extended period of underperformance, Smith & Nephew set out a “12 point plan” to shareholders last year in a bid to improve productivity, strengthen profit margins and overhaul the company’s orthopaedics group which has seen its market share begin to slip in recent years. This morning’s earnings report suggests the plan is starting to pay off,” said Mark Crouch, analyst at investment platform eToro.