The FTSE 100 was softer on Thursday as a raft of corporates updates disappointed markets and offset strong gains in CRH. A weaker session in the US overnight dented sentiment as Tesla sank 5%.

The FTSE 100 was trading down 0.15% at 7,901 at the time of writing. The German DAX was 0.35% weaker and French CAC was dead flat.

“Markets in the US ended down a little yesterday with the S&P 500 falling 0.47% to 3,951.39,and the NASDAQ composite following suit closing 0.66% to 11,379.48. The fall came as 10-year bond yields in the US climbed again, flirting briefly with the psychologically important 4% level,” said Derren Nathan, head of equity research at Hargreaves Lansdown

Beazley was by far the FTSE 100’s worst performer, down 10%, after the insurer said profit before tax nearly halved in 2022. A net investment loss wiped out any strength in their Cyber security business.

Taylor Wimpey followed Persimmon in warning of a tough trading environment in 2023 as higher mortgage rates curtail demand for properties. Taylor Wimpey was down only 0.5% after tanking in line with Persimmon yesterday.

CRH was the standout FTSE 100 performer as the construction company revealed a deft management of input prices with a 10bps increase in EBITDA margin. CRH shares were 10% higher.

CRH also said they were going to shift their primary listing to the US, a blow for the London Stock Exchange at the same time ARM Holdings said it has decided on the US for their listing.

“Now we’ve got the news from construction group CRH that it wants to switch its primary listing to the US. That would mean it no longer qualifies for inclusion in FTSE indices and therefore would leave the prestigious FTSE 100 index,” said Russ Mould, investment director at AJ Bell.

“There is logic to the move. A large chunk of CRH’s earnings come from the US, so that’s where it spends a lot of time both operationally and talking to investors. There is also the fact that it could get a higher valuation by trading on the US stock market which could come in handy if it wants to issue shares for acquisition deals. Plumbing group Ferguson did exactly the same thing.”

“Efforts to relax the listing rules to attract more companies to London come across as a bit desperate. It should be a badge of honour to list in the UK, but that reputation is dwindling fast. Overseas investors lost interest in the trading venue as soon as the UK voted in favour of Brexit, and valuations have got even cheaper. That’s hardly a good sales pitch to attract more big companies to the UK market.”

Taylor Wimpey is the latest UK housebuilder to reveal marginally higher revenue for 2022, but warned of challenging conditions in the year ahead.

Taylor Wimpey revenue rose 3.2% to £4,419m in 2022 but investor focus is on the year ahead, and falling reservations levels.

Taylor Wimpey’s results echoed Persimmon’s update this week in as far as they both experienced a poor Q4 but had experienced some improvement in sales rates in the early weeks of 2023.

“Taylor Wimpey’s posted strong results in a tough environment for housebuilders. Higher average house prices helped drive group revenues forward last year, but the picture’s not so pretty for this year,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“If current sales rates persist for the rest of 2023, full-year completions are expected to fall by around 30%, which would likely cause a big hit to profits. And while operating profits rose this year, tighter cost controls can only move the dial so far.”

Taylor Wimpey shares had given up just 0.4% of their value at the time of writing on Thursday having been dragged lower by Persimmons results yesterday.

Taylor Wimpey shares are up 15% higher year-to-date.

CRH, the construction company with operations in the Americas and Europe, has announced it will shift its primary listing to the US alongside strong performance for 2022.

While a 12% jump in revenue to $32.7bn and 13% increase in EBITDA to $5.6bn will be welcome news for investors, the decision to shift their primary listing to the US is a blow for London’s markets.

“So much for making London the go-to place for companies to list their shares. London Stock Exchange is having to work overtime just to keep those already listed, let alone attract new ones,” said Russ Mould, investment director at AJ Bell.

“This week has delivered a triple blow to the stock exchange operator. First, we had reports that Shell looked at shifting its stock market listing and headquarters to the US, although that doesn’t seem to be on the table now. Second, reports suggest that chip designer Arm will not return to the London stock market and instead opt for a US listing.”

“Now we’ve got the news from construction group CRH that it wants to switch its primary listing to the US. That would mean it no longer qualifies for inclusion in FTSE indices and therefore would leave the prestigious FTSE 100 index.”

CRH Results

Strong performance in North America and Europe drove higher revenues and the company has successfully navigated higher input prices by achieving a 10bps increase in EBITDA margin to 17.2%.

“Our 2022 performance reflects the outstanding commitment of our people, the underlying strength and resilience of our business and the continued delivery of our integrated, solutions-focused strategy,” said Albert Manifold, Chief Executive of CRH.

“Despite significant cost pressures throughout the year, we delivered further improvements in profits, margins and returns. Our strong cash generation together with our relentless focus on disciplined capital allocation has also delivered the strongest balance sheet in our history, providing us with significant opportunities for further growth and value creation going forward.”

The inclusion of recent acquisitions also helped drive performance and CRH said their pipeline of potential acquisitions was a factor in their decision to switch their primary listing to the US. CRH said they believe the availability of capital in the US would be preferential to remaining a FTSE 100 company.

ITV’s CEO called 2022 “a year of significant strategic progress” in which “ITV delivered a robust set of financial results.”

ITV’s group revenue rose 7% to £4,345m in 2022 with their studios business doing all of the heavy lifting. ITV’s studio business revenue grew 19% to £2,096m while Media & Entertainment revenue slipped 1% to £2,249m due to lower advertising spending.

However, the risk of ‘jam tomorrow’ saw shares slip as the company’s continued investment in their media and entertainment business caused EBITDA to fall 12% to £717m. ITV said the lower EBITDA was a result of investment in new content and ITVX.

ITV shares were 3% weaker at the time of writing.

“ITV continues to put in robust performance in the face of a challenging economic backdrop and ultra-competitive market,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“The Studios business, ITV’s content creation powerhouse, remains the golden goose putting in a record fourth quarter and delivering all the group’s top-line growth for the year. Strong content demand from streaming platforms means ITV’s expecting to see a bigger portion of sales from those customers over the medium term, expected to equate to around 30% of Studios revenue by 2026.”

ITV Studios is the creative studios behind productions enjoyed in over 13 countries and is increasingly producing content for streaming services such as Physical for AppleTV+ and Ten Year Old Tom for HBO Max.

Tekcapital portfolio company Innovative Eyewear has bolstered their range of smart eyewear with the launch of Titanium styles of Lucyd Lyte 2.0.

Lucyd’s smart eyewear allows users to connect to mobile applications in a safer hands-free manner using bluetooth. Since launching their wearable technology, Innovative Eyewear has partnered with global lifestyle brands Nautica and Eddie Bauer, and enhanced their distribution capabilities.

The new styles announced today brings the total number of designs in the Lucyd smart eyewear range to 15.

“With these five new styles of Lyte 2.0 smart eyewear, we are continuing to make the category more accessible than ever before, particularly to women and petite customers by giving them the sizing and styles they need,” said Harrison Gross, CEO of Innovative Eyewear.

“A great pair of smartglasses is defined by three key factors: fashion, tech and suitability for all-day vision correction. The Lyte 2.0 collection addresses this successfully by offering smart frames with seamless, user-friendly Bluetooth features, high-end designer styling in a large number of shapes and sizes, and the comfort necessary for all-day wear.”

The FTSE 100’s miners sprang back into action on Wednesday after the Chinese manufacturing grew at the fastest pace for over a decade in February.

The FTSE 100 was 0.9% higher after Chinese manufacturing purchasing managers index (PMI) jumped to 52.6 in February, up from 50.1 in January. A reading above 50 signifies an expansion.

Markets have been awaiting evidence a Chinese economy recovery was taking place after the lifting of COVID restrictions late last year. The latest PMI data confirms the world’s second economy is indeed on the front foot.

Rio Tinto gained 4.7% while Antofagasta added 4% and Antofagasta rose 3.9%.

“Miners helped lead the FTSE 100 higher on the latest Chinese manufacturing data which has positive implications in terms of commodities demand,” says AJ Bell investment director Russ Mould.

“Further evidence of the industry’s positive outlook could be found in results from mining services firm Weir which unveiled an impressive increase in its dividend and posted a record order book.”

“The strength in resources stocks helped make for a fragile housebuilding sector as Persimmon’s results created a stink and house prices continued to soften in the UK.”

Housebuilders fall

As Mould alludes to, it was a bad day for the UK housebuilders with Persimmon shares tanking around 10%, dragging the sector down with them.

Taylor Wimpey was down 3.8% and Barratt Developments shed 3.3% of their value.

“Persimmon’s continuing to feel the effects of a shaky housing market. While revenues increased this year thanks to higher house prices and a greater number of completions, the outlook’s not so rosy next year,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“If current sales rates persist for the rest 2023, full-year completions are expected to fall by more than 40%, which would take a huge bite out of revenues.”

Weir Group

Weir Group was the FTSE 100’s top riser after the mining engineering firm revealed record orders and a 21% jump in revenues in 2022.

“The value creation opportunity for Weir is compelling. The mining industry is playing a crucial role in meeting the twin demands for decarbonisation and economic growth, resulting in multi-decade demand growth for critical metals. Weir is the focused mining technology leader that is well placed to capitalise,” said Jon Stanton, Chief Executive Officer of Weir Group.

Weir Group shares were 8% higher at the time of writing.

The UK’s leading independent tissue converter, Accrol, has announced a mega deal with Unilever, which is one of the world’s largest consumer brands groups.

Accrol Group Holdings (LON:ACRL) is a leading tissue converter and supplier of toilet tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK’s leading discounters and grocery retailers across the UK.

The Group operates from six manufacturing sites, including four in Lancashire, which generate volumes totalling some 21.5% of the £2.5bn UK retail tissue market.

The step change deal with Unilever is to exclusively produce and sell a kitchen towel product under its Lifebuoy brand.

Lifebuoy is the third most-chosen FMCG brand globally, being picked by consumers more than a billion times a year.  With over 70% brand awareness amongst consumers in the UK, the Lifebuoy kitchen towel product is expected to expand Accrol’s offering to include those consumers who prefer to buy global brands but are seeking best-value.

Production of the Lifebuoy kitchen towel product requires no additional capital investment by Accrol.

Gareth Jenkins, Chief Executive Officer of Accrol, said:

“Last month, we laid out our strategic plans for the business, which included the expansion of the Group’s activities into higher margin, third party licensed brands. That Unilever has chosen Accrol to bring Lifebuoy kitchen towel to market is testament to the capability of our business and our increasingly strong reputation in the market.”

Analyst Opinion – Target Price of 60p

Wayne Brown at Liberum Capital rates the group’s shares as a Buy, with a 60p Target Price.

His estimates for the current year to end April are for £230m (£159m) sales and a pre-tax profit of £7.6m (£1.1m), worth 1.8p (0.3p) in earnings and enabling a 0.4p (nil) dividend per share.

For the coming year he goes for a sales standstill at £230m, but with £13.8m profits, 3.1p earnings and a 0.9p dividend.

Mike Allen and Rachel Birkett at Zeus Capital have £7.0m current year profit estimates and earnings of 1.8p.

For the 2024 year they go for £240.3m sales, £10.4m profits and 2.5p earnings per share.

Conclusion – a higher profile, a higher price

This is a clever deal and could well be highly impactive for the group over the next few years, especially if it is the first of a number of similarly high-profile licencing deals.

It really could help to lift the group’s profile significantly and hopefully seeing a corresponding rise in the shares which are now up 5% on the news at 32.5p.