Investors ditched shares in a quartet of FTSE giants on Thursday morning, recoiling at financial updates ranging from Royal Bank of Scotland’s £8.2 billion loss to Standard Life’s failure to justify its hefty share price premium.
RBS (RBS.L) was the biggest stinker, with shares slumping nearly 7% to 330p as investors couldn’t ‘get rid of their shares quick enough’, according to Marc Kimsey, senior trader at Accendo Markets.
Ross McEwan, chief executive of the 81% state-owned group, told the BBC’s Today Programme that it would take three to five years for the bank to recover after reporting 2013’s pre-tax profit loss of 8.24 billion. This was worse than the City expected, with analysts suggesting that RBS had paid for its faster-than expected ‘de-risking’.
RBS yesterday announced that it intended to sell its remaining 28% stake in Direct Line Insurance (DLGD.L) through a placing of shares to institutional investors
The bank is least-liked FTSE 100 stock among analysts and its shares have hardly moved over the past 12 months. One of the few analysts not advising clients to ditch RBS shares, Liberum’s Cormac Leech, said ‘buy on the dips’.
Troubled RSA Insurance Group (RSA.L), another little-liked blue chip stock, wasn’t far behind. Shares dropped 3.1% to 99p after the struggling insurance company also missed City expectations for 2013 profits (pre-tax loss of £244 million), while confirming reports of a rights issue to raise £775 million.
Stephen Hester, the former RBS boss who is the group’s new chief executive, tried to convince investors drastic action was being taken to turn around the group’s fortunes. ‘RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and undercapitalisation,’ he said.
But he didn’t win over Nick Johnson, an analyst at Numis: ‘We continue to see downside risk and move to a REDUCE rating given recent share price strength,’ he said.
A more nuanced set of results from WPP (WPP.L) didn’t prevent a 4.3% share price decline for the world’s largest advertising company. The company reported 2013 like-for-like revenues up 3.5%, a 20% rise in its full-year dividend to 34.2p and an increase in its share buy-back programms.
But margins were hit by emerging market exchange rates.
Roddy Davidson, analyst at Westhouse, was ‘encouraged by the strong cash generation, income growth, news on share buybacks, positive start to the current year and strong momentum in new business wins’.
Standard Life (SL.L) garnered more publicity for its warning that a ‘yes’ vote to Scottish independence could see the insurer and asset manager move parts of its operations out of the country, than its forecast-beating 2013 results.
The Edinburgh-based company announced a 13% drop in operating profit before to £751 million, the decline due to a number of one-offs.
There’s better value elsewhere though, noted Shore Capital’s insurance company specialist Eamonn Flanagan: ‘There is no doubting the group’s credentials as an asset accumulator…However, within the asset management sector, we prefer the likes of Jupiter and do not view Standard Life’s rating as compelling compared to its quoted asset management peers.’
Other investors clearly agreed with Flanagan: Standard Life shares fell 3% to 373p while Jupiter (JUP.L) rose 4% to 419p after the funds group reported a 55% surge in 2013 pre-tax profits, despite its funds’ performance waning and margins tightening.
The biggest winners of the day were to be found on the mid-cap index. Copper miner Kazakhmys (KAZ.L) leapt 17% higher to 261p on plans to sell its underperforming mines, while hedge fund manager Man Group (EMG.L) rose 12% to 93p after announcing it would repurchase $115 million of shares.
Amid the flurry of disappointing financial updates, the FTSE 100 fell 0.6% to 6,755, in line with declines on other European markets. Buffeted by concerns about rising political tensions over Ukraine, the blue chip index has fallen some 100 points over the past three days, bringing an end to a rally of three weeks. That rally came after a turbulent January – amid fears over the ’tapering’ of US stimulus and the health of emerging markets – which in turn followed a strong 2013 in which the FTSE 100 rose 14%.
But investors are set to pile more money into UK shares, according to a survey from Schroders. Almost two thirds (64%) of UK investors polled by the asset manager are more confident about investment opportunities this year compared to less than half (41%) last year.
The biggest FTSE 100 winners of 2014 so far have been miners Fresnillo and Randgold, both up just shy of 30% as they track the prices of silver and gold higher.