St James’s Place (SJP) lost almost a fifth of its value yesterday amid a spate of grim FTSE trading updates that shocked the city.
Shares in the FTSE 100 wealth manager fell to third place – wiping £1bn off their value – after it set aside £426m to cover the cost of mounting customer complaints and cut its dividend.
He stock closed down 18.6 per cent, or 115.2p, at 505.8p. It comes days after the death of the company’s founder, Lord Jacob Rothschild.
SJP was not the only blue-chip company to suffer a sell-off yesterday: consumer goods giant Reckitt plunged 13.3 per cent after its sales fell short of expectations.
The gloomy updates helped drag the FTSE 100 down 58 points, or 0.8 per cent.
Halfords, a big-name company outside the top flight, was also caught in the carnage as the bike and car parts retailer fell 27 per cent after a profit warning.
Sell-off: St James’s Place shares fell by up to a third after it set aside £426m to cover the cost of mounting customer complaints and cut its dividend.
Investors left SJP after CEO Mark FitzPatrick revealed a “significant increase in complaints, particularly in the latter part of 2023” about services that customers say they did not receive.
“We have taken this very seriously and where gaps in record-keeping mean evidence of ongoing service provision is missing, we have refunded these charges,” he said.
The company said that following its investment in a new IT system in 2021, this was now a “historical issue”.
He is now reviewing customer records dating back to 2018.
He said he had “engaged extensively” with the Financial Conduct Authority (FCA), the City’s watchdog.
The £426m set aside for repayments dragged SJP into a £4.5m loss.
“We recognize this is a disappointing result for everyone,” FitzPatrick said.
The final dividend was cut by more than three-quarters to 8p and it warned payments would continue at a lower level than before for three years as it moves to a new charge structure and sees an expected decline in profit growth. .
FitzPatrick added: “In the near term, we expect the industry outlook to remain challenging given the pressures customers continue to face.”
High inflation and rising interest rates, as well as global conflict and political instability, forced clients to withdraw their money during a “challenging” 2023.
The group is under increasing scrutiny from the FCA, which last year introduced a new “consumer duty” to stop customers being defrauded.
In October it succumbed to pressure to review some punitive charges to customers, one of the reasons behind its lower profit outlook.
And FitzPatrick said investors would have to wait some time before improving.
“Once our new fee structure is fully integrated, we anticipate the business will be on an improving trajectory through 2027 and beyond,” he said.
But he said underlying performance had been “solid in what has been a very difficult external environment” and that it faced “significant historic challenges.”
Fitzpatrick added: “We are working hard to put these challenges behind us so we can move forward with confidence as we chart our path to 2030.”
Jefferies analysts expressed fear that its latest problems could get worse. “Complaints increased in the second half of 2023 and there may be concerns that more are coming,” they said.
Halfords shares fall 27%
Weather warning: Halfords said weak customer confidence and wet weather had hit sales
Halfords lost more than a quarter of its value after saying profits would be much lower than expected this year.
The company said “weak customer confidence and unusually mild and very humid weather” were partly to blame as they weighed on demand for both cycling and automotive products.
The shares plunged 26.7 per cent, or 53.5 pence, to 147.1 pence.
The group expects profits of between £35m and £40m for the year ending March 29, down from its previous guidance last month of £48m to £53m.
Weakness in its cycling, auto retail and consumer tire operations led to a “significant decline” in retail revenue.
The company said fewer shoppers visited stores and there was reduced demand for some products.
Reckitt hits lowest level since 2015
Reckitt Benckiser shares plummeted to their lowest level in nearly a decade after sales fell late last year.
The company, whose brands include Nurofen, Dettol and Durex, reported a 1.2 per cent drop in fourth-quarter revenue to £3.6 billion.
The business was hurt by lower demand for cold and flu medications, as well as a drop in sales of baby formula.
Boss Kris Licht admitted the performance was “unsatisfactory” but vowed to turn his fortunes around.
In a further setback, annual sales were £55m lower than expected, £14.6bn, due to an accounting anomaly in the Middle East.
The shares fell 13.3 per cent, or 776 pence, to 5,062 pence, the lowest level since January 2015.
“Reckitt’s results were disappointing overall,” said Tineke Frikkee, fund manager at Waverton Asset Management.
RBC Capital Markets analysts added: “We feared the results would not be great, but we certainly had not anticipated the reporting anomaly which, in our view, means Reckitt’s results were truly dismal rather than simply poor.”
For the full year, revenue rose 3.5 percent as higher prices offset a 4.3 percent drop in the volume of goods sold.
Annual profits amounted to £3.4 billion, down 1.9 percent from 2022.
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