St James’s Place (SJP) yesterday lost nearly a fifth of its value amid a flurry of dismal FTSE trading updates that sent shockwaves through the City.
Shares in the FTSE 100 wealth manager tumbled by as much as third – wiping £1billion off its value – after it set aside £426million to cover the cost of mounting customer complaints and slashed its dividend.
The stock closed 18.6 per cent, or 115.2p, lower 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 frenzied sell-off yesterday, with consumer goods giant Reckitt plunging by 13.3 per cent after its sales fell short of expectations.
The grim updates helped drag the FTSE 100 down by 58 points, or 0.8 per cent.
Halfords, a household name firm outside the top-flight, was also caught up in the carnage with the bicycle-to-car-parts retailer veering 27 per cent lower after a profit warning.
Sell-off: Shares in St James’s Place tumbled by as much as third after it set aside £426m to cover the cost of mounting customer complaints and slashed its dividend
SJP was dumped by investors after chief executive Mark FitzPatrick revealed a ‘significant increase in complaints, particularly in the latter part of 2023’ over services customers claim not to have received.
‘We’ve taken this very seriously and where gaps in record-keeping mean that there is a lack of evidence of the delivery of ongoing servicing, we’ve refunded these charges,’ he said.
The company said that following its investment in a new IT system in 2021 this was now a ‘historic issue’.
It is now reviewing customer records going back to 2018.
It said that it had ‘engaged extensively’ with the Financial Conduct Authority (FCA), the City watchdog.
The £426million set aside for refunds dragged SJP to a £4.5million loss.
‘We recognise that this is a disappointing outcome for everyone,’ FitzPatrick said.
The final dividend was slashed by more than three-quarters to 8p and it warned payouts would continue at a lower level than before for three years as it shifts to a new charging structure and sees an expected decrease in profit growth.
FitzPatrick added: ‘In the near-term, we expect the industry outlook to remain challenging given the pressures that clients continue to face.’
High inflation and rising interest rates as well as global conflict and political instability left clients needing to pull out their money over a ‘challenging’ 2023.
The group is under growing scrutiny from the FCA, which last year introduced a new ‘consumer duty’ to stop customers being ripped off.
In October it succumbed to pressure to overhaul some punitive customer charges – one of the reasons behind its lower profit outlook.
And FitzPatrick said investors would have to wait some time before an improvement.
‘Once our new charging structure is fully embedded, we anticipate that the business will be on an improving trajectory during 2027 and beyond,’ he said.
But he said underlying performance had been ‘robust in what has been a very difficult external environment’ and as it faced ‘important historic challenges’.
Fitzpatrick added: ‘We are working hard to put these challenges behind us so that we can move forward with confidence as we plot our path to 2030.’
Analysts at Jefferies voiced fears that its latest issues could worsen. ‘Complaints increased in the second half of 2023, and there may be concerns that more will come in,’ they said.
Halfords shares dive 27%
Weather warning: Halfords said weak customer confidence and wet weather had hit sales
Halfords lost more than a quarter of its value after it said profits would be far lower than expected this year.
The company said ‘weak customer confidence and unusually mild and very wet weather’ were partly to blame as they weighed on demand for both cycling and motoring products.
Shares plummeted 26.7 per cent, or 53.5p, to 147.1p.
The group expects profit of between £35million and £40million for the year to March 29, down from its previous guidance last month of £48million to £53million.
Weakness in its cycling, retail motoring and consumer tyres operations caused a ‘significant drop’ in retail revenues.
The company said that fewer shoppers visited stores and there was reduced demand for some products.
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Reckitt hits lowest level since 2015
Shares in Reckitt Benckiser crashed to their lowest level for almost a decade after sales fell at the end of last year.
The company, whose brands include Nurofen, Dettol and Durex, reported a 1.2per cent slide in fourth-quarter revenues to £3.6billion.
Business was hit by weaker demand for cold and flu medications as well as a drop in baby formula sales.
Boss Kris Licht admitted the performance was ‘unsatisfactory’ but pledged to turn its fortunes around.
In a further setback, annual sales were £55million lower than expected at £14.6billion due to an accounting anomaly in the Middle East.
Shares plunged 13.3 per cent, or 776p, to 5062p – the lowest level since January 2015.
‘Reckitt’s results were disappointing all round,’ said Tineke Frikkee, a fund manager at Waverton Asset Management.
Analysts at RBC Capital Markets added: ‘We had feared that the results wouldn’t be great but we certainly hadn’t anticipated the reporting anomaly that in our view means that Reckitt’s results were really grim rather than just poor.’
Across the full year, revenues were up 3.5 per cent as higher prices offset a 4.3 per cent slump in the volume of goods sold.
Annual profits came in at £3.4billion, 1.9 per cent lower than 2022.
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