UK shares face further selling pressure after big declines were posted on Wall Street overnight as investors become increasingly worried about rising volatility and macro data.
The FTSE 100 slumps more than 50 points in early trade on Thursday, sinking further below the 7,000 mark at 6,906.94. There is little in the way of corporate news to stem to negative mood with a big share sell-offs at ad agency WPP (WPP) and professional service firm RPS (RPS).
There is also the long-mooted kitchen sink job at embattled department stores chain Debenhams (DEB) for investors to digest, none of it particularly appetising.
SINKING LIKE A STONE
WPP shares crash close on 20% to 853p after the advertising giant cut full year sales and margin guidance. Third quarter results show a 1.6% revenue decline after factoring in currency movements leading new boss Mark Read to talk of the need for ‘decisive action and radical thinking’ to turn things around.
WPP has been under the cosh for much of 2018, a year in which founder and long-run chief executive Sir Martin Sorrell departed the company under acrimonious circumstances. It is believed to have lost out on a string of major pitches in recent months.
Professional services firm RPS sees its share price collapses by more than 30% in early trade after reporting lower than expected profit before tax in the third quarter and steering towards a worse than hoped-for full year outcome.
Pre-tax profit before amortisation comes in at £12.8m in the three months to 30 September, versus £14.3m a year ago, pulling the nine months £40.1m below expectations. There’s also hints that RPS will take several one-off costs over the next couple of years as it tries to shape itself better for future growth.
Investors are seriously spooked, however, sending the share price plunging to five-year lows of 143.2p, valuing the business at just £325m or so.
REVIEW SPARKS DEBENHAMS SURVIVAL HOPES
Debenhams results reveal the dramatic rethink that investors have been hoping for years, although come at the cost of a £491.5m loss after swallowing a £524.7m hit from asset write-downs and other one-off costs.
The new strategy will see the doors slammed shut on 50 stores over the next few years, up from earlier plans to close 10 underperforming outlets, with massive job losses likely. The hope is that this will streamline a business that has long looked completely out of date in today’s online environment.
To the surprise of nobody there is no dividend for shareholders for the year to 1 September.
Today’s news sparks modest encouragement, with the share price edging 5% higher to 8.93p, although that is less than a tenth of the 100p-plus levels the stock was trading at five years ago.
Telecoms giant BT (BT.A) has appointed its new chief executive, naming former Worldpay man Philip Jansen as the new boss. He will officially take the reins on 1 February 2019.
He’ll have the chance to stamp his identity on a business facing significant challenges, including keeping regulator Ofcom on side while addressing growth and cash, declining landline business, cash flow issues in the face of a substantial black hole in its pension scheme.
BT shares dip about 1% to 247.45p, although that probably says more about the wider investor mood than it does about any judgement on the new boss.
LLOYDS PROFITS SLIP
Profits slipped in the third quarter at Lloyds Bank (LLOY), but total income climbed in the three months to 30 September.
Following Barclays (BARC) update yesterday, Lloyds update shows pre-tax profit falling from £2bnto £1.8bn versus a rough 1% increase in net income to £4.7bn.
Shares in the high street bank rise 1.6% to 57.6p, although the stock remains close to five-year lows.
An increasingly stiff competitive car insurance market heaps the pressure on Hastings (HSTG) with the company now expecting its full year loss ratio will be at the lower end of its 75% to 79% target range.
That news slams the brakes on the share price, which slumps more than 8% to 202.6p, the lowest the stock has been in more than two years.
