2018's Highest Profile Share Price Collapses

Profit warnings, debt and short selling have crashed Carpetright, Interserve and Thomas Cook, while Carillion went into liquidation and Patisserie Valerie was suspended

James Gard 13 December, 2018 | 12:26PM

Carpetright

It’s been a volatile year for global stock markets with daily falls of 2% or 3% on the Dow Jones and FTSE 100 in recent months, as geopolitical events buffeted investors. But that's small fry for some UK listed individual shares which have suffered staggering losses in 2018.

Carillion’s collapse in January this year was an inauspicious start to 2018, especially for the rest of the outsourcing sector, which suffered a contagion effect. The company’s demise was anticipated by a number of extreme losses on the stock market – the shares fell off a cliff in July 2017 – and it was placed into compulsory liquidation on January 15, reportedly the largest ever liquidation seen in the UK.

The following companies made headlines for both chunky one-day losses and for losing substantial value through the year. Carpetright (CPR), Interserve (IRV) and Thomas Cook (TCG) lead the pack with losses of more than 80%.

Carpetright: Down 89%

Shares in Carpetright started the year at 162.5p but are now trading around 17p after a sequence of profit warnings. The carpet retailer’s shares lost 40% in January on its first profit warning of the year.

Weak consumer demand – despite an uptrend in DIY as people choose to renovate houses rather than move up the ladder in a subdued housing market – has combined with painful restructuring to make a grim year for Carpetright. The company made a loss of £11.7 million in the six months to the end of October, against a loss of £600,000 in the same period of 2017. Yet the most recent set of results was well received by the market as losses and a fall in sales are as expected.

Interserve: Down 88%

Interserve, which provides services such as cleaning to the government departments is facing a similar struggle to survive at the end of the year amid speculation it is the “next Carillion”.

On December 10, the company’s shares plunged 70% in inter-day trading, and closed down 50%, after it said that a rescue plan would significantly dilute shareholders’ existing holdings. Interserve shares started the year at 99.20p and are now around 11.31p, a loss of around 88% year to date.

Thomas Cook: Down 80%

A succession of profit warnings hit FTSE 250 travel firm Thomas Cook, which lost 25% one day in September after it warned that full-year profits would be lower than expected.

This was followed in November by another 25% fall in the share price as Thomas Cook said that these profits would be even lower. Thomas Cook’s shares are off from 124.70p at the start of the year to 32p now.

Kier: Down 67%

The Carillion curse also hit Kier (KIE), whose shares fell 25% in one day as it unveiled a rights issue at a 34% discount to the previous price. Kier was the most shorted FTSE stock in November, as traders bet that its plan to slash over £600 million would not succeed.

Nearly 14% of its stock was in the hands of short sellers, according to regulatory filings. Kier shares started the year at £10.68 and are now around 400p. Morningstar columnist Rodney Hobson urged caution for investors but his advice was for them to “grit their teeth” and subscribe to the rights issue.

Capita: Down 52%

Capita’s share price (CPI) collapse followed closely on from Carillion’s demise, with a 47% slump on the last day of January after a profit warning. A second profit warning in August pushed the price from 162p to 123p before an attempt at recovery later in the summer.

The outsourcer, which manages London congestion charge, was also under pressure in November after reports of NHS cancer screenings errors pushed the share price down nearly 10%. The shares started the year at 250p and are now around 118p. Nevertheless, brokers at Deutsche Bank have a price target of 130p a share for Capita.

WPP: Down 37%

Chunky share price falls are not just confined to the outsourcing sector. Advertising giant WPP (WPP) suffered a 25% plunge in one day in October. The wider market was very volatile that month and any disappointing outlook for a high-profile company triggered a slump in the share price. The headline price fall was not comparable to the others on this list, but it is unusual for a FTSE 100 company of WPP’s size to lose a quarter of its value in one day.

Hobson wondered at the time: “These are anxious times, when a moderately disappointing set of results can have a disproportionate impact on the share price. But is that because investors have had an attack of nerves or is it a case of traders playing games?”

Multiple factors were at work with WPP that month, including the market adjusting to the idea that a once outperforming FTSE 100 giant would struggle to match that success in the future, particularly without high-profile adman Sir Martin Sorrell. WPP’s shares are down from £13.39 at the start of the year to around 850p now, a fall of around 37%.

...and Other Stock Disasters

Profit warnings, possible fraud, CEO scandal, short selling, debt fears and market volatility have been a heady cocktail for UK listed stocks this year. Royal Mail Group (RMG) and AA (AA) also sustained heavy losses this year and are down 35% and 56% respectively. Both stocks are currently among the most heavily shorted in the FTSE, according to the FCA.

Shares in Patisserie Valerie (CAKE) were suspended at 429.5p after a fraud investigation was launched so the upmarket cake shop makes the list by default. The fate of shareholders’ funds is still unknown, as it’s not certain when trading will resume.

But Hargreaves Landsdown’s Laith Khalaf doesn’t believe that these extreme swings in prices are unusual historically, it’s just that investors have been lulled into a false sense of security by 2017’s low volatility. The plunges seen this year have been company-specific, he says, rather than reflecting some wider stock market issue.

These plunges have also provided a useful reminder of the risk to individual investors of single company investing. For those who put their entire ISA allowance into Interserve shares a £20,000 investment would now be worth £2,400. The FTSE All Share is down 10% this year in comparison.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AA PLC50.10 GBX3.17
Carillion PLC14.20 GBX-28.95
Interserve PLC  
Kier Group PLC80.10 GBX4.43
Patisserie Holdings PLC  
Royal Mail PLC216.10 GBX-1.64
Thomas Cook Group PLC5.07 GBX-6.11

About Author

James Gard  is subeditor for Morningstar.co.uk

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