Worst Performing Stocks in 2016

The worst performing FTSE 100 stocks in 2016 were domestically focused companies, including airlines and housebuilders, data from Morningstar Direct reveals

Karen Kwok 3 January, 2017 | 2:46PM
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All this week, Morningstar.co.uk will be bringing you a Guide to Investment Ideas for 2017; stock picks, market reactions and political forecasts from the investment professionals.

Mining stocks rose from the bottom to the top in 2016; becoming the best FTSE 100 performers of 2016, reversing their losing streak of 2015. If this is the case in 2017, the worst performing stocks in 2016 listed below might provide investors with some investing ideas.

Capita (CPI)

Return year to date: -54.1%

Capita provides business process outsourcing and professional support services. The company announced two profit warnings in 2016, as it outlined plans to sell of some of its businesses in an attempt to combat difficult market conditions that it expects to continue into 2017.

Last month the company said the BBC had agreed to extend the partnership covering television licence collections for a further two years until June 2022. The current contract between the two has been running for eight years and was due to expire in June 2020. Over the remaining term of the contract, both parties will continue to work closely together to further improve revenue collection rates, reduce evasion and decrease the cost of collection for the BBC.

The company will introduce further enhancement to its insight and analytical capability, and introduce new technologies to enhance the service experience for the Licence Fee payer. Capita Chief Executive Andy Parker said the company now collects £3.7 billion in licence fees on behalf of the BBC, and said efficiencies had been delivered over the contract that have reduced collection costs to below 3.0 pence in every pound. The stock is not rated by Morningstar analysts.

easyJet (EZJ)

Return year to date: -39.3%

EasyJet PLC operates as a low cost airline company in Europe. The company issued a profit warning after the EU referendum as shares fell 18% on the result. Last month EasyJet warned its full-year profits may face a bigger hit from post-Brexit sterling weakness than previously anticipated. In September EasyJet was under threat of strikes by its pilots over concerns about fatigue, however the issue is ended in November after a new agreement is reached. The stock is not rated by Morningstar analysts.

Next (NXT)

Return year to date: -29.1%

Next is a UK-based multi-channel fashion retailer. In November the retailer said full-price sales in the third quarter to the end of October fell by 3.5% year-on-year, as retail sales dropped by 5.9% and sales from the directory business remained flat. The stock is not rated by Morningstar analysts.

Dixons Carphone (DC.)

Return year to date: -28.2%

Dixons is an electrical & telecommunications retailer and services company. The company offers electrical and mobile products, supported by after sales services from the Geek Squad and Knowhow. It is not rated by Morningstar analysts.

Royal Bank of Scotland (RBS)

Return year to date: -25.9%

Royal Bank of Scotland is a dominant U.K. bank that has made considerable progress on its transformation, according to Morningstar analysts. The bank received £45 billion in UK government bailouts but has since lost its all, and then some, on dodgy assets and misconduct, said Stephen Ellis, director of financial services equity research for Morningstar.

While the road ahead is increasingly clear, Ellis expects it to be a bumpy ride. Ellis said the additional clean-up costs to credits, estimated at another £4.3 billion through 2017, along with £2.8 billion of additional misconduct provisions, will eat up much of the bank's operating profits through 2017 or 2018. 

Ellis added that RBS' loss-making corporate and investment bank to turn to profit in 2017, but it faces uncertain outlook and short-term headwinds as Brexit reduces capital-markets activity. The stock is rated three-star by Morningstar analysts, meaning analysts believe the stock is trading at their fair estimate for the share price.

International Consolidated Airlines Group (IAG)

Return year to date: -24.5%

International Consolidated Airlines is an operator of international and domestic scheduled air services for the carriage of passengers and cargo. It operates British Airways and Spanish carriers Iberia and Vueling. The company reported growth in its group traffic and capacity for the month of November 2016. The stock is not rated by Morningstar analysts.

Travis Perkins (TPK)

Return year to date: -23.5%

Travis Perkins operates based building materials and products distribution businesses. It supplies products for all types of repair, maintenance and improvement projects. In October 2016, Travis Perkins said it will close more than 30 UK branches and said the outlook for 2017 is clouded by uncertainty. The restructuring at the group, which will put 600 jobs at risk, was blamed on weak demand in the UK. Market capitalisation of the company is now below the entry level for the FTSE 100 and the company was from the index on December 19 2016.

Barratt Developments (BDEV)

Return year to date: -21%

Barratt is engaged in acquiring and developing land, planning, designing and constructing residential property developments and selling the homes it builds throughout Britain. Shares prices of the company were hammered after the EU referendum outcome. This is due to concerns on the UK economy that will likely result in a slower growth in the UK house market. In November 2016 Barratt Development said market conditions remain healthy, while consumer demand is strong supported by good mortgage availability and an undersupply of homes. The company expects to deliver further good progress on operating performance in 2017. It expects to deliver cash returns of £1 billion of dividends in the three year period to November 2017.

Berkeley Group Holdings (BKG)

Return year to date: -20.8%

Berkeley Group is engaged in the residential-led property development focusing on urban regeneration and mixed-use developments in London and the south of England. This high-end housebuilder said both revenue and profit grew in the first half of its financial year in 2016, and it remains on track to deliver on its target of £2 billion in profit for the three years ended April 2018.

Berkeley added higher property transaction costs and uncertainty relating to the Brexit vote have impacted transaction levels throughout 2016. However, Berkeley added that pricing remains resilient, and in overall terms, its prices have moved in line with the market. At higher price points, Berkeley said it has absorbed the impact of the rise in stamp duty charges, though said this was "more than offset by increases elsewhere".

ITV (ITV)

Return year to date: -20.3%

ITV operates a commercial television network in the UK. The broadcaster has agreed to sell UTV Ireland to Virgin Media Ltd in November 2016. This was subject to regulatory and competition approval. It has also kicked off the search for the long-term successors to both its chief executive and finance chief this month.

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barratt Developments PLC447.60 GBX-2.33Rating
Berkeley Group Holdings (The) PLC4,540.00 GBX-0.57Rating
Capita PLC13.34 GBX-5.92
Currys PLC62.55 GBX-1.88
easyJet PLC512.00 GBX-1.88
International Consolidated Airlines Group SA157.80 GBX-1.74
ITV PLC69.25 GBX-1.70
NatWest Group PLC268.80 GBX-2.89Rating
Next PLC8,838.00 GBX-1.25
Travis Perkins PLC720.00 GBX-2.17

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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