Rotten day for these UK stocks as FTSE 100 slumps

There's concern that negative reaction to the latest bunch of corporate announcements may set the tone for this results reporting season.

Share price punishment for Sabre Insurance Group (LSE:SBRE), Trustpilot Group (LSE:TRST) and Portmeirion Group (LSE:PMP) today highlighted the extent of market jitters as London’s half-year earnings season looms into view.

Double-digit percentage falls for the trio were accompanied by selling pressure for food-to-go business SSP Group (LSE:SSPG) and Barratt Developments (LSE:BDEV), even though both bolstered profits guidance.

The economic storm clouds mean investors are seizing on any signs of vulnerability, preferring to act now rather than wait for actual evidence of demand weakness.

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Today’s round of trading updates signalled what might lie ahead for shares in the week beginning 25 July, when Unilever (LSE:ULVR), Lloyds Banking Group (LSE:LLOY), Shell (LSE:SHEL), NatWest Group (LSE:NWG) and Centrica (LSE:CNA) are among the blue-chips due to report half-year results.

The market’s readiness to hit the sell button at any sign of weakness creates potential long-term buying opportunities, including some high-yielding stocks. This is particularly the case in housebuilding, where valuations are now a third lower this year despite robust sales.

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Barratt Developments illustrated this today when it forecast full-year profits slightly ahead of City expectations, with net cash of £1.1 billion giving flexibility for further capital returns.

Insurance is another high-yielding sector under pressure, particularly after heavy share price falls for Admiral Group (LSE:ADM) and Direct Line Insurance Group (LSE:DLG) following a profits warning by Sabre Insurance.

FTSE All-Share stock Sabre lost a third of its value today as it revealed the impact of rapidly rising claims costs. Its prices have gone up 19% as a result, causing a further loss of market share but protecting longer-term interests due to disciplined underwriting.

Chief executive Geoff Carter said: “The strong recent progress in the business will be impacted in 2022 by the need to reflect the current extraordinary inflationary pressures.”

He pledged to pay a dividend for 2022, albeit at a reduced level, before returning to more normal levels in 2023. The balance sheet remains strong with a solvency capital ratio comfortably above the preferred 140% to 160% range.

Peel Hunt called the company’s approach sensible but slashed its earnings forecast for this year by 65% and 40% the following year, while lowering its target price from 280 to 210p.

Analyst Andreas van Embden said: “Sabre is justifiably reacting to market circumstances, which to a certain extent are beyond its control.

“To management’s credit, the strategy is first and foremost to protect capital and reserves, hence the long-term franchise value of the business.”

Today’s double-digit percentage fall for consumer reviews business Trustpilot came even though it stuck to guidance for the full year and expectations it will break even in 2024.

The City remains unconvinced by this latter target, particularly after the company today reported softer bookings growth of 22% for the first half. Shares in the former FTSE 250-listed stock have de-rated 80% in the past year, which Liberum analyst Ciaran Donnelly believes makes this an opportunistic time to buy a stock now valued on 1.8 times sales.

Shares were 14.85p lower at 79.85p, down from more than 450p in September and compared with Liberum’s target of 220p. The broker said: “Trustpilot’s multi-country proposition gives it one of the largest addressable market opportunities amongst the peer group.”

Portmeirion was another stock to come under heavy selling pressure, even though its update contained no specific downgrade to guidance.

The owner of homeware brands Spode, Royal Worcester, Pimpernel and Wax Lyrical said first-half sales rose 5% to at least £45 million but the AIM-listed shares fell 42.5p to 367.5p after it reported some destocking by retail customers.

It flagged the risk of further declines in consumer and retailer confidence in the second half, although chief executive Mike Raybould said this would be offset by the benefits of diversified markets, strong brands and ongoing strategic investment.

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Other stocks in the red today included Upper Crust business SSP, which fell 4.2p to 232.8p despite increasing its 2022 guidance towards the top end of City hopes.

It has been boosted by a recovery in airport passenger numbers, leading to revenues for the last seven weeks of the quarter being at 89% of 2019 levels.

Despite reassurance from the company, investors focused on the uncertainty caused by airport disruption, labour shortages and industrial action across air and rail markets. SSP is also faced with cost pressures throughout its supply chain.

SSP is valued at 7.3 times forward earnings, which Peel Hunt views as attractive given the significant cash generation that should result when trading fully recovers. The broker has a target of 350p, which compares with 231p seen today.