U.K. Stocks’ Battered Losers and Underwhelming Winners of 2018

(Bloomberg) -- The glum year experienced by the U.K.’s stock market has Brexit and its accompanying uncertainties painted all over it and among individual names, the losers upstaged the winners.

The FTSE All-Share Index slipped 13 percent, in line with the dismal year had by Europe’s Stoxx 600 benchmark. Eight U.K. stocks lost more than three quarters of their market value, while only two winners managed to match that to the upside. The FTSE 100 Index is set for its biggest annual drop since the financial crisis a decade ago.

U.K. Stocks’ Battered Losers and Underwhelming Winners of 2018

Cash is streaming out of stock funds in the U.K., and money managers globally have slashed their allocations to the country. Still, the optimists aren’t extinct. Some see domestically focused U.K. stocks as “bargain basement” buys, given the beating Brexit uncertainty has dealt to the market, and at least one bank reckons U.K. equities might be the surprise winner in 2019.

Here’s a list of the FTSE All-Share’s biggest winners and losers of the year (for comparison, click here to see where things stood halfway through 2018). We haven’t included everything, just the most interesting stock stories:

The Winners

Ocado Group Plc: Up 94%
This was the year that the promise of Ocado, a U.K. grocery-delivery company, finally started to come to fruition. After years of investors expecting it to sign deals with international retailers, Ocado scored several during the year that served to legitimize its aims and allowed it to gain membership in the FTSE 100. But 2019 will be when investors get to see how much these international deals are going to cost Ocado to operate and whether all that promise will eventually yield a sustainable future.

Gem Diamonds Ltd.: Up 60%
The simple fact is, one of the best things that can happen to a diamond miner is to find a slew of really, really big diamonds. While peers struggled amid concerns about trade and sinking base metals prices, Gem Diamonds unearthed a record number of 100-carat-plus stones from its Letseng mine in Lesotho, southern Africa. Now if it can only do the same in 2019.

Plus500 Ltd.: Up 53%
The cryptocurrency boom may be petering out but at least one company got a big boost from it this year. Plus500’s contracts for difference linked to Bitcoin and its ilk helped the shares hit a record high in May, providing a buffer for the firm as it ran up against extra concerns about new regulations on its industry. Those rules meant its rivals, IG Group Holdings Plc and CMC Markets Plc, both dropped while Plus500 managed to hold onto its gains.

Hikma Pharmaceuticals Plc: Up 49%
The stars aligned for Hikma in 2018. The company raised its revenue and earnings guidance twice after stronger-than-anticipated performance at its injectable and generic-drug franchises, plus it benefited from optimism about U.S. drug pricing for injectable products. Debates around the price of medicines in the U.S., the subject of heavy criticism from President Donald Trump, have weighed on the pharmaceutical market but Hikma sailed through.

The Best of the Rest...
The U.K.’s star IPO performer was investment advisory house IntegraFin Holdings Plc (up 57 percent), which entered the FTSE 250 Index after listing in February. Nanoco Group Plc (up 44 percent), a maker of nanoparticles used in medical imaging and televisions, recovered from a profit warning in April as it secured commercial orders for its products. Polyolefin foams maker Zotefoams Plc (up 53 percent) upgraded guidance twice, carrying on the optimism with which it ended 2017 when it signed a deal to supply foams to sneaker giant Nike Inc.

The Losers

Carpetright Plc and Debenhams Plc: Down 89% and 86% respectively
It seems only fair to include the two worst stories in the U.K. retail sector together. Carpetright has suffered as consumers cut back on more expensive purchases like carpets and flooring, while Debenhams took a heavy hit from the slowdown in spending in department stores that led to the collapse of its rival, House of Fraser. The list of shame for U.K. retail is long, with convenience store operator McColl’s Retail Group Plc and fashion retailer Superdry Plc also getting clobbered. And based on revenue updates in December, the sector is in need of a Christmas miracle.

Countrywide Plc: Down 87%
The U.K.’s biggest estate agent had to come cap in hand to shareholders in August, selling stock at a huge discount to shore up its balance sheet. The sector has been hammered by the uncertainty Brexit has caused, as potential house buyers wait for the outcome of negotiations before they start splashing out on a new home. Until the picture becomes clearer on the U.K.’s exit from the European Union, there’s nothing to suggest the situation is going to improve soon.

Thomas Cook Group Plc: Down 76%
Long the byword for travel agents in the U.K., Thomas Cook had a woeful year. Two profit warnings only two months apart shattered confidence in the company and eyes started to turn to its debt pile as shares slumped. The group was hit partly by Brexit-related uncertainty but also by the U.K.’s other primary conversation topic, the weather. A very hot summer meant many vacationers decided to holiday at home rather than spending to go abroad, a pattern Thomas Cook will have no power to influence but which it will hope does not repeat in 2019.

Indivior Plc: Down 73%
The U.K. firm which makes Suboxone Film, a treatment for opioid addiction, suffered a tough year as a generic version of its key medicine came closer to reaching the market. Court delays have kept the cheaper alternatives out of the way for now, but Indivior essentially faces a race against time for its other drugs to gain traction before the income from Suboxone Film starts to dry up.

The Worst of the Rest...
Newspaper delivery firm Connect Group Plc (down 64 percent) issued a kitchen-sink profit warning in June that wiped out almost half its market value in a day. Undertaker Dignity Plc (down 63 percent) had a rollercoaster year capped off by a big drop when U.K. regulators launched a pricing probe of the funeral market. Construction firm Kier Group Plc (down 62 percent) plunged when it announced a rights issue and saw its problems compounded when the appetite for the new shares proved underwhelming.

©2019 Bloomberg L.P.