Few winners amid wreckage of FTSE 100

By Stephen Foley
Tuesday 01 January 2002 01:00

The year 2001 will be remembered more for its stock market losers than for its winners, the year when fortunes could be lost on the biggest companies as if they were penny shares.

Marconi was a £25bn company at the start of the year, but is now valued at less than £1.2bn. Railtrack was worth £4.6bn a year ago; now it is uncertain what, if anything, the shareholders will receive following the company's administration.

Marconi's riches-to-rags tale is most emblematic of the themes of 2001: the painful unwinding of the hubris and over-investment of the late Nineties' telecoms investment boom. Its shares have fallen 94 per cent as sales collapsed.

None of Lord Simpson, the former chief executive, John Mayo, his deputy, and Sir Roger Hurn, chairman, survived the implosion of the group's attempt to transform itself from industrial conglomerate to telecoms equipment maker. Nor did some 10,000 employees. Now the talk is of a rescue rights issue to cut the group's £3bn debt burden.

The suspension of Railtrack shares in October, when Stephen Byers, the Secretary of State for Transport, put its main operating business into administration, was just one of the high-profile company collapses in 2001 – the year that saw the world's biggest-ever bankruptcy in Enron, the US electricity trader.

In the UK, Independent Insurance, which was worth £1bn at the start of the year, halted trading on the stock market with a giant hole in its accounts. The company has gone into administration, the Serious Fraud Office is investigating, and the former chief executive, Michael Bright, has been declared bankrupt. Photobition, the printing services group, the fitness clubs operator Lady In Leisure, and EuroTelecom Communications, the networking business, have also called in administrators.

As shown by the table of the best and worst performers among the UK's biggest 350 stocks, a company need not fold completely for shareholders to lose substantially all their investment. Colt Telecom and Energis, two firms to have been extending their telecoms networks across Europe this year, have plunged out of the FTSE 100 and wiped out about 90 per cent of their investors money. The telecoms services sector is among the worst performers of the year, down 36 per cent. Computer hardware, much of which has been focused on supplying the telecoms operators was the worst-performing sector for the second year in a row, down 78 per cent.

Some of the tech stocks that already looked bombed out this time last year have managed to find themselves in 2001's 90 per cent club – the band of companies to be worth less than 10 per cent of their value at the start of the year. Baltimore Technologies, down 95 per cent, parted company with its chief executive, Fran Rooney, as sales of its internet security software plunged. Redstone Telecom had to launch an equity fundraising at a share price just 2 per cent of its value last December. And Bioglan Pharma, the biotech stock, collapsed when a failed acquisition revealed spiralling debts and incautious accounting; Terry Sadler, chairman and chief executive, saw his paper fortune crumple from £150m to £2.5m.

Gameplay, the clicks-to-bricks computer games retailer, is the year's biggest loser remaining on the market, with shares down from 121.5p to 0.7p on Friday. It ran out of cash and was forced to sell most of its business and fire all the staff.

So who could keep their bread when all about them were losing theirs? Marks & Spencer's long-suffering shareholders not only stopped losing money but saw the company, run by Luc Vandevelde, post the best performance of any blue-chip share, surging 94 per cent over the year – even though the first signs of recovery in clothing sales only peeped through in the autumn trading update.

The strength of the UK consumer kept the retailers in favour across the board, but it was corporate turnarounds that attracted the biggest share price rewards. Arcadia was the best performer in the sector, more than tripling in value thanks to the completion of a store rebranding and closure programme and, late in the year, a tentative bid from the Icelandic retailer Baugur. Electronics Boutique shares crackled back to life as the PlayStation2 and other new console launches boosted sales. And New Look shares doubled as the fashion chain managed to improve profit margins.

The best-performing sector overall has been packaging – up 47.6 per cent thanks almost entirely to the sales recovery and restructuring at Rexam, the world's largest maker of drinks cans. The sector won't be able to repeat the trick in 2002: it is being disbanded because, with just eight companies, it is now regarded as too small.

Two speciality finance companies were particular winners this year. Man Group entered the FTSE 100 in September having shed its sugar trading business in the mid-Nineties to focus on running hedge funds. As an investment class, these came into their own in 2001 as investors sought ways to beat the depressed equity market, and Man shares have risen 93.5 per cent. Among the mid-cap stocks, the bonds brokerage Icap – the renamed Garban Inter-Capital – has seen its shares surge 180 per cent despite having its New York offices destroyed in the World Trade Centre attacks.

The changed world following 11 September also changed the outlook for a number of smaller companies, leaving investors with big gains. Acambis, which won an emergency contract to supply the US government with enough smallpox vaccine to innoculate the population against a bio-terrorist assault, saw its shares rise 238 per cent in 2001, while Biotrace International, which makes an anthrax detection kit, has soared 343 per cent.

But the biggest stock market return this year has been won by the hardened gambler. Those who punted on Edinburgh Oil & Gas at 20.5p at the end of 2000 now have shares worth 127.5p – a whopping 522 per cent gain. The discovery of the Buzzard oilfield in the North Sea, one of the largest finds in over a decade, has left Edinburgh sitting on up to 15 million barrels of oil.

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