What does 2024 have in store for Kent Plc
Kent's stock exchange-listed firms wait and see if their growth and turnaround plans will yield results in 2024
This week marked the starting gun of an exciting year for companies and business leaders across Kent & Medway. In this edition, we look at a number of Kent’s public limited companies (PLCs) traded on the London stock markets, and explore what might be in store for them over the next 12 months. Was this newsletter forwarded to you? Sign up below to receive weekly newsletters directly to your inbox.
This article is for informational purposes only and not investment advice. If you have any doubts as to the merits of an investment, you should always seek advice from an independent financial adviser.
IN DEPTH
What could propel and hold back Kent’s listed firms this year
Investors in 2023 spent much of the year concerned about losses or looking for the next big market bounce that could lift their investments. While US markets secured impressive gains as the Magnificent Seven pushed markets higher and higher, closer to home, UK markets languished with low single-digit growth. It was a subdued year that for the most part left UK investors wanting more.
Against this backdrop, Kent’s publicly listed firms delivered mixed returns to investors during the year. At the top end, Kings Hill homebuilder Vistry Group (VTY) delivered over 40% share price growth during 2023 and is knocking on the door of the FTSE 100 at 3.2bn market capitalisation while Tenterden’s Chapel Down Group (CDGP) entered AIM on December 7th and has since returned a stunning 33% increase in share price during the month. On the other side of the coin, Chatham’s FTSE 250 One Savings Bank (OSB) dropped around 8% during 2023 as some customers chose to refinance fixed rate deals earlier, impacting their loan book. The picture was worse at Margate’s model railway maker Hornby (HRN) which saw its share price drop over 40% with its annual results announcement in June 2023 showed a loss of £5.9mn.
If 2023 was the year that put Kent & Medway’s leading firms on diverging paths, 2024 might be the year in which the growth and turnaround plans of these companies are tested, and pushed to the limits. The Post explores the challenges some of Kent’s public-listed firms face, and what we can expect to see in 2024.
Vistry Group knocks on the door of the FTSE 100. High mortgage rates, reduced first-time buyer demand, and the increasing price of construction materials has led a number of UK homebuilders to shift their short-term ambitions. This includes FTSE 250-listed Vistry Group which announced to markets last autumn that it planned to pivot its strategy to focus on partnerships and social housing in order to increase profitability. "Delivering on the acute social need for housing across the country and increasing the availability of affordable, sustainable homes is at the core of the Group's social purpose and vision, and I look forward to delivering upon this exciting and unique opportunity for Vistry," said CEO Greg Fitzgerald in the firm’s half-year results. Whilst the October 2023 results announcement led to a drop in the firm’s share price, it has since recovered lost ground. A further lift in the company’s share price could push it into the FTSE 100.
There are plenty of concerns around the house building sector right now, however, with inflation dropping better than expected, home supply low, and many expecting the first rate cuts to come in the middle of 2024, this might benefit those with spades in the ground. Marcus Dixon, a director at global real estate agent JLL says: 'The UK housing market still faces challenges in terms of supply, with a cumulative shortfall of 720,000 homes expected between 2023 and 2028.’
For now, city analysts remain unconvinced by the Kings Hill-headquartered home builder. UBS analysts downgraded the stock to a sell in October 2023 after noting: ‘We are cautious about the recently presented business plan which requires near record volumes delivered for a single UK housebuilder and are cautious about relatively high leverage and fair value adjustments’. This was echoed by Glynis Johnson, an analyst at Jefferies, ‘the evolution to a full Partnership model looks good as a spreadsheet exercise’.
Gusbourne awaits new leadership. Many feel that english sparkling wine is having a ‘coming of age’ moment as warmer temperatures, an enhanced global reputation, and increased acres under vine push the UK viticulture sector to new highs. Ashford’s Gusbourne is playing an important role in this growth as it builds on two decades worth of experience growing and producing wines in the Kent countryside. It now has 230 mature acres under vine but strong ambitions to go further in the future. While its competitor Chapel Down seeks to exploit growing demand among the mass market, Gusbourne is looking to dominate the luxury and premium end of the wine market. As part of this approach, the firm plans to grow its direct-to-consumer sales and penetrate international markets this year.
While on paper this seems the right path, questions remain over Gusbourne’s future. The firm is currently on the search for a replacement leader following former CEO Charlie Holland’s departure in September. Likewise, while Gusbourne’s UK wine sales increased by 24% year-on-year to £2.3m in H1’23, international sales declined by 7%. The company blamed this decline on the ‘timing’ of orders, but this highlights the challenges of expanding into international markets for the firm. Elsewhere, low consumer confidence in the UK could impact demand for the firm’s wines in the future which often retail above £30. Is there still demand for expensive sparkling wine when budgets are tight?
Yet, we shouldn’t forget recent green shoots at Gusbourne. The 2023 harvest was one of its strongest with the winemaker predicting its "biggest yield to date" in 2023. As demand soars for english sparkling wines, Gusbourne plans to plant a further 135 acres of land over the next two years as demand soars. Off the back of a number of awards, Gusbourne’s growth ambitions, underpinned by strong demand, means the firm is a one to watch in the future. That said, the lesson from other luxury brands is that to achieve this reputation and strong market positioning, it can take many years of hard work to come to fruition.
Will strategic investments at Hornby get it back on track? Over one hundred years after producing its first clockwork model train set, Margate’s Hornby plc is navigating a challenging period. In November, the firm, with a market capitalisation of over £28mn, announced that pre-tax losses had widened as growing revenues were offset by increased operating costs. CEO Olly Raeburn noted that the “structural, strategic and operational change” he had implemented was starting to bear fruits in revenue growth but came at a cost which had widened losses in the immediate. The share prices has been out of love after exposing itself in 2022 with a significant stock holding on account of a combination of over-commitment and under performance.
In recent times, the firm has made a number of senior strategic hires including appointments of a new Chief Marketing Officer Alex Mawer (ex Lego) and a Group Sales Director Shaun Dubberley (ex Mattel) to turnaround the company’s fortunes. The small cap toy manufacturer has further developed a number of entry-level products in order to create more accessible prices for new customer acquisition, and invested in nurturing greater customer loyalty. Hornby’s investment in its online presence has led to an increase in direct sales via its website, with a year-on-year uplift of more than 30% in the first two quarters of 2023/24. In July, Hornby announced that it had acquired a 25% share in Warlord Games as it seeks to diversify and grow its footprint in games.
Despite all this, Hornby expects profitability to be “depressed” in 2023/2024 with a return to the black in the years ahead as these strategic initiatives improve efficiencies and increase profit margins. For now, we wait for a Christmas trading update later this month to see if the turnaround is bearing fruits and putting the business back on track.
Rate changes could impact One Savings Bank. The IMF recently noted that rising rates are a risk for banks with loan losses, in particular, potentially increasing as consumers and businesses face higher borrowing costs. Changing consumer behaviour is impacting financial firms with some benefitting and others being put to the test. In July 2023, FTSE 250 OneSavings Bank, formerly Kent Reliance, dropped a quarter in morning trading after announcing that it would take a hit of up to £180m from a “step change” in customer behaviour. For OSB Group, their customers looked to refinance earlier with Bank of England rates changing so fast.
The specialist mortgage lender based in Chatham focuses on certain sub-sectors of the mortgage market such as complex commercial and shared ownership mortgages. As a result, the bank is particularly exposed to changes in the macroeconomic environment such as with inflation and interest rates. Despite this, the most recent trading update for Q3’23 highlighted the firm’s resilience. Three months plus arrears balances remained broadly stable at 1.3%, and OSB Group expects to deliver underlying net loan book growth of c.9%. CEO Andy Golding noted: “whilst the outlook for the UK economy and the overall mortgage market remains somewhat unclear, the fundamental drivers of demand in the private rented sector continue to be robust. Our strong capital and liquidity position, secured loan book and proven risk management capabilities, as well as our focus on professional and portfolio landlords, position us well to continue to generate attractive and sustainable returns”.
Last year, OSB’s share price was down around 14% but over a five-year period has returned 27% as well as a decent dividend to shareholders. 2024 will reveal whether this company can overcome a challenging macroeconomic picture, continue to support customers, and return to share price growth.
2024 is set to be an exciting year for business leaders and companies in Kent. Want to hear about new local business opportunities before others? Receive The Post directly to your inbox each week, sign up now >
IF YOU MISSED IT…
The Post in 24
BEFORE YOU GO…
As always, thank you for reading. Please spread the word about The Post and share today’s edition with your colleagues and friends. Our subscriber list grew by over 30% in December - if you haven’t already, we highly recommend you subscribe.