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What were the best FTSE 100 performers in 2023?

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For much of 2023, we have seen a lot of fear in the equity markets with many investors using inflation, central bank rate hikes and conflicts in Ukraine and the Middle East as a reason to continue to sit on the side lines in the UK and Europe.

However, in recent months, we have seen Central Banks asserting some level of control over inflation, with inflation rates dropping significantly. This has heralded the prospect of a freeze on further interest rate hikes across all major economies with investors now looking forward to the first interest rate reductions next year.

A wave of optimism has flooded the equity markets in recent weeks, bringing with it a rally that has taken the US equity markets into all-time-high territory.

For the FTSE 100, the story has been mixed in 2023. The blue chip index topped the 8,000 mark early in the year, an all-time-high, but has failed to build on those levels as inflation and Bank of England interest rate hikes served to hold back UK equities. The Bank of England’s decision to hold rates with UK inflation moving in the right direction in line with other major global economies has helped move the FTSE 100 into positive territory for the year. There still appears to be a lot of value in UK blue chip stocks and a favourable start to 2024 could help take the index back up to all-time-highs.

Although it has been a tough year for many FTSE 100 stocks, we have seen some stellar performances. Here are our thoughts on the top five performers in 2023. Scroll down to find the full table.

#1. Rolls-Royce

Rolls-Royce has been the FTSE 100’s best performer in 2023, up a staggering 234% this year. It got off to a great start in January with the appointment of new CEO, Tufan Erginbilgic. Erginbilgic has made no secret of his ambition to quadruple Rolls-Royce profits by 2027 and has targeted a “step change”, within five years, Over that period, Rolls-Royce are aiming to deliver annual profits of £2.5-2.8bn at an operating margin of 13-15% with free cash flow in the £2.8-£3.1bn range. The aerospace and defence company also aims to deliver savings of £400-£500m over the medium term, and has recently announced a streamlining of the workforce with the loss of between 2000 and 2500 jobs worldwide.

Additionally, plans are in place to sell around £1.5bn of assets and re-allocate the proceeds to business areas where Rolls-Royce can generate better returns. Rolls-Royce’s Civil Aerospace division which boasts a multibillion dollar order book and very little competition will be a big beneficiary with its operating divisional margins expected to improve from 2.5% in 2022 to 15-17% by 2027.

Rolls-Royce performance this year has come as no surprise to us here at The Armchair Trader. Regular readers will have seen our article last year featuring analysis from AI stock analytics generator, Bridgewise, and positive sentiment from institutional investors pointing to a very good year.

According to Sharecast, Rolls-Royce is being followed by 18 brokers with 6 ‘Strong Buys’, 7 ‘Buys’, 5 ‘Neutral’ ratings and 0 negative ratings. Can it maintain its run in 2024?

#2. Marks & Spencer

Marks & Spencer shares are second on our list having bagged a 120% uplift over the last 12 months. The retailer has made excellent headway this year, reporting considerable progress with each set of results throughout 2023.

Like Rolls-Royce, Marks and Spencer’s recent performance has been based on a successful reform of the business. A focus on price as well as quality has helped to increase market share and earnings, with food sales continuing to be strong and clothing sales higher. 

Its online joint venture with Ocado LON:OCDO has created a new, modern opportunity for the retailer but there’s still plenty to do to improve profitability.

Marks and Spencer is also working to shrink its estate, closing larger stores in town centres, whilst improving its in-store selection for customers to drive sales in a strategy that is now bearing fruit.

17 brokers are following Marks and Spencer with five rating it a ‘Strong Buy’, three rating it as a ‘Buy’, five rating it as ‘Neutral’ with just one broker offering a ‘Sell’ rating. It has been a year of excellent progress for the retailer and Brokers are expecting more next year.

#3. 3i Group

Shares in 3i Group are up over 83% over the last 12 months. The listed private equity and venture capital specialist has benefited heavily from its holding in Action, a private European retailer. Benelux-based Action looks well-placed to continue to provide fuel for the 3i share price as it continues to expand.

In many respects the success of 3i demonstrates the value of listed private equity for investors, who can access the upside of unlisted assets through a listed vehicle like this one. 3i is admittedly the poster boy for the sector, but it has also benefited from the fact that many institutional investors were looking for defensive assets in 2023, and 3i fits the bill for many of them.

Risk factors going int0 2024 include 3i’s heavy exposure to retail: this could prove a double-edged sword. While it has paid off with Action. discretionary consumer spending erosion due to higher interest rates and inflation could provide some headwinds going into the New Year. 3i is good at picking winners though, reporting in November that 89% of its portfolio companies grew earnings in the 12 months to 30 June this year.

Outside the good news on Action, 3i reported its infrastructure business generated a gross return of 2%, compared to 3% reported in September 2022. The company also reinforced its liquidity position with the issue of a six year EUR 500m bond in June.

RBC Capital became the latest broker to initiate coverage of 3i, with an outperform rating earlier this month. Ten brokers are now following 3i, with three rating the company a Strong Buy and a further five with a Buy rating.

#4. Centrica

Fourth on the list of best performers in 2023 is British Gas owner Centrica which has seen its shares rise by 56% in the last 12 months. Back in June, the energy supplier provided a positive update on the first five months of the year. Thanks to increased allowances in the UK domestic tariff cap, the British Gas Energy division delivered significantly higher operating profits than in previous years. However, profits have been reduced by the lowering of the tariff in recent months and Centrica’s share price has been stagnating as a result.

There are also headwinds for the business to navigate going forward as the UK government looks set to target energy suppliers. This was prompted by a report commissioned by Centrica, warning that an excess of planned renewable energy projects seeking to connect to the UK’s electric grid could discourage investment in the sector, potentially jeopardising the nation’s climate targets. The report revealed that there are projects with the capacity to produce 371 gigawatts of power waiting to connect to the grid. However, only around half of these projects are expected to be completed before 2029.

The report also suggests that only 30% to 40% of these projects are likely to be realised, with the majority of them still in the early phases of development. This oversupply of projects could create uncertainty and hinder investment in the renewable energy sector.

According to Sharecast, 17 brokers are currently following Centrica with the consensus pointing to a ‘Strong buy’.

#5. Sage Group

Sage is fifth on the list of FTSE 100 performers this year. The software business has seen shares rise by 52% this year. Last month, the company released its full year results  noting double digit revenue growth, an 18% uptick in underlying profits and a modest uptick in margins. Shareholders are being rewarded with an extra 5% in the full year dividend, whilst the company has separately announced a £500m share buyback scheme. Sage’s move to a subscription model continues to grow while organic total revenue next year is expected to be in line with the FY23 print and operating margins are also scaling upward. The business is uniquely positioned to drive the automation of back-office software for small and mid-sized businesses in the next decade.

Brokers are expecting Sage to sustain double-digit organic revenue growth rate until 2025 and potentially accelerate further in 2026-30. According to Sharecast, five brokers rate Centrica as a ‘Strong Buy’, six rate the business a ‘Buy’, six are ‘Neutral’ while two have a ‘Sell’ rating and 2 have a ‘Strong sell’ rating.

Top FTSE 100 performers in 2023

Name Ticker 1M* 3M* 6M* 12 Months*
Rolls Royce LON:RR. 19.59 29.38 85.59 234.82
Marks & Spencer LON:MKS 2.51 17.31 39.41 120.2
3i Group LON:III 12.33 14.05 21.51 86.29
Centrica LON:CNA -4.86 -17.65 17.98 56.34
Sage Group LON:SGE 19.14 15.1 34.14 52.31
Associated British Foods LON:ABF 0.21 13.14 20.39 51.9
Melrose Industries LON:MRO 6.2 12.14 9.55 49.13
Intermediate Capital Group LON:ICP 16 28.66 25.05 48.01
InterContinental Hotels Group LON:IHG 18.34 13.37 31.99 47.12
Howden Joinery Group LON:HWDN 19.12 12.66 28.91 45.22
JD Sports Fashion LON:JD. 25.09 26.1 17.14 45.22
Next LON:NXT 6.08 14.01 21.04 43.8
Taylor Wimpey LON:TW. 16.39 24.41 37.27 42.74
Dechra Pharmaceuticals LON:DPH 1.85 1.16 6.24 40.78
DCC LON:DCC 9.79 24.87 25.03 39.48
Barratt Developments LON:BDEV 17.56 24.09 29.67 38
B&M European Value Retail SA LON:BME 4.95 -1.24 -1.55 36.92
Whitbread LON:WTB 7.64 -1.94 4.22 35.86
Sainsbury (J) LON:SBRY 11.2 6.44 13.03 34.92
RELX LON:REL 3.66 9.68 17.69 32.7
Admiral Group LON:ADM 4.5 10.97 25.29 32.51
Auto Trader Group LON:AUTO 0 17.17 15.06 31.25
Tesco LON:TSCO 2.98 3.81 9.63 27.53
BAE Systems LON:BA. 0.61 0.56 11.23 27.08
London Stock Exchange Group LON:LSEG 10.19 10.48 8.64 26.35
Informa LON:INF 4.27 1.86 7.33 26.3
Frasers Group LON:FRAS 9 16.91 31.79 26.05
Diploma LON:DPLM 17.71 14.95 18.91 25.97
HSBC Holdings LON:HSBA 0.66 -2.84 -0.86 24.49
IMI LON:IMI 3.96 9.77 -0.85 24.45
Berkeley Group LON:BKG 5.75 14.56 22.18 23.88
M&G LON:MNG 7.73 9.78 12.69 21.54
International Consolidated Airlines LON:IAG -1.66 3.7 -5.2 20.01
Coca-Cola HBC AG LON:CCH 8.44 0.09 -2.03 17.41
Flutter Entertainment LON:FLTR 8.87 -7.88 -15.97 17.37
Hikma Pharmaceuticals LON:HIK 1.71 -16.48 -5.38 16.49
Unite Group LON:UTG 6.48 15.06 15.58 15.9
Ocado Group LON:OCDO 30.14 -8.91 69.3 15.63
Land Securities LON:LAND 10.31 21.17 23.5 15.32
Segro LON:SGRO 7.85 21.61 18.76 14.64
Airtel Africa LON:AAF 10.91 0.32 4.69 13.74
Ashtead Group LON:AHT 4.38 4.42 0.19 13.24
Shell LON:SHEL -0.72 -2.91 7.34 13.11
Antofagasta LON:ANTO 20.57 15.68 11.01 12.35
Experian LON:EXPN 10.26 16.06 9.81 12
Weir Group LON:WEIR 1.52 -3.16 5.94 11.77
BT Group LON:BT.A 5.64 4.97 -4.99 10.36
Bunzl LON:BNZL 7.51 9.08 3.22 9.95
Smiths Group LON:SMIN 5.54 3.79 4.48 9.87
Compass Group LON:CPG 0.24 1.85 -4.05 9.78
SSE LON:SSE 4.32 11.4 0.22 9.42
Halma LON:HLMA 10.95 6.99 1.58 8.85
F&C Investment Trust [LON:FCIT] 5.76 6.24 8.78 6.83
Scottish Mortgage Investment Trust [LON:SMT] 10.01 14.07 17.2 6.49
Mondi LON:MNDI 8.62 9.57 25.71 6.21
ConvaTec Group LON:CTEC 7.58 8.84 15.41 6.16
United Utilities LON:UU. 0 10.36 4 5.69
National Grid LON:NG. 3.81 3.2 0.14 5.29
Endeavour Mining [LON:EDV] 4.21 10.2 -7.09 5.13
Rightmove LON:RMV 10.93 1.79 9.36 4.71
Standard Chartered LON:STAN 2.48 -12.92 -5.67 4.7
Kingfisher LON:KGF 4.46 15.57 5.47 4.5
Lloyds Banking Group LON:LLOY 9.88 9.56 7.44 4.03
Smurfit Kappa Group [LON:SKG] 14.79 8.69 18.32 3.89
Intertek Group LON:ITRK 7.73 -3.69 -5.7 3.17
Rio Tinto LON:RIO 6.8 10.82 12.93 2.73
Pearson LON:PSON -0.86 6.4 14.99 2.31
Haleon LON:HLN -2.62 -1.75 -0.98 2.16
BP LON:BP. -0.68 -11.36 0.26 2.15
GSK LON:GSK 4.38 -4.03 5.16 1.02
Schroders LON:SDR 8.81 6.24 -0.68 -0.68
Legal & General Group LON:LGEN 8.31 8.6 8.6 -0.81
Aviva LON:AV. 3.92 8.06 9.52 -1.58
Smith (DS) LON:SMDS 6.98 4.47 5.58 -1.7
Smith & Nephew LON:SN. 2.1 0.58 -15.23 -3.1
Severn Trent LON:SVT -2.88 6.38 -3.77 -3.49
Barclays LON:BARC 5.37 -7.28 -3.27 -5.13
Reckitt Benckiser Group LON:RKT 0.97 -6.78 -10.77 -5.51
Spirax-Sarco Engineering LON:SPX 14.91 4.64 -0.83 -6.86
WPP LON:WPP 6.42 -2.88 -12.77 -6.92
AstraZeneca LON:AZN 1.87 -2.45 -10.62 -7.17
Unilever LON:ULVR -1.85 -8.1 -7.51 -9.09
RS Group LON:RS1 11.65 14.72 6.41 -11.14
Imperial Brands Group LON:IMB 0.33 3.26 3.7 -11.24
Phoenix Group Holdings LON:PHNX 7.94 -2.58 -3.16 -12.71
Glencore LON:GLEN 1.09 0.58 2.36 -12.89
NatWest Group LON:NWG 9.26 -5.43 -6.83 -15.25
Beazley LON:BEZ -3.09 -7.38 -8.97 -16.06
Rentokil Initial LON:RTO -7.37 -28.08 -31.5 -17.19
Prudential LON:PRU -5.84 -5.88 -21.13 -18.22
Vodafone Group LON:VOD -8.18 -15.55 -7.56 -19.73
Diageo LON:DGE 1.97 -9.56 -13.86 -21.43
Croda International LON:CRDA 9.19 1.75 -5.98 -25.51
Burberry Group LON:BRBY -2.29 -26.66 -29.56 -25.76
Entain LON:ENT 15.02 -11.96 -20.75 -26.17
British American Tobacco LON:BATS -7 -14.18 -10.49 -29.44
Fresnillo LON:FRES 3.35 -4.64 -11.11 -35.04
St James’s Place LON:STJ -0.93 -19.14 -37.85 -37.77
Anglo American LON:AAL -16.3 -19.48 -22.03 -41.25

*performance as of 19th December 2023

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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