EU Business News February 2018

20 EU BUSINESS NEWS / Q1 2018 , Global Growth Pushes UK plc Profits to Record High UK plc revenues rise by 12.6% to £126.6bn, a new record for the latest group of companies to report results. UK-listed companies reporting annual results between October and December saw sales and profits hit record highs, according to the latest Profit Watch UK from The Share Centre. A stronger world economy and a weaker pound drove up revenues by 12.6% to £116.6bn. This is the highest sales for this group of companies on record. To each its findings the Share Centre analyses raw data from the financial reports of the UK’s largest 350 listed companies (provided by Factset, excluding equity investment trusts, with other information sourced direct from company announcements). All results reported in currencies other than sterling were converted at the average exchange rate for the relevant period. This report analyses financial data for companies with year ends up to 30th September 2017, and which report over the period up to 31st December 2017. Growth was broadly based, with ten sectors growing revenues, compared to just one in which sales fell. Multinationals reported the strongest performance. Contract caterer Compass, the largest company to report, saw revenues climb by 15.1%, benefitting from exchange-rate gains, and improving demand in overseas markets. These two factors were also behind positive results from globally exposed companies such as Ferguson (formerly Wolseley), TUI, and Associated British Foods. Domestically focused companies such as JD Wetherspoon, Mitchells & Butlers and WH Smith achieved decent, albeit slower, sales growth. The property sector, however, was a particular bright spot, following government support for the housing market, while strong stock markets lifted the results of general financials. Collective pre-tax profits rocketed 44.8% on a like-for-like basis to a record £11.2bn. In line with revenues, 10 sectors raised pre-tax profits, and only one saw them decline, and even then, only marginally. Overall, nine-tenths of the companies reporting raised their pre-tax profits. Easyjet, was the clear outlier, despite higher passenger numbers and higher revenues, with pre-tax profits falling sharply year-on-year. Higher fuel costs and the pound’s weakness were major factors. Greencore, the convenience food manufacturer, also saw profits fall, owing to exceptional costs on its acquisition of Peacocks, a transaction which boosted the group’s revenues considerably. For the most part, the earnings reported were high quality, reflecting real operational improvement across UK plc. On top of these, there were also lower quality gains from factors such as exceptional profits on the disposal of businesses in the case of AB Foods, or the revaluation of derivatives contracts in the case of Imperial Brands. Exchange-rate gains boosted the profits of many companies reporting. Even without these factors, however, this group of companies would have booked record profits. Pre-tax profits among the top 100 leaped by more than half, far faster than the next 250. Nonetheless, a jump of nearly a third for mid-caps still represented a strong reporting period. Helal Miah, investment research analyst at The Share Centre, discussed the findings and how they impacted on firms within the UK corporate landscape. “Whichever way you look at it, UK plc has performed well. Even without the added sheen of exchange-rate gains, we would have seen record-breaking results. Sales are climbing across the board, earnings are looking healthier still, and there is more to come. “Fading exchange-rate gains in 2018 won’t hold back the UK’s largest companies. With the wider global economy in great shape, multinationals will profit from strong trading conditions in their overseas businesses, and manufacturers and exporters will enjoy rising demand for their goods. Domestically sensitive sectors, such as construction, seem to be on shakier ground. These depend more on investment into the UK and confidence in its economy. The high-profile collapse of Carillion, which had a large construction division, testifies to these pressures. Companies that depend on consumer demand at home are likely to see their profits underperform, as real incomes continue to fall.”