Global growth pushes UK plc profits to record high.
The latest ProfitWatch UK analyses the results of the UK's top 350 companies reporting between October to December 2017. Best Financial Campaign winner at the PRCA Awards.
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.
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.
"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.”