UK firms getting stronger despite commodity fall

 
Marion Dakers

THE TURMOIL in the commodities markets knocked £47.4bn off yearly revenues reported by the biggest London-listed companies in the last quarter, disguising a steady recovery in other firms’ trading, research out today claims.

Turnover at FTSE 350 firms that reported annual figures by the end of March fell 1.5 per cent to £1.51 trillion, The Share Centre said, while net profits fell 5.5 per cent to £68bn.

However, this figure includes the dent made by dramatic swings in the price of natural resources, which was last month partly blamed for a 44 per cent drop in profits at Shell, the biggest company listed in London.

Revenues at the largest firms excluding commodities companies rose 3.2 per cent, the fastest pace since 2009 according to the research. Net profits fell 2.6 per cent to £43.6bn.

“Despite the disappointing headline figure, it’s clear that there is broad-based recovery underway,” the researchers said, pointing out that revenues rose in 24 sectors and fell in just 12 in this quarter’s annual results.

Total revenues are now 44.6 per cent higher than they were at the 2007 peak, while profits are almost a quarter lower.

Profits in consumer goods firms have far surpassed their pre-recession level, as have earnings at consumer services and technology firms. However, oil, basic materials and financial firms are all lingering well below 2007 levels.

“We can’t expect a return of the unsustainably high profits we saw in the last boom – especially in the financial sector – but companies should now have finished cleaning up their accounts, meaning they are well placed to increase their profits quite sharply from here,” said Helal Miah, investment research analyst at The Share Centre.

While mid-cap companies make up less than a tenth of all revenues in the FTSE 350 firms, their performance has strengthened considerably.

Revenues are up an average of 9.7 per cent and, stripping out the effects of new entrants in the index, net profits were up 25 per cent.