UK profits in shock 30 per cent decline

Marion Dakers

BRITAIN’S biggest listed companies have suffered a drop in profits of almost 30 per cent in the last year, figures out today show.

While the FTSE 100 has smashed pre-recession highs in recent weeks, many London-listed firms have failed to match booming share prices with record-breaking profits.

FTSE 350 firms generated revenues of £2.07 trillion last year, up 2.1 per cent. This rise is the slowest in at least five years, and the only year in this period where turnover has fallen short of inflation, according to The Share Centre, a stockbroker that authored the report.

Profitability falling in Britain's biggest companies

Net profits slumped 29.7 per cent to £114.5bn last year, 14 per cent below 2007 levels, but higher than in 2008 and 2009. Gross profits last year fell 6.9 per cent compared to 2011, hitting £380.1bn, and pre-tax profits fell 24.6 per cent to £163.6bn.

Revenues are 44 per cent higher than in 2007 but margins have been slashed. Net profit margins declined from eight per cent to 5.5 per cent last year; 2007’s 9.3 per cent has not been matched since.

Capita Registrars said that waning profitability means investors are unlikely to see a repeat of 2012’s bumper dividends, when payouts hit a record £80.4bn. “Dividends cannot outstrip profits indefinitely,” said chief executive Justin Cooper.

Revenues rose for 23 sectors and fell at 14; 19 sectors saw profits rise, but 18 saw them fall, the worst performance since 2008-2009. Pharma saw the weakest sales performance in 2012, along with banks, engineering firms and industrials, the Share Centre said.

Last year’s net profit weakness reflects negative trends at three of the FTSE’s most profitable sectors – mining, oil and finance. The concentration of resources firms in London meant the volatility in commodity prices made a particularly large dent in the indices’ combined earnings.

Out of the 10 largest firms by profit – which together make a staggering 50 per cent of revenues and 57 per cent of the FTSE 350’s profits – three work in natural resources.