Profits at UK-listed companies hit record highs last year, driven by a stronger global economy and weaker pound, according to new research.
The latest Profit Watch report from The Share Centre looked across the financial reports of the UK’s 350 largest listed firms. It revealed those companies reporting their annual results between October and December posted record sales and profits.
Revenues as a whole rose 12.6 per cent to a record £126.6bn, with 10 sectors recording rising revenues, and only one, the banking sector, seeing a fall.
Internationally-focused companies saw the strongest growth as they got the biggest boost from the weakness in sterling but The Share Centre said that even without exchange-rate gains as a contributing factor, many companies would still have booked record profits.
Pre-tax profits jumped 44.8 per cent to new record of £11.2bn, with nine out of 10 companies boasting an increase. Among the top 100, pre-tax profits climbed by more than half, far faster than the next 250, but there was also a jump of almost a third for mid caps.
Helal Miah, investment research analyst at The Share Centre, said: "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."
But he added that 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."
Contract caterer Compass was the largest company to report, seeing revenues climb by 15.1 per cent. The group benefited from exchange-rate gains and improving demand in overseas markets.
These two factors were also behind positive results from Ferguson, TUI and Associated British Foods. Domestically-focussed companies such as JD Wetherspoon, Mitchells & Butlers and WH Smith achieved decent, but slower, sales growth.
The property sector was a particular bright spot, following government support for the housing market, while strong stock markets lifted the results of general financials.
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 its revenues.
There were also lower quality gains from factors such as exceptional profits on the disposal of businesses, for example in the case of AB Foods.
