Publication of latest "Profit Watch UK" report

AIM: SHRE

Share plc

("Share" or "the Group")

Publication of latest "Profit Watch UK" report

Share, which operates The Share Centre Limited, a leading independent UK stockbroker, is pleased to announce the publication of its latest quarterly issue of "Profit Watch UK", which analyses the revenues and profitability of the top 350 UK listed companies. The report examined the financial results of companies with year ends up to the end of the September 2014 and which reported results in the quarter to 31 December 2015. A full copy of the report can be found on The Share Centre website at https://www.share.com/experienced-investors/profit-watch-uk.

Profit Watch UK notes:

· Total annual revenues of FTSE 350 companies reduced by 1.7% year-on-year to £111.8bn

· Sterling currency translation impacted sales by £2.7bn

· Gross profit decreased by 2.0% and operating profit reduced by 2.4%

· FTSE 250 stocks significantly outperformed FTSE 100 stocks at top line, gross and operating profit level

· FTSE 350 PBT rose 20.8% - reflecting reduced asset write-downs and lower exceptional costs among largest companies

· Net profits rose 30.0% - reflecting lower tax charges

· Currency effects are likely to support earnings growth in 2015 with domestically-orientated companies set to outperform

UK plc sales stalled on the back of sterling strength according to the latest Profit Watch UK report from The Share Centre.

Total annual revenues for FTSE 350 companies with year ends up to the end of September 2014 and that reported them during the fourth quarter were £111.8bn. On a like-for-like basis, this was a 1.7% fall on the same period a year ago.

The biggest drag on sales was the impact of the strength of sterling, which knocked £2.7bn from the total estimated in this period. Without this currency loss, revenues would have grown year-on-year. Larger scale, internationally focused firms reporting felt the largest impact. The biggest revenue falls at Imperial Tobacco, Thomas Cook, Compass Group and Associated British Foods. As a result, FTSE 100 firms saw revenues fall 2.1% on a like-for-like basis, compared to a 0.7% fall among FTSE 250 firms.

The decline was mirrored at gross profit level, with overall gross profit falling to £26.9bn, a drop of 2.0% on a like-for-like basis. Sterling was a key contributor, though Imperial Tobacco, Smiths, and Thomas Cook all pointed to difficult trading conditions in parts of their businesses. Mid caps outperformed at gross profit level too. While FTSE 100 gross profits dropped 2.5%, meaning that margins were squeezed, FTSE 250 gross profits fell by only 0.3%, meaning that their gross profit margin expanded slightly.

Across UK plc, like-for-like operating profit declined 2.4% to £10.0bn, faster than the fall in gross profit, meaning that operating margins felt a greater squeeze than gross margins. Among those FTSE 100 companies reporting, eight out of ten saw operating profit fall. By contrast, eight out of ten FTSE 250 companies reporting saw operating profit rise.

Pre-tax profits provide cheer for investors

There was better news for investors in pre-tax and post-tax profits. Pre-tax profit was £8.1bn, a dramatic 20.8% increase year-on-year. However, this is linked to lower asset write-downs, lower exceptional costs, and to lesser extent improvements in the way companies finance themselves, rather than operational success at UK plc. Net profits (profits after tax) also rose sharply, climbing by 30.0% on a like-for-like basis to £6.4bn, as a result of lower tax charges and lower exceptional costs. This was driven by the largest companies reporting. For instance, Imperial Tobacco made up one third of UK plc's £1.5bn net profit growth, as higher pre-tax profits were boosted by £220m in lower tax charges.

Best performers tap into UK growth

The best performers at an operational level were those firms exposed to the UK economy, and in particular the UK consumer. For instance, Bellway (a housebuilder), reported solid revenue growth, and added £116m to its gross profits in the period (+56%). Easyjet delivered an additional £105m (+13%) in gross profits.

Helal Miah, investment research analyst at The Share Centre, said: 

"UK plc has struggled to move up a gear, despite the domestic economy growing at its fastest annual pace since 2007 last year. Lacklustre growth on a global scale has weighed on sales, while the strength of the sterling acted as an albatross around the neck of the FTSE 100's largest companies. That said, companies exposed to the UK consumer have bucked the general trend, with low inflation boosting discretionary spending. 

"The year ahead looks rather different to the year behind us. The strengthening of the dollar against the pound will add to the UK's bottom line, improving the fortunes of exporters and those with the greatest international exposure, although the weak euro will continue to act as a drag. Oil prices have halved, and while this will be a challenge for commodity firms, lower fuel and energy costs will boost the profitability of many UK companies and turbocharge consumers' spending. With this in mind, the outlook for earnings is broadly positive, but we anticipate that domestically orientated companies will continue to outperform."

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Notes to editors

Methodology

Raw data from the financial reports of the UK's largest 350 listed firms (provided by Factset, excluding equity investment trusts) was analysed and cross referenced with additional data from the London Stock Exchange. The researchers compiled the data for the whole market and analysed by sector and index.

This report analysed financial data for companies with year ends up to 30 September 2014 and which reported up to 31 December 2014.

About Share plc

Share plc is the parent holding company of The Share Centre Limited and Sharefunds Limited and its shares are traded on AIM. The Share Centre started trading in 1991 and provides a range of account-based services to enable investors to share in the wealth of the stock market. These include share accounts, ISAs, CTF accounts and SIPPs, all with the benefit of investment advice, and dealing in a wide range of investments. Services available to corporate clients include share plan administration and 'white-label' dealing platforms.

For more details contact 0800 800 008, or visit www.shareplc.com or www.share.com.

2014

Highest Overall Client Satisfaction award - Investment Trends

Best Customer Service - Investment Trends

Best Stockbroker - MoneyAM

Best Customer Service - MoneyAM

2013

Online Stockbroker of the Year - Financial Times and Investors Chronicle

Execution-only Stockbroker of the Year - Financial Times and Investors Chronicle

Best Online Stockbroker - Personal Finance Awards

2012

Stockbroker of the Year - Financial Times and Investors Chronicle

Execution-only Stockbroker of the Year - Financial Times and Investors Chronicle

Best Online Stockbroker - Personal Finance Awards

Highest Overall Client Satisfaction award - Investment Trends

Best Value for Money - Investment Trends

Best Trading Platform - Investment Trends

Risk Warning

This document is not intended to constitute an offer or agreement to buy or sell investments and does not constitute a personal recommendation. The investments and services referred to in this document may not be suitable for every investor and if in doubt independent financial advice should be sought. No liability is accepted whatsoever for any loss howsoever arising from any information in this document subject to the rules of the Financial Conduct Authority or the Financial Services and Markets Act 2000. Share prices, values and income can go down as well as up and investors may get back less than their initial investment. The Share Centre is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference 146768.