Early doors for FTSE chieftains
The last Thursday of July has turned into the Grand National of the FTSe 100 results. There is an obligation on companies to get their results out as quickly as possible but the dumping of so much data on investors in one day has more to do with the way that senior directors run affairs for their convenience – a quick getaway for the yachts in the Med and villas – than the broader interest of other stakeholders.
It is another example of the shortterm, selfish thinking that infects the London Stock exchange. Amid the debris of the July results season several bigger themes emerge.
The first, Alex Salmond and Nicola Sturgeon please note, is that the North Sea bonanza and the oil services which go with it is well and truly over although Centrica vows to keep a presence.
With Brent crude trading at $53.48 and the possibility that the market could soon be flooded with Iranian oil, in the wake of the recent Tehran-Washington nuclear deal, energy firms waiting for a recovery in the market might as well whistle in the wind.
The second theme is that Shell and Centrica, coming at it from very different places, recognise this reality and are taking a fresh look at exploration and production.
The loss of some 12,500 jobs across both companies, with a substantial number in Britain, reflects the changes in the oil market. Centrica is aiming to get out of distance production from natural gas in Alberta to oil and gas and Trinidad.
And Shell is slowing its exploration around the world and will be relying on the BG takeover, still in the throes of getting necessary permissions to take it forward.
By rights this ought to be a bumper period for British firms, given the expansion of the AngloSaxon economies.
Not all of our major companies have emerged from the era of the Great Recession that well.
The nation’s engineering champion Rolls-Royce looks a great deal weaker after the John Rishton inter- regnum as chief executive. Profits slumped 57pc to £310m in the six months to June as the company’s Trent 700 engine and the updated Trent XWB (7000) struggles to compete with US competitors Ge and Pratt & Whitney.
Oddly enough BAe, which is looking for new leadership, seems a bit better prepared for the longer term as defence budgets are restored and investment in cyber security comes into its own.
What is very much clearer is that Britain’s biggest companies and investors need to look over the horizon rather than simply focusing on short-term results.
Investment by BAe in cyber is paying off and will prove far more rewarding for the country and our pension funds than a merger with Airbus which remains something of a transnational enigma.
Similarly, at Johnnie Walker and Guinness champion Diageo patience with emerging markets and China, after a couple of disappointing years, is proving rewarding.
But we shouldn’t ignore the regulatory inquiries in the US or the boardroom rifts at United Distillers in India.
elsewhere the focus on R&D at AstraZeneca, still thankfully British (no thanks to the Coalition government), must be regarded as far more significant than the slippage in first half profits.
The group’s blood thinning medicine Brilinta is outperforming. But most exciting is the accelerated path to market for AZD9291, the inhouse developed lung cancer treatment, that is being pushed through the pipeline at record speed.
Those investors who are still disappointed at AZ’s refusal to submit to Pfizer may yet have a pay day.
Winding road
WhAT can one say about Royal Bank of Scotland?
Seven years after it fell into the hands of the taxpayer, management is still struggling with Fred Goodwin’s toxic legacy.
Quarter upon quarter profits are still being eaten away by regulatory costs and restructuring.
The biggest battle on the horizon is over mortgage securities with some US firms, Bank of America Merrill Lynch and JP Morgan Chase, having paid gigantic fines.
Credit to chief executive Ross Mcewan for seeking to build the bank’s position in mortgages (up 40pc) and traditional commercial lending, after a long break.
Progress on these fronts should be helpful when Goldman Sachs looks to place the first taxpayer shares in the market this autumn.
As nice as a dividend would be, establishing a market for the Government shares is the right thing to do.
High street retreat
IT goes without saying that Grand National day for results is a good time to bury bad tidings.
The winning trophy goes to Marks & Spencer which is closing stores on unfashionable high streets from Walsall to Aldershot and Wood Green (in London) to Stevenage.
It used to be that M&S had a strong sense of community responsibility. Revitalising town centres in dull neighbourhoods rather than switching to glossy shopping centres ought to be part of that.
Very disappointing.