profitwatchuk analysis of the UK s top 350 companies from The Share Centre

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1 profitwatchuk analysis of the UK s top 35 companies from The Share Centre MAY 215 Executive summary 3 UK 35 revenues fall sharply 4 UK plc gross margins pulled down by oil industry 8 Operating profit down almost a fifth 9 Companies perform better at pre-tax level 11 Companies report worst net profits since Outlook 15 Appendix 16 Profit Watch UK May 215

2 2 introduction Executive summary Two fifths of the top 35 reported annual results between January and March The first quarter of the year is the most important reporting season. Two fifths of the top 35 listed companies report their annual results in the first quarter of the year, and they are the largest companies. Together they account for roughly three quarters of the total revenue for the index. We call these fourth quarter figures because these companies all closed their books between October and December 214. The UK s stock market is unusual among its global peers because it is so concentrated in international oil and resources stocks, along with some large banks. Each of these industries is facing specific difficulties related to their sectors, but they have also been exposed to extremely large swings in global exchange rates in the last year. Their performance contrasts with those companies more exposed to the rapidly growing UK economy. The report shows all the trends in the UK s leading companies sales and profits, from gross margin through to profits after tax. We hope you enjoy reading the Profit Watch UK report. Teamspirit Public Relations Mark Baker Head of Research / mbaker@teamspiritpr.com The Share Centre Stephanie Reynolds PR Manager stephanie.reynolds@share.co.uk thesharecentre@teamspiritpr.com Methodology The Share Centre analysed raw data from the financial reports of the UK s largest 35 listed companies (provided by Factset, excluding equity investment trusts), and cross referenced it 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 analyses financial data for companies with year ends up to 31 December 214 and which reported up to 31st March 215. Helal Miah, Investment Research Analyst Helal joined The Share Centre in 212 as an Investment Research Analyst. He graduated with a degree in economics in 1998 and has since been working within the investment industry. Helal has helped manage private client, institutional, retail and hedge funds with a focus on asset allocation and global macro strategies. He has worked for some reputable companies including Smith & Williamson, Schroders, The Industrial Bank of Japan and Mitsubishi Corporation. Helal has also spent some time as an independent proprietary trader, trading the US equity futures market. Helal holds the Securities Institute Diploma having passed papers in Fund Management, Private Client Investment Management & Advice and Regulation, and also holds the Investment Management Certificate and has passed the CFA Level 1. Revenues fell 7.5% to 1.44 trillion; (taking into account changes in the index) like for like revenues fell 7.7%. These are the weakest results since sectors saw revenues fall compared to 16 that saw them rise Falling oil and commodity prices, weak global growth and strong sterling during 214 are key factors Oil, banking, mining, pharmaceuticals, and aerospace saw the biggest falls in sales The top 1 is most exposed to negative global trends, seeing revenues fall 8.4% (like for like) to 1.3 trillion. Mid-caps, exposed to the growing UK economy, saw revenues grow Financial services, insurance, property, house building, support services, retail, travel and leisure sectors all do well Strong sterling in 214 knocks 49.4bn off UK plc revenues when translating accounts reported in foreign currencies into sterling, however sterling s strength would have had a wider effect on company accounts than just translation Operating profit fell by 18.6% to 91.3bn, down over 2bn, with top 1 profits falling much faster than mid-caps Pre-tax profit fell 15.8% (like for like) to 88.bn, a smaller drop than in operating profit which reflects lower write-downs from mining companies 2 sectors saw pre-tax profit fall against 16 that saw increases Financial sectors do best, raising pre-tax 43%. They are the UK s largest providers of pre-tax profits for the first time since 21 Oil industry sees a two thirds decline in pre-tax profit, as lower oil prices are compounded by asset impairment charges Pre-tax profits from the top 1 fell -14.2% (like for like) to 79.1bn, while mid-caps saw their profits, drop (15.8% like for like), particularly thanks to Serco, but other sectors did less well too Net profits were also down -9.8% (like for like) to 64.3bn. This was the lowest profits from this cohort of companies since 28 A little over a quarter of the fall (- 1.8bn) was due to direct currency translation effects Top 1 net profits fell 7.2% (like for like) to 57.1bn, while the mid-caps also saw theirs fall -17.6% to 7.2bn A resurgent dollar will bring currency gains in 215, though the plunging euro will damage the operations of UK companies in, or selling to, the eurozone Weak oil prices will take a further toll in 215 Companies exposed to the fast growing UK economy will do much better; overall we expect better results in the year ahead than the one past Profit Watch UK May 215 Profit Watch UK May 215

3 4 UK 35 revenues fall sharply posting weakest performance since 21 Nearly half of the top 35 UK companies reported their annual results in the first quarter, making this by far the most important reporting period. Their revenues fell rather sharply, down 7.5% or 116bn to 1.44 trillion. On a like for like basis, which takes into account changes in the 35 index, revenues fell 7.7%. This was the weakest revenue performance from this cohort of companies since 21. Indeed, 21 sectors saw their revenues decline against 16 that saw a rise. Revenue vs net profit (Companies with year end in 3 months to end Dec, reporting by 31 Mar 215) 1,8 1,6 1,4 1,2 1, , 1,5 1, 5 Revenue (left) Revenue Net Profits (right) Q47 Q48 Q49 Q41 Q411 Q412 Q Falling oil prices, languishing commodity prices, and weak global economic growth all hit the UK stock market s three largest sectors oil, mining and banking. In addition, sterling was markedly stronger over the course of the year (on average a little over 5% stronger against the dollar and the euro year on year) which means those companies reporting in dollars saw their results translated at less favourable exchange rates. The principal contributors to the decline were the oil sector, losing 63bn in sales, the banking sector which was down 24bn, mining companies, down 23bn, while pharmaceuticals and aerospace each saw their revenues fall 3bn. One third of this total decline was due to the higher value of sterling. Shell and BP alone account for a quarter of UK 35 revenues, so the decline in oil prices has taken a significant toll, as their revenues together fell over 6bn. After currency translation is deducted, 36bn reflects the deteriorating operating conditions those two companies faced and there is more to come. Oil prices for 215 look set to be lower on average than in 214 which will hit their results. Among the banks, HSBC and Standard Chartered felt the currency translation effect, because they report in dollars. However even allowing for that, their revenues fell, as did the revenues of the rest of the banking sector. Mining companies similarly saw revenue declines across the board on lower commodity prices. Pharmaceutical companies continue to suffer competition, especially from generics manufacturers, with currency effects compounding revenue declines. Only Shire increased its sales. With these major headwinds, it is no surprise members of the top 1 companies did badly. Collectively their revenues fell 8.8% on a headline basis (-8.4% like for like) to 1.3 trillion, a decline of 126bn. This is by far the largest drop in revenues since at least 27. Sector revenue 27 41% 25% 11% Top 1 stocks - revenues 23% 43% Sector revenue % Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell BP BP BP BP BP BP BP BP Glencore Glencore HSBC Holdings Glencore Glencore Glencore Glencore Glencore International International International International International International International HSBC HSBC Glencore HSBC HSBC HSBC HSBC Prudential Holdings Holdings International Holdings Holdings Holdings Holdings Royal Bank of Royal Bank of Lloyds Banking Lloyds Banking Barclays Prudential Lloyds Banking HSBC Scotland Scotland Holdings Aviva Aviva Royal Bank of Aviva Lloyds Banking Lloyds Banking Prudential Legal & General Scotland Barclays Barclays Prudential Prudential Aviva Unilever Unilever Lloyds Banking Prudential Rio Tinto Aviva Royal Bank of Royal Bank of Legal & General Legal & General Unilever Scotland Scotland Lloyds Banking Unilever Legal & General Barclays Rio Tinto Barclays Barclays Barclays Unilever GlaxoSmithKline Barclays Legal & General Prudential Rio Tinto Rio Tinto Aviva Combined Revenue m 695,631 82, ,25 869, , , ,59 913,824 Total Revenue % % 25% Basic materials (mainly mining) Oil & gas Financials The rest Revenues fell 7.5%, 116bn, to 1.44 trillion Profit Watch UK May 215 Profit Watch UK May 215

4 6 One third of total decline down to higher value of sterling However, it would be a mistake to assume all the news is bad. Financial services, insurance, property, house construction, support services, retailers, travel and leisure companies all grew their sales. Many of these are in the midcap index and so are not big enough to offset the harsh conditions facing their larger counterparts. They nevertheless demonstrated that companies exposed to the rapidly growing UK economy continue to prosper. On a like for like basis, the mid-cap 25 grew their sales.6% to 141bn, but this would have been 2.% without currency losses, from which the mid-caps are not immune. Headline revenues, which encompass new entrants to the index, rose 7.5%. For the full year, which covers all 35 companies, total revenues fell to 2 trillion, down 5.5% (-5.3% like for like), the lowest level of combined sales since 21, and the first time the Profit Watch UK report has registered a fall in sales across the market. A strong performance from the mid-caps, with revenues at a record level of 274bn, was masked by the top 1 weakness. How currency swings affect revenues The direct currency translation effect on UK revenues for companies reporting 214 results in dollars or euros over the full year was to knock 49.4bn off the total revenues (3.3%), compared to a constant currency scenario. Almost all of this was in the latest quarter. Of course, this is not enough to explain the full effect of exchange rate movements. Many companies report in sterling, but they have significant operations in other countries, or export to them. They would also have seen a significant deterioration in their financial performance year on year owing to the rise of the pound. Whilst we are not able to capture this effect in our analysis, there is no doubt this would also have contributed to the UK s revenue fall. Indeed, it is common for such companies to make reference to it in their presentations to investors. For example, WPP reported sterling net sales slightly down year on year, but acknowledged they would have been 6.3%, or around 65m higher on a constant currency basis. Indexed revenue by industry Basic materials Consumer goods Consumer services Financials Health care Industrials Oil and Gas Technology Telecommunications Utilities Q47 Q48 Q49 Q41 Q411 Q412 Q413 Revenue - 1 vs 25 Revenue vs net profit (Companies with year ends Oct-Dec) Q47 Q48 Annual Q49 Annual Q41 Annual Q411 Annual Q412 Annual Q413 Annual Annual change change change change change change change Revenue m 1,71,622 1,144, % 1,248, % 1,416, % 1,476, % 1,542, % 1,553,492.7% 1,437, % Net Profit m 1,94 33, % 7, % 88,7 26.4% 18, % 72, % 7,58-2.4% 64, % Q413 Q412 Q411 Q41 Q49 Annual revenue vs net profit (Full 35) 19% Q48 Q Annual 29 Annual 21 Annual 211 Annual 212 Annual 213 Annual 214 Annual change change change change change change change Revenue m 1,445,872 1,573, % 1,723, % 1,892, % 2,2,83 5.8% 2,95, % 2,111,668.8% 1,995, % Net Profit m 13,377 65, % 75, % 129,31 7.2% 16, % 114, % 14,1-9.5% 165, % 5 1, FTSE 1 FTSE 25 1,5 ProfitWatch May 213 Profit Watch UK May 215

5 8 UK plc gross margins pulled down by oil industry 16 Operating profit 14 Gross profit measures a company s raw pricing power. It is defined as sales minus cost of goods sold (e.g. raw materials and labour costs) and varies widely from industry to industry. UK plc gross profit margins declined, pulled down in particular by the oil industry whose gross profits declined by almost a quarter, at more than twice the rate of oil revenue declines. Total gross profit was 28.4bn for companies reporting annual results between January and December, down 11.5% (11.7% like for like) year on year. It is clear that many companies were not able to reduce input costs enough to offset the impact of lower sales Q47 Q48 Q49 Q41 Q411 Q412 Q Gross profit Operating profit down almost a fifth Q47 Q48 Q49 Q41 Q411 Q412 Q413 Oil industry gross profits decline by almost a quarter Operating profit (or EBIT earnings before interest and tax), is a very important measure. It tracks how successfully companies are managing their cost base, regardless of the way they finance themselves. 21 sectors saw operating profit fall in the latest set of annual results, compared to just nine that saw it rise - the weakest ratio since we began the study in 27. Total operating profit was down almost a fifth (-18.6% headline, -18.4% like for like) to 91.3bn, a drop of over 2bn. Of this, 3bn was due to currency translation. The big international sectors we have already discussed also hit the operating line, but other notable weakness came from British American Tobacco, with 7m knocked off operating profit. Tobacco is a slow to no growth industry, and one that is exposed to currency trends. Centrica suffered from the mild winter and lower energy prices and reported a 1.1bn loss. There were however some success stories in retail, travel, media, support services, healthcare equipment, software and technology, but these were too small to make a big positive impact. Unsurprisingly, the top 1 operating profits were down 21.9% headline (2.3% like for like) to 79.8bn. The mid-caps saw headline operating profits up 16.2% at 11.5bn, but this was mainly because a number of demotions from the top 1 boosted the total significantly, such as Tullow Oil, William Hill, Rexam and Petrofac. Those promoted from the top 25 in many cases were financial companies which don t have operating profits like other companies, so there was a particularly large adjustment. Like for like, mid-cap profits fell.6%. It is rather difficult for companies to adjust their operating costs quickly to respond to lower sales. Some industries have very high fixed costs and so are more exposed to falling sales than those who can vary more of their costs according to trading conditions. Even companies with scope to vary their costs, for example, those who employ large numbers of people, often cannot make redundancies quickly, or choose to hoard labour in the expectation that poor trading conditions are just temporary. Margins suffer in the short term as a result. The overall operating margin in the latest period fell from 9.6% to 8.6% year on year. Operating profits in period fall more than 2bn Profit Watch UK May 215 Profit Watch UK May 215

6 1 Pre-tax profit Q47 Q48 Q49 Q41 Q411 Q412 Q413 Strong performance in finance industry and lower write-downs in mining boost figures Companies post better performance at pre-tax level Profits before tax take into account how a company finances itself. If it has lots of borrowing to fund its operations, the interest cost will be recognised here. Exceptional costs and write-downs are also recognised here. Pre-tax profit fell 14.8% to 88.bn (-15.8% like for like), a fall of 15.3bn, of which 2.4bn was due to the direct translation effect of currency. This slightly better performance than the decline in operating profit was principally due to lower write-downs from mining companies, and a strong performance in the financial industry. Indeed, the financial industry did best of all, raising pre-tax profits 43% and adding 1.8bn to its total. Financials have in fact regained the top spot as the biggest contributors to UK profits, and by a large margin - a position they last held in 21. In many respects they were the saving grace for the whole UK 35. The banks grew pre-tax profits by 7.2bn, with a sharp improvement at Lloyds and in particular at rehabilitating RBS more than offsetting lower profitability at Barclays, HSBC and Standard Chartered. Insurance and real estate also showed good growth. In the mining industry, Rio Tinto and Glencore both posted sharp improvements at the pre-tax line on lower write-downs. This more than offset Anglo American s slide into a loss, which was due to a large write off at its Brazilian operation caused by lower commodity prices amongst other setbacks. Overall, the mining sector saw a 1bn pre-tax profit improvement. Travel & leisure, food producers, household goods and house builders, and media were also strong. The biggest negative factor was the oil sector, as its pre-tax profits plunge by more than two thirds to just 11.6bn, compared to revenues of almost 5bn. The 26bn decline in pre-tax profits was more than twice the decline in operating profit and reflects the weight of restructuring costs in an industry adjusting to lower oil prices. The pharmaceutical giants saw their pre-tax fall by over a third, a decline of 3.7bn, while in the gas utilities sector, Centrica slipped into a loss of 1.5bn owing to large impairment charges. The support services sector suffered a big hit as Serco posted a big pre-tax loss with write-down costs compounding wafer thin margins on new contracts. British American Tobacco saw a big decline too. Overall, 2 sectors saw pre-tax profits fall, while 16 saw them rise. Pre-tax profits from the top 1 fell 14.% (like for like -14.2%) to 79.1bn, while the mid-caps saw their profits fall 21.5% (15.8% like for like) to 9.1bn. This was particularly thanks to Serco, which posted a 1.4bn pre-tax loss. A big loss at Balfour Beatty, due to poor project management and cost overruns on poorly priced contracts, as well as weakness in aerospace & defence, mid-cap miners and metals companies all contributed to the poorer pre-tax line for the mid-caps. Oil sector sees pre-tax profits plunge by more than two thirds Profit Watch UK May 215 Profit Watch UK May 215

7 12 Companies reporting in first quarter post their worst net profits since Net profit 1 Net profit represents the return left over for shareholders. Companies with year ends by the end of December, and which reported their results by the end of March, posted 64.3bn in profits, by far the worst performance for this cohort since 28. This was a decline of 8.8% (-9.8% like for like), or 6.2bn year on year. In 28, this group made profits of 33.8bn. A little over a quarter of the fall (- 1.8bn) was due to the translation effect of currency on those company results reported in foreign currencies. The slew of profit warnings over the course of the last few months has indeed added up to a significant decline in this most important reporting season. Net profits fall 8.8% year on year, down 6.2bn In order of the size of their declining profitability in cash terms came oils, pharmaceuticals, gas utilities (Centrica), aerospace and tobacco. The miners and financials (especially the banks) made the largest positive contributions, along with travel and leisure, house builders, and tech hardware. The winners, though greater in number, were dwarfed by the losers when it came to their sheer size as 2 sectors saw profits rise against 17 that saw them fall. Top 1 profits fell 6.6% (-7.2% like for like) to 57.1bn, while the mid-caps saw theirs fall 22.7% (-17.6% like for like) to 7.2bn. For the full year 214, which includes all the results of the whole 35 index reported over the last twelve months, net profits rose 59.2% to 165.6bn, thanks to the huge profit Vodafone made from its sale of Verizon Wireless. If we exclude the mobile giant, total net profit was 2.6% higher (+1.6% like for like), as companies reporting annual results in earlier quarters were in sectors less exposed to the three big trends of a strong pound, weak oil and commodities, and weak global growth % Indexed net profit by industry Basic materials Consumer goods Consumer services Financials Health care Industrials Oil and Gas Technology Utilities Sector net profits 27 Sector net profits 214 Revenue vs net profit (Companies with year ends Oct-Dec) Q47 Q48 Annual Q49 Annual Q41 Annual Q411 Annual Q412 Annual Q413 Annual Annual change change change change change change change Revenue ( m) 1,71,622 1,144, % 1,248, % 1,416, % 1,476, % 1,542, % 1,553,492.7% 1,437, % Net Profit ( m) 1,94 33, % 7, % 88,7 26.4% 18, % 72, % 7,58-2.4% 64, % 31% 15% 22% 8% 11% 8% Annual revenue vs net profit (Full 35) Annual 29 Annual 21 Annual 211 Annual 212 Annual 213 Annual 214 Annual change change change change change change change 32% 73% Revenue ( m) 1,445,872 1,573, % 1,723, % 1,892, % 2,2,83 5.8% 2,95, % 2,111,668.8% 1,995, % Net Profit ( m) 133,677 65, % 75, % 129,31 7.2% 16, % 114, % 14,1-9.5% 165, % Basic materials (mainly mining) Oil & gas Financials The rest Profit Watch UK May 215 Profit Watch UK May 215

8 14 Outlook Sectors with rising or falling net profits Top 1 Stocks - net profit Q48 Q49 Q41 Q411 Q412 Q413 Sectors with rising profits Sectors with falling profits Net profit (Companies with year ends Oct-Dec) FTSE 1 93,48,121,215 37,17,921,885 66,237,639,951 79,81,4,539 11,638,956,329 65,25,339,859 61,172,44,53 57,119,82,973 FTSE 25 7,855,829,74-3,33,79,51 3,96,193,489 8,89,447,537 7,333,38,139 6,998,138,734 9,335,777,537 7,214,62,957 Royal Dutch Shell Royal Dutch Shell BP Royal Dutch Shell Royal Dutch Shell Royal Dutch Shell BP Royal Dutch Shell BP BP Royal Dutch Shell Rio Tinto BP HSBC Holdings Royal Dutch Shell HSBC Holdings HSBC Holdings GlaxoSmithKline GlaxoSmithKline HSBC Holdings HSBC Holdings BP HSBC Holdings Unilever Top 1 stocks - profit m Royal Bank of Barclays AstraZeneca AstraZeneca AstraZeneca GlaxoSmithKline GlaxoSmithKline Rio Tinto Scotland GlaxoSmithKline Unilever HSBC Holdings Anglo American GlaxoSmithKline AstraZeneca Unilever British American Tobacco Barclays AstraZeneca Rio Tinto Barclays PLC Anglo American British American British American GlaxoSmithKline Tobacco Tobacco Rio Tinto BG Lloyds Banking Unilever Rio Tinto Unilever Standard Chartered BP Lloyds Banking HSBC Holdings British American Xstrata Xstrata Standard Chartered Rio Tinto Prudential Tobacco AstraZeneca Anglo American Barclays British American British American Rolls-Royce Reckitt Benckiser Shire Tobacco Tobacco Holdings Xstrata PLC British American Unilever Standard Chartered Unilever Prudential AstraZeneca Reckitt Benckiser Combined Revenue m 65,393 52,349 46,959 55,661 73,554 56,787 57,589 39,52 Total Revenue % For 214 as a whole, net profits climb 59.2% thanks to Vodafone s sale of Verizon 214 was characterised by healthy recoveries in the US and the UK but contrasting with languishing eurozone and emerging economies. This culminated in the announcement of quantitative easing in the eurozone in January 215. These factors drove the US dollar and sterling higher against most other currencies, and had a impact on corporate income and balance sheets. On top of this, major structural changes within individual sectors such as food retailers, oil & gas, mining, banks have also played a, mostly negative, part and will continue to be a major factor in the short to medium term. However, the year ahead gives reasons for optimism and that partly explains the recent run-up in the market. There is a significant weight of money being invested in shares as the only asset class capable of providing a decent income while government bond yields remain so depressed and with monetary stimulus staying on the menu for some time to come. As a result, there seems to be renewed optimism surrounding the Eurozone. But the moderating growth rate of China and its slow transition towards a consumption led economy still poses a risk to global growth. The pound has now fallen sharply against the dollar, but it has soared in value against the euro. Because of the large number of dollar reporting companies in the index, we expect there to be currency gains for such companies translating results back into pounds this year, though, given the importance of the eurozone to Britain as a trading partner, many companies who report in sterling will nevertheless lose out on business done with the bloc this year. Overall, though, currency will act as a boost to UK plc trading around the world in the year to come relative to the year past. The oil sector continues to look vulnerable, with oil prices likely to spend 215 on average markedly lower than they were in 214. There is the prospect of further asset write-downs so profits therefore should fall further. The worst of the falling profitability in the mining sector should, however, be behind us now. The financial sector should continue to strengthen, and with the domestic economy in such fine shape, and real household incomes now rising strongly, we think profits should be rising strongly, especially for the mid-cap more domestically orientated sectors. We believe that equities still represent the asset class of choice for most investors given its superior income levels and risk return trade-off. The UK stock market is unusually concentrated in global oil, mining and banking stocks, so the UK index actually provides far less diversification than some other major countries. That means that index trackers are, contrary to conventional wisdom, actually rather riskier than a better diversified portfolio of shares. The results in our Profit Watch UK demonstrate that very clearly. This presents opportunities for investors to create a more balanced portfolio that taps them in to the best of the rapid economic growth to be found here in the UK. Profit Watch UK May 215 Profit Watch UK May 215

9 16 appendix Indexed revenues by industry Revenues by sector m Basic Materials Consumer Goods Consumer Services Financials Health care Industrials Oil & Gas Technology Telecommunications Utilities TOTAL Indexed net profits by industry Basic Materials Consumer Goods Consumer Services Financials Health Care Industrials Oil & Gas Technology Utilities Chemicals 2,5 2,268 2,664 3,24 3,896 3,88 3,718 3,18 Forestry & Paper 4,55 4,171 3,766 4,698 4,112 4,58 5,499 5,159 Industrial Metals & Minin ,511 6,731 9,477 11,179 1,299 1,423 7,928 Mining 122,23 15, , ,77 29, ,145 29, ,667 Automobiles & Parts 3,869 4,376 4,223 5,84 5,746 6,51 7,136 6,982 Beverages ,837 5,247 Food Producers 29,34 26,822 28,745 33,625 33,522 4,84 42,283 39,34 Household Goods & Home Construction 13,554 12,68 12,51 12,924 13,193 13,733 15,56 15,542 Personal Goods Tobacco 1,18 12,122 14,28 14,883 15,399 15,19 15,26 13,971 Food & Drug Retailers ,6 1,178 1,299 1, ,753 General Retailers 6,216 6,436 5,768 6,85 6,36 6,315 6,782 7,129 Media 16,931 19,585 21,753 22,693 23,828 23,369 24,17 24,345 Travel & Leisure 21,524 15,442 16,516 24,53 29,465 31,695 35,335 35,756 Banks 26,188 25, , ,7 23, ,573 89, ,142 Financial Services 4,317 4,454 4,298 5,43 6,559 6,332 6,699 7,937 Life Insurance 121,887 9, , , , , , ,1 Nonlife Insurance 11,835 12,691 2,178 21,29 21,869 21,93 22,74 22,721 Real Estate Investment & Services 1,96 1,61 1,168 1,157 1,164 1,489 2,53 2,379 Real Estate Investment Trusts 1,268 1,446 1,457 1,288 1,389 1,364 1,378 1,31 Health Care Equipment & Services 1,682 2,35 2,655 2,86 2,897 2,951 3,366 4,322 Pharmaceuticals & Biotechnology 38,911 43,22 51,912 52,567 51,219 47,962 46,964 44,81 Aerospace & Defence 24,822 29,814 35,514 37,121 34,321 34,349 37,324 34,16 Construction & Materials 22,56 23,188 22,436 23,259 23,64 25,282 25,469 24,58 Electronic & Electrical Equipment 1,656 1,953 2,63 2,318 2,635 2,665 3,422 3,277 General Industrials 3,611 4,618 4,866 4,619 4,734 4,312 5,454 5,276 Industrial Engineering 5,917 7,766 7,749 8,936 1,76 9,59 7,794 7,384 Industrial Transportation 1,16 1,368 1,339 1,447 1,621 1,753 1,832 1,835 Support Services 33,23 38,985 41,317 42,783 46,419 47,616 48,821 49,75 Oil & Gas Producers 329, , ,28 448, ,26 554,52 547, , Oil Equipment, Services & Distribution 8,8 7,981 8,898 1,17 11,759 14,268 14,9 12,613 Software & Computer Services 2,784 3,114 3,165 3,446 3,748 3,992 3,948 4,6 Technology Hardware & Equipment 1,347 2,291 2,795 3,846 3,341 3,585 3,78 3,421 Fixed Line Telecommunications 1,27 1,11 1,162 1,195 1,114 1,238 1,338 1,25 mobile Telecommunications Electricity 1,247 1,753 1,476 1,648 1,836 1,78 2,62 2,85 Gas, Water & Multiutilities 16,342 21,345 21,963 22,423 22,824 23,942 26,571 29,48 Total ( m) 1,55,28 1,123,118 1,226,9 1,393,832 1,453,613 1,518,286 1,526,921 1,48,328 Profit Watch UK May 215 Profit Watch UK May 215

10 Net profit by sector m Chemicals Forestry & Paper Industrial Metals & Mining 62 1, Mining 11,929 1,358 8,17 21,41 17,615-1,647-3,258 4,159 Automobiles & Parts Beverages Food Producers 2,748 3,317 2,434 3,244 3,81 3,514 4,111 4,167 Household Goods & Home Construction 1,24-1, ,957 1,933 2,271 2,362 2,613 Personal Goods -11 Tobacco 2,13 2,457 2,713 2,879 3,95 3,841 3,94 3,115 Food & Drug Retailers General Retailers Media 1,615-1,364 1,385 1,969 2,663 2,24 2,449 2,538 Travel & Leisure 2,552 2,37 1,688 2,447 2,273 1,135 1,885 2,445 Banks 26,36-17,418 8,787 14,191 11,536 4,15 4,129 11,949 Financial Services , ,39 1,469 Life Insurance 4,344-1,771 3,765 5,47 3,646 4,374 4,741 6,28 Nonlife Insurance 1,89 1,48 2,29 1,358 1,78 1,83 1,453 1,847 Real Estate Investment & Services Real Estate Investment Trusts , , ,48 2,82 Health Care Equipment & Services Pharmaceuticals & Biotechnology 8,79 7,992 1,765 7,273 11,978 9,12 8,112 5,91 Aerospace & Defence 1, ,666 2,2 2,662 3,94 1, Construction & Materials 1,273 1, Electronic & Electrical Equipment General Industrials Industrial Engineering Industrial Transportation Support Services 1,61 1,469 1,563 1,621 1,818 2,269 1, Oil & Gas Producers 28,62 28,844 2,972 12,726 37,268 27,427 27,455 9,512 Oil Equipment, Services & Distribution Software & Computer Services Technology Hardware & Equipment Fixed Line Telecommunications mobile Telecommunications Electricity Gas, Water & Multiutilities 1, , , ,12 Total ( m) 99,68 33,949 69,56 86,827 18,53 7,975 69,558 65,346 Source: The Share Centre via FactSet Research Systems Inc. For FactSet Fundamentals data: Copyright 213 FactSet Research Systems Inc. All rights reserved. Source: FactSet Fundamentals Source: FactSet For FactSet Global Filings data: Copyright 213 FactSet Europe Limited. All rights reserved. Source: FactSet Global Filings Source: FactSet For FactSet Pricing data: Copyright 213 FactSet Research Systems Inc. All rights reserved. Source: FactSet Source: FactSet Important information about our investment research and content of this magazine: The investments and/or services referred to in this document may not be suitable for every investor and if in doubt you should contact a financial adviser. You should be aware that the prices and values of stock market investments and the income from them may go down as well as up and you may not get back the amount you originally invested. Performance figures shown are calculated on bid price to bid price basis (mid to mid for OEICS) with net income (dividends) reinvested. Performance figures are shown in sterling unless otherwise stated. Past performance is not a reliable indicator of future performance. Full details of how we reach our views on investments and risk rate investments can be found on our website at The Share Centre or a connected company may be providing or may have provided within the previous 12 months significant advice or investment services in relation to the investments within this document, or related investments. The bases and levels of taxation may change. The information contained in this document is believed to be correct, but cannot be guaranteed. Any opinions expressed herein are given in good faith and may be subject to change without notice. This document does not constitute a personal recommendation. 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 & Markets Act 2. The Share Centre or a connected company, their clients, officers and employees may have a position or engage in transactions in any of the investments mentioned. FTSE is a registered trademark of the London Stock Exchange plc and the Financial Times Limited and is used by FTSE under licence. The Share Centre Limited is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference number Profit Watch UK May 215 Profit Watch UK May 215