Profits at UK-listed companies fell for the second quarter in a row in the final three months of 2019, according to a new report.
Revenues also sank during the period for the first time in three years, with low oil prices helping to intensify the earnings recession for listed businesses, The Share Centre’s Profit Watch research found.
Profits dropped 10.4% on average during the three-month period – making it the third consecutive quarter to see more than half of listed companies reporting lower profits.
Market expectations for earnings this year are likely still too high. We are more optimistic now on the global economy, given the easing of trade tensions, but the latest news on the UK economy is rather poorRichard Stone, The Share Centre
The proportion of companies growing their bottom line has declined from a peak of 70% in 2017 and is now the lowest since the last economic recession a decade ago, at 49%, the report added.
When the 40 largest companies in the UK are excluded, the number is even worse, with profits falling every quarter for the last seven – the worst run since 2008 to 2009.
Richard Stone, chief executive of The Share Centre, said: “There’s no doubt that the latest batch of UK results is disappointing, hit by both global and domestic factors.
“This, along with the uncertainty caused by the UK’s protracted internal wrangling over Brexit, helps explain why the UK stock market lagged so far behind its peers in 2019.
“Market expectations for earnings this year are likely still too high.
“We are more optimistic now on the global economy, given the easing of trade tensions, but the latest news on the UK economy is rather poor.
“A decisive election result is certainly a major positive as it breaks the confidence-sapping political deadlock, but the Brexit cliff-edge has merely been postponed, and as such will continue to weigh on sentiment in the months ahead.”
Revenues also dropped during the fourth quarter, down 0.6% year-on-year, despite the weak pound helping boost foreign interest in British-based businesses.
Researchers found that Shell and BP each suffered in particular, with oil prices falling and the weak pound dragging energy sector revenues down 9.2%.
If oil majors were excluded, UK plc revenues overall would have risen 3.7% year-on-year, only a little behind the long-run average, The Share Centre added.
Property companies also suffered, being hit by difficulties in the retail industry, with British Land and Land Securities most severely hit.
But there was better news in healthcare, driven by GlaxoSmithKline which is benefiting from successful new product sales.
Airlines and the leisure industry also performed well, although this did not translate into higher profits over the fourth quarter.
There was mild hope for the year ahead, however, with analysts predicting median profit growth of 7.5%.
This was down from 8.6% three months earlier.