Profits posted by UK businesses were almost 34 per cent lower in the year to March 2013 after write-downs by two of the country’s biggest firms.
The Share Centre’s Profit Watch UK report shows that profits after tax of companies reporting in the second quarter amounted to just £16.6bn – a “collapse” of 33.8 per cent from the £25.1bn recorded during the 12-month period before.
The quarterly report, which examined 62 members of the FTSE 350 as well as analysis of the whole market, explains that “most of the damage” was down by Vodafone and Tesco.
Vodafone made write-downs of £7.7bn to reflect the poor performance of its businesses in Spain and Italy, wiping out almost a third of profits from all companies reporting, while Tesco wrote down £1.5bn.
The Share Centre notes that without these write-downs, UK Plc would have seen profit before tax rise 2.9 per cent to £25.8bn over the period in questions – driven mainly by 3i being able to reverse the large losses it suffered in the previous year.
Revenue performance also painted a disappointing picture. Headline sales of the 62 firms were up 4.1 per cent for the year to the end of March 2013, moving from £346.4bn to £360.4bn. However, sales were up by just 1 per cent when inflation is taken into account – which is the weakest increase in any reporting period since mid-2010.
The Share Centre research investment analyst Helal Miah says: “If sales are vanity and profits sanity, then UK Plc is neither vain nor sane at present. The Profit Watch UK shows just how tough conditions have been for UK Plc over the last year. The latest cohort of companies reporting has found it just as difficult as those in the previous few quarters.
“There are very encouraging signs of life in the UK economy so even though world growth forecasts are rather gloomy, we should see sales and margins begin to recover as the tough economic conditions of 2012 wash out of the annual numbers, and a weaker pound gives those earning in foreign currencies a boost.”