Why Simultaneous Company Results Make it Difficult for Investors and Media
It is becoming increasingly challenging for investors and the media to properly assess the performance of businesses in recent months and predict their future prospects. This difficulty arises from the fact that many companies, including Centrica, Rentokil, BT, Barclays, Anglo American, and St James’s Place, are all releasing their financial results at the same time. This trend is not limited to the FTSE-100 constituents but extends to other companies as well, such as Relx, Schoders, Shell, Sage, Frasers Group, and RS Group.
With almost one in six members of the FTSE-100 publishing financial results, the resources of investors, analysts, and the media are spread thin. The City analysts, in particular, have already experienced significant cuts since the implementation of the EU’s MIFID II directive. This reduction in resources has led to a lack of research on many quoted companies, especially in the small and mid-cap sectors. Consequently, when multiple companies release their results on the same day, it further strains the available resources and leaves many company results under-researched. This situation can potentially result in share price anomalies, creating opportunities for those with the means to properly analyze the results, but leaving other investors at a disadvantage.
Reasons for Simultaneous Results
Several factors contribute to the simultaneous release of company results. One reason is the regulatory requirement for companies to report their results in a timely manner. Most companies now have a December financial year-end, which means their first half-year results are due at the end of June. However, it takes companies about a month to compile their results and submit them to auditors for approval. As a result, a barrage of results is released in the final week of July.
In the past, companies were more inclined to release their half-year results in September, allowing for a summer break. However, regulators now emphasize the rapid publication of results to prevent the emergence of a false market in share prices. This shift in regulatory expectations has led to the rush of results in July.
Thursdays are a popular choice for releasing results because companies prefer not to do so on Mondays or Tuesdays. Releasing results early in the week would require company executives to rehearse presentations to investors over the preceding weekend. Executives prefer to conduct these rehearsals once the working week is underway, making the latter part of the week a better option. Fridays are typically avoided due to historical practices of senior City professionals leaving for their country retreats by Friday lunchtime. Therefore, Wednesdays and Thursdays are the preferred days for releasing results.
July and February tend to be particularly busy months for results due to the timing of financial year-ends and the preparation required for full-year results. Additionally, some companies publish quarterly results, leading to increased activity on the final Thursdays of April and October.
While the simultaneous release of company results poses challenges, there are limited solutions available. It is unlikely that companies will move away from December or June financial year-ends, and regulators are unlikely to relax their rules on timely reporting. One potential solution is for UK-listed companies to publish their results after the market has closed, as is common practice in the United States. However, this approach may not be suitable for the UK market, as after-hours trading is less established and liquidity is lower, leading to more volatile price movements.
Therefore, investors and the media must adapt to the current arrangement of simultaneous company results. It is important to consider various factors beyond share price movements when assessing the performance of companies. The outlook statement and communication from company officials on results days can provide valuable insights and help set market expectations.
Among the companies reporting their results today, Centrica has emerged as the star performer in the FTSE-100. The company’s British Gas division experienced a significant recovery in profits, surpassing market expectations. Investors also responded positively to the extension of Centrica’s share buy-back program.
Informa, the world’s largest exhibitions and events organizer, also delivered strong results that exceeded market expectations. The company’s recent momentum had not been fully priced in by the market, leading to a positive response from investors.
Airtel Africa, a recent addition to the FTSE-100, reported a quarterly loss after tax of $151m. However, this loss had already been anticipated due to the devaluation of Nigeria’s naira. Investors focused on the company’s strong sales growth across all business segments, leading to a favorable response.
Relx, a leading data information and analytics specialist, reported a 9% increase in half-year sales. The company is considered a global leader in its field and has high expectations for future growth, particularly in generative artificial intelligence.
On the downside, wealth manager St James’s Place saw its shares fall by 15% after cutting its forecast for investment management fee margins. Shell also experienced a decline in share price due to adjusted earnings of $5.1bn for the three months ending in June, falling short of market expectations. Barclays faced a similar situation, with its shares falling by 6% as its half-year results contained various negative aspects, including higher impairments against doubtful loans and a decline in net interest margin.
The simultaneous release of company results poses challenges for investors and the media in properly assessing business performance. While there are no immediate solutions to this issue, it is important to consider various factors beyond share price movements when evaluating company performance. Today’s results highlight the mixed outcomes and the need to carefully analyze the outlook statements and communications from company officials. Despite the challenges, investors and the media must adapt to the current arrangement and make informed judgments based on the available information.