There are two international companies listed in the UK that I regard as bellwethers for the world economy. One is advertising and media giant WPP (WPP) and the other is recruitment group Michael Page (MPI).
Despite currency movements knocking 6-7% off figures when translated into sterling, WPP has had another record year in 2014. Pre-tax profits would have enjoyed double digit growth at constant currencies; even allowing for the strength of sterling the gain is 3.7%, taking the figure above £1.5 billion for the first time. The dividend is raised 11.7%.
This column cannot do justice to all the goodies but it is worth noting that revenue grew in all regions and the trend has continued into this year. WPP has fully justified the surge in the share price since mid-September and there could be more to come.
Michael Page has also surged over the past five months for good reason. Pre-tax profits, before exceptionals, for 2014 are up from £67.1 million to £78.4 million, including strong results from the major economies of the UK, Germany, US and China, although the increase in the total dividend from 10.5p to 11p looks rather conservative.
Chief executive Steve Ingham says the underlying business environment is more positive in some of key markets, with improving momentum in the second half of 2014.
I think Page also has further to rise. As with WPP, its performance augurs well for the world economy.
Foxton Trot
London estate agent Foxtons (FOXT) throws up several important points for investors. It is a reminder that buying stocks in a flotation is not a sure fire thing.
Foxtons was floated at 230p in September 2013 and the shares danced up to 390p as loads of property changed hands in central London at ridiculous prices. Now that Russian oligarchs have got out as much money as they could before the collapse of the rouble, central London has gone way off the boil – and so has Foxtons.
The shares are now around 190p and it is hard to understand why they have recovered from a low of 155p in November. Profits this week were well short of previous expectations. It’s great being at the centre of the action but when the action moves elsewhere you are left behind. The shares look decidedly risky.
One further thought: This does not mean we should start to worry about housebuilders as well. Foxtons is too dependent on the number of property sales rather than prices and is concentrated in a comparatively small, though admittedly heavily populated, area. There are plenty of would-be buyers looking for homes at rather lower prices than those prevailing in Mayfair.
What Next for HSBC?
HSBC (HSBA) has been put through the mill over the past few months and the evidence is in the share price, down from 670p in August to 560p now. After a further grilling by a House of Commons select committee, the executives have slunk off to lick their wounds.
Much has been made in the press about “reputational damage”. Yet whose reputation? All three executives who have now appeared have successfully distanced themselves from the tax dodging scandal. We even had one director offering to take responsibility while making it clear that it was not really his fault at all.
The bank itself is unscathed and the odd fine here and there is now a part of life for all banks. HSBC, in which I took a stake long before the latest round of finger pointing began, will bounce back.
The shares look cheap. So, too, does the select committee, which really has little idea how to pin down the people it summons for questioning. The committee has suffered more reputation damage than HSBC.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice. His views are not necessarily the views of Morningstar UK.
