So let’s get this straight. Investors are worried about the downturn in Asia, the stalling of recovery in the United States, anaemic growth in Europe and the fragile recovery in the UK. Yet three companies with global operations reported results this week that flew in the face of this argument. It goes to show that whatever is happening in the world, a strong company can survive and thrive.
One… Shipping
Of all the companies you would expect to be struggling in this scenario, Clarkson (CKN) would rate prominently. The self-styled “world's leading shipping services group” says it plays “a vital intermediary role in the movement of the majority of commodities around the world from offices in 20 countries on six continents”.
What’s been happening with commodities over the past year? Don’t all answer at once. Yet Clarkson managed to increase pre-tax profits from £25.2 million in 2014 to £35.8 million in 2015. A sharp rise in revenue was admittedly helped by the acquisition of RS Platou last February but there is no arguing with a 50% leap in underlying profits last year. The dividend rises from 60p to 62p – it has increased every year since 2002 and there have been plenty of global crises in that time.
Utterly undaunted, chief executive Andi Case is looking to capitalise on new opportunities. His update makes light of what he calls the “unprecedented challenges” and plays up the positives. I like his attitude.
Case adds: “Market turbulence continues to drive a flight to quality.” Quite so.
All the bad news has been absorbed by the share price, which has fallen from 2,800p last August to 1,722p a month ago. Despite a recent pick-up, they are still languishing. Any investor believing that global recovery will come sooner or later might like to take a look.
Two… Recruitment
Well if not shipping, surely recruitment must be in the doldrums. Not if Robert Walters (RWA) is anything to go by. Pretax profit and revenue both grew in 2015, by 28% and 20% respectively. Like Clarkson, Walters has raised its dividend. Expectations for 2016 have been reaffirmed despite potential economic challenges.
Net fee income increased across its international operations, with very strong growth in Japan – yes, slowdown in Chinese growth doesn’t mean the entire continent is in recession. There was also a robust performance in the UK despite a slowdown in financial services recruitment towards the end of the year. Europe net fee income grew on strong Dutch, Belgian and Spanish markets, while Robert Walters said some encouraging signs of recovery emerged in France.
Apparently the strong performance has been underpinned by growth across emerging and established recruitment markets, across permanent, interim and contract recruitment as well as in the outsourcing business Expectations for the full year remain undented.
The shares have fallen from 475p to below 300p in seven months. Again, a lot of bad news is priced in.
Three… Insurance
So, what about insurance? Prudential (PRU) is milking the growing middle class in Asia, where operating profits were up 16% and the value of new business won by 26%. The insurer likewise won new business in the US and UK. Pre-tax profits, after allowing for returns to policyholders, rose from £2.6 billion to £3.15 billion, no mean feat in the circumstances and the Pru felt able to pay a special dividend of 10p on top of the total 38.78p for 2015, itself a 5% increase on the previous year.
Mike Wells, group chief executive, says: “The fundamentals of the Group remain compelling.” I’m not inclined to argue with that. Pru shares are also well down on the highs of last March despite an uptick over the past month.
The moral is that you should not take fright and quit the equities market. You just have to be more discerning when times are tough.
Small Setback
I apologise for the non-appearance of last week’s column. I was taken ill the previous Monday and despite a rapid recovery I decided to rest for a week. I’ll try to see it doesn’t happen again.
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.
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