FTSE 350 revenues nosedived by £191bn (15.2%) year on year to £1.07trn and operating profits fell by 38.5% to £55bn, their lowest level since at least 2007, the firm’s latest ProfitwatchUK report has revealed.
The three sectors hit the hardest were also the UK’s largest, accounting for two fifths of all top 350 revenues, and were the most susceptible to global headwinds – oil, mining and banking. These companies collectively lost £202bn in sales within the latest reporting quarter, no doubt impacted by the swift decline in commodity prices and negative interest rates, The Share Centre indicated.
Helal Miah, investment research analyst at The Share Centre said oil, mining and banking companies had been “dragging down profits across the top 350 for three years running” and said this phenomenon serves to “highlight the unequal weighting across the index.”
The poor performance of the FTSE350 oil, mining and banking corporates also obscures “encouraging signs elsewhere” in industries across the UK’s economy, the firm said. Those companies outside of these sectors fared much better during the same reporting period with revenues increasing by 2.5%, the Profit Watch study found.
Building materials and construction companies, as well as non-supermarket retailers benefitted from buoyant sales and better consumer spending, respectively, while media and support services outfits also had promising periods of trading.
Miah added that the unequal weighting throughout the FTSE 350 likewise has troubling implications for passive investors:
“For passive investors, this hammers home the fact that tracker funds can leave them with a dangerously skewed portfolio. This re-emphasises our view that 2016/2017 is a stock pickers market and that active fund investing is an easier way to diversify away from risks.”