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UK results: business should come clean on unflattering comparisons

Corporate earnings updates

There is nothing like a soft comparative to make a business look like it is flying. Many British companies have gratefully exploited dire 2020 numbers to imply they are in great shape now. In contrast, only one-third of the 150 or so FTSE 350 companies to publish half-year results and updates since the start of July included direct, consistent comparisons with 2019.

There is a good case for business to measure all their headline financial results for 2021 against 2020 and 2019 — the last year before the world changed forever

Companies that underperformed have shown the highest propensity to leave out pesky 2019 comparatives. The shares of these coy corporates were just 11 per cent higher on average since the start of 2020. Businesses that compared new numbers against both prior years were rewarded by an average rise of 24 per cent.

Shopping centre owner Hammerson — whose shares fell most in our sample — provided limited but important comparisons on footfall and leasing levels with 2019. Software group Micro Focus mentioned the pandemic just once in its half-year results that were void of any 2019 comparisons.

Profits of pub chain Mitchells & Butlers were predictably bad following long closures. But its comparisons with 2020 and 2019 were refreshingly honest. Premier Foods, maker of Mr Kipling cakes, included both one-year and two-year “comps” in its quarterly update. Recent sales lagged levels achieved during panic buying last year, but beat 2019.

Watches of Switzerland crowed that sales in the three months to August were double last year and half as much again as in the same period of 2019 as customers spent lockdown savings. WPP showed characteristic advertising industry panache, announcing that the latest quarter was the best on record by one measure. But revenues were just 0.5 per cent more than in the first half of 2019.

Companies should do themselves a favour by including 2019 comparisons in the non-statutory chunk of their results announcements this year. This spares investors the hassle of digging the numbers up themselves. Otherwise, as normality returns, chief executives risk suspicions they are using dire conditions of last year as a smokescreen for mediocre performance now.

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