That vote
This column has previously considered the long-term uncertainty caused by the UK's vote to leave the European Union. That the vote came at the end of companies' typical six months to June trading period makes it difficult to separate the uncertainty running up to the vote from any early consequences of it, though statements on post-period conditions and future outlook helped widen the picture.
Sterling's fall was one new fact of life, boosting dollar earners and testing hedging programmes. Elsewhere, City-focused recruitment companies suffered as permanent recruitment slowed, an effect foreshadowed by the market following the referendum. Equity-focused fund managers suffered retail outflows. But elsewhere it was all about second-order effects. The Bank of England's decision to cut interest rates is going to squeeze margins for certain lenders, as we covered in last week's cover feature.
Bricks and mortar
There were signs of slowing activity in the residential housing market: a lull in transactions led estate and lettings agency LSL Property Services (LSL) to warn on full-year operating profit two weeks before releasing its half-year report, playing a similar tune to Foxtons (FOXT) just following the referendum.
But in the new-build market, housebuilders such as Persimmon (PSN) shook off the sell-off to reassure on demand from buyers, which should only be encouraged by the recent interest rate cut. These are different businesses than they were pre-financial crisis: healthy balance sheets supporting some equally healthy payouts for shareholders. Companies in the supply line such as pipe and ventilation specialist Polypipe (PLP) also reported strong activity. After some volatility in the commercial market, developers saw their revaluation surpluses shrink against tough comparatives, lowering pre-tax profits. The big question here is whether the market is over-egging the discounts it is putting on these companies' net assets.
Inputs and outputs
After an effective exercise in managing expectations, mining companies pulled hard on one of the only levers they have left to pull: unit cash costs. While impairments hammered income statements on the back of stubborn lows in commodity prices, BHP Billiton (BLT) managed to beat cost guidance in its copper division. Leaving aside the merits or otherwise of its continuing disposal programme, Glencore (GLEN) managed a similar cost-cutting trick across its major commodities.
The oil price squeeze
A similar focus on operational improvements at the major listed oil companies could not disguise concerns about how long sector dividends can withstand the low price of crude. Both BP (BP.) and Royal Dutch Shell's (RDSB) current dividend yields are at levels that suggest concern over sustainability, and in both cases (especially Shell's following the BG acquisition) the balance sheet is looking stretched. Capital outlays are being heavily scrutinised, and some market commentators are expecting oil producers to have to follow their mining counterparts and cut their dividends, something they very much don't want to do.
Bookies' new look
The results season also had a sub-plot of consolidation in the gambling sector, helped by the fact that the doomed love triangle comprising Rank (RNK), 888 (888) and William Hill (WMH) played out in the middle of it. What was so interesting about the proposed partnership was that it raised questions about the nature of the industry over the long-term: is scale to become the sine qua non of the sector? One answer is presented by industry giant Paddy Power Betfair (PPB), now a £9bn beast which is at least three times as big as its nearest listed rival. With synergies ahead of plan, and strong ongoing performance when merger costs are excluded, its rivals have every right to be concerned.
