Of the many unprecedented diktats that inform life with coronavirus, the decision to suspend the announcement of company results for at least two weeks is the most surprising. It is also the least justified and probably the most counterproductive.
The stock market works on the basis of freely available information readily accessible by all investors and distributed as quickly and fairly as possible. Like all properly regulated markets, the London Stock Exchange runs as level a playing field as you can reasonably get. The release of relevant information is vital. Otherwise we are trading in a false market, as the Financial Conduct Authority, which imposed the partial blackout, should well know.
The timely announcement of companies’ half year and full year figures is essential at any time. In the current situation it is clearly so. How well companies did over the past 12 months may bear little resemblance to how they do over the next 12, but we are at least entitled to know which companies are going into the crisis in the best state of health and are thus likely to get back to growth soonest.
Credit to Kingfisher
Fortunately we are past the main reporting season for companies with December 31 year ends and even, on the whole, for retailers who tend to draw accounts up to the end of January, their quietest periods. Not entirely, though. Kingfisher (KGF) was due to announce full year results this week.
To its credit, the owner of the B&Q and Screwfix chains did release sales figures for the final quarter and the full year, figures that were actually better than we have seen for some time. It also announced that it was, quite sensibly, suspending the dividend in the extenuating circumstances. It reported on its cash position, what measures it was taking to offset the impact of the pandemic and the state of current trading, which again was better than one might have expected. All we lacked, quite pointlessly, was details of profits.
The shares leapt 6% on the day, buoyed in part by a 400 point rebound in the FTSE 100 index. One hopes that when the profit figures come out, those who bought now will not feel they have been lured into a false sense of security.
Other companies of interest to many investors, such as Fevertree (FEVR) and 888 (888), have been similarly affected.
Disorderly Markets
The regulator claims to have been acting to maintain open and orderly markets. Why, then, wait until we had had four weeks of disorderly markets with the FTSE 100 index slumping from 7,400 points to under 5,000, with falls of up to 500 points in a single day? Why wait until governments in the UK and the United States, among others, were already pulling together financial packages that would help to stop the rot? In any case, this kind of action is more likely to spark anxiety as it is to calm nerves. And there is nothing open about hiding information.
It is true that auditors need to sign off the books but that does not stop companies from producing preliminary results that can be audited later. These results need not be accompanied by forward looking statements that would be unreliable because no-one knows quite how the pandemic, and the measures taken to mitigate the impact on the economy, will work out. Marks & Spencer (MKS) and Travis Perkins (TPK) are examples of companies that have, quite reasonably, abandoned issuing guidance on future trading.
Even though investors are more interested in what is going to happen rather than what is in the past, banning forward guidance, which is all speculative, would make more sense than banning company results, which tell us facts. One must hope that the regulator will not go one step further and close the exchange.
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