Who are the General Election winners and losers? Well most investors have benefited because the market as a whole has risen today after the election results gave the Conservatives an unexpected victory. Specific sectors that benefited were house builders and utility companies. House builders were generally up at the time of writing this note, with Berkeley Group in particular up 10% – no doubt investors being relieved there would be no mansion tax affecting expensive properties in London. Utility companies were in favour after the threat of price caps and socialist style intervention in gas and electricity markets was abated – Centrica was up 7% and even National Grid was up 3%. Other risers were Paypoint although that might have been crystallised by the resignation of the Chairman “with immediate effect” this morning, and Rolls-Royce.
Why Rolls-Royce should rise when they issued a very negative “Interim Management Statement” this morning where they indicated a £350 million reduction in revenue in 2015 from foreign currency rates is not clear – surely the new Government might strengthen the pound and make matters worse? They also reported that free cash flow will be more weighted to the second half which is the normal “jam tomorrow” story with Rolls-Royce of late. It was evident from the Annual General Meeting of Rolls Royce today that the company is very sensitive to exchange rates. The most amusing comment at the AGM was from one investor who commented on the transfer of work from the UK to other countries including the USA and then asked “are you introducing a Marshall Plan in reverse?”.
One unfortunate loss for private investors in the election was Vince Cable – a LiberalDemocrat who headed the BIS Department and who lost his parliamentary seat after a long political career. He has been a positive influence on tackling such issues as excessive remuneration in public companies and other recommendations that came out of the Kay Review which he commissioned. It might also affect the ShareSoc shareholder rights campaign as new ministers might need to be educated on the basic issues we are complaining about.
A peculiar casualty of the General Election was SCS, a sofa retailer who only recently listed on the market. The day of the election they issued a profit warning blaming warmer weather and the uncertainty of the election outcome affecting consumers confidence in buying big ticket items. The share price dropped by 32% on the day. Did it bounce back now the result of the election is known and a likely Government settled? The answer is NO. So one can take those comments with a pinch of salt.
Roger Lawson
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