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What we’re seeing a lot of nowadays is companies blaming Brexit when things aren’t going their way. This morning, for example, shares in insurer Admiral Group went down by 7% after its H1 2016 results missed analysts’ forecasts. The reason? Brexit!
Meanwhile construction firm Balfour Beatty saw its share price rise by 7% after its results beat expectations. Balfour Beatty builds property, the price of which, we are told, is set to tank by 20% due to Brexit. If Balfour Beatty’s results had disappointed, you can bet your bottom dollar its outlook would’ve been ‘…darkened by Brexit’. In the event, Balfour Beatty was able to say that ‘there has so far been no negative impact from Brexit,’ which investors will take as evidence of astute management and a resilient business. Never mind the actual reason. Any message involving Brexit carries much more weight.
UK results season has been peppered not only with words like the one I’ve already peppered this article with, but also phrases like ‘the UK’s decision to leave the EU’ and various other, paraphrased alternatives.
Brexit is used as a reason for a company’s underperformance in H1 – even though H1 was before the referendum, when everyone was confident the UK would remain. Those that don’t treat investors like complete idiots simply put Brexit in the outlook instead. Want to cover all your bases? Put it everywhere!
“The loss was due to the effects of the UK’s vote to leave the EU, and we see Brexit continuing to put pressure on earnings growth over the coming…”
Or
“The 10% rise in H1 profit is testament to the hard work we’ve done to mitigate the effects of Brexit, which have yet to materialise as headwinds for earnings growth over the coming…”
Brexit mania has given CEOs an easy way to both talk up their firms’ strengths and abdicate responsibility for any shortcomings. Maybe Admiral Group just did badly in H1. Maybe Balfour Beatty just did well. If that’s the case, then these two stocks might just find themselves under- and over-valued respectively today.
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