The corporate reputations of companies listed on the London Stock Exchange account for close to £1trn, at £911bn. This has more than doubled in the past four years, according to the seventh annual study published today by intangible asset specialists, Reputation Dividend Ltd.
The study puts Unilever, Diageo and Royal Dutch Shell as the top performers in terms of reputational contribution for 2013. Analysts found that on average, corporate reputation is delivering proportionately more value to FTSE100 companies (c41% of market cap) than to FTSE250 ones (c25%), but the FTSE250 are now well poised for growth based on improving their footprints and reputation strategies.
According to Reputation Dividend’s study, the combined value of reputation across the FTSE100 and 250 grew by close to £108bn, an increase of 13% in the year; non-reputational component of market capitalisation was up 4% points less. Simon Cole, Founder of Reputation Dividend stated that “regardless of the fact that corporate earnings struggled to make much headway, the combined value of the index was up by 11% at the end of 2013. Investors may not necessarily have seen the profit growth they were hoping for but confidence, fuelled by stronger, more compelling corporate stories, continued to build and the recovery held steady. Corporate reputations proved to be one of the main drivers of market cap growth.”
Said reputation expert and director, Sandra Macleod, “in a year marked by continued banking fraud, PPI mis-selling, supply chain issues such as the horsemeat scandal and sweatshops in the fashion industry, there is a growing need and appetite for companies to be held to accountable for their reputations above and beyond delivery of financial performance and in a way that assures investors and stakeholders that sound management is in place. While communications budgets continued to feel the pinch last year, their impact was more significant than at any time since the downturn started. Communications leaders should take a lot of credit for building the value of the assets in their charge. The growing professionalism of the function and its impact on corporate decision-making paid dividends.”
Unilever and Diageo jump to number 1 and 2 spots with the most potent corporate reputations in the UK
Further down Reputation Dividend’s index, companies such as AstraZeneca suffered a marked loss of reputation value. Issues relating to for example marketing practices in China, revenue and earnings pressures, an ‘ageing’ product portfolio etc. combined to chip away at the confidence of investors and lead to halving of the Reputation Contribution to nearly 17%.
The study also found that many reputations offer companies significant potential to increase shareholder value further by focussing their communications on the messages that matter most to investors which in 2013 became dominated by ‘growth’ characteristics. Perceptions of companies’ ‘ability to attract talent’ and ‘use of corporate assets’ are now the two most impactful characteristics, with messages relating to companies’ ‘ethical, community and environmental’ credentials starting to find traction for the first time in three years. Cole added; “This is a consequence of the growing criticism of, for example, ‘exotic’ tax planning practices which could impact consumer attitudes and ultimately, revenues.”
For more information please visit: www.reputationdividend.com
Follow Market Research World on Twitter or join in the conversation with our LinkedIn Group