Sunshine amid showers: companies thriving despite the recession
Have you heard the one about the high street bank, with millions of British customers, that is making so much money it doesn't know what to do with it?
It's not a joke. Listen to this:
"At this rate, we would have to take a decision. Either we do a bigger payout, an extraordinary dividend, a buyback or we stay [with this excess capital]... until the legislative clouds clear," the chief executive said.
Bosses at Barclays, Royal Bank of Scotland and Northern Rock must be rubbing their eyes in disbelief.
Well, it certainly doesn't apply to them, which in banking terms are the (not so) good the (very) bad and the extremely ugly. But it does apply to at least one bank with a familiar face in Britain.
Banks don't have to be disasters
Spain's Santander, owner of Abbey and Alliance & Leicester has had a good war, you might say.
By largely steering clear of subprime loans, having extensive holdings in the booming Latin American markets and treading carefully through the property disaster in its home market, Santander has shown how a bank can make its own luck.
Chief executive Alfredo Sáenz, who made his envy-provoking comments in an interview in the Financial Times, isn't the only happy banker in the world.
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Excitable bankers
Almost everyone working for Goldman Sachs, almost the last man standing in Wall Street banking circles, is going to be pretty excited too, sharing a $16.7 billion (£10 billion) bonus pot so far this year after forecast busting results in the third quarter.
That works out at $630,000 (£384,000) per staff member on average for the whole of 2009.
In Goldman's case, most of its competitors are dead (Lehman Bros), bruised (Citibank, Bank of America) or are being revived after life-saving takeover (Merrill Lynch, Bear Stearns).
No wonder Goldman and the other big survivors, JP Morgan Chase and Morgan Stanley, are doing so well.
Beating a recession isn't just about being a survivor. If you have the rare ability to produce products that capture the imagination of customers, then you can glide through troubled waters that sink less nimble rivals.
The core of Apple's success
Apple Computer struggled for years as computing's David against the goliath of Microsoft (owner of MSN and publisher of this column), until the visionary co-founder Steve Jobs returned to the helm in 1997.
Since then it has produced a series of revolutionary products, notably the iPod and iPhone, that captured market territory well beyond the firm's traditional arena.
Such is the power of the brand, that in its latest quarter Apple blew past all analysts expectations, with a 25% jump in sales and a 47% leap in net earnings.
This comes at a time when most consumer products companies are struggling to stand still. Sales of the iPhone, which in the UK can set back a consumer £1,100 on a two-year contract, were half a million higher than a year ago, at 7.4 million. If we desire it enough, the consumer can clearly find the money to get it.
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Apple hasn't crumbled
If you bought Apple shares just five years ago, for a shade under $10, they would now be worth 20 times as much.
Apple's proposition is coolness embodied in usability, but beating a recession doesn't necessarily require lofty design concepts or a great brand. Sometimes a product is absolutely unique and creates its own space.
That is true of Autonomy, Britain's largest software firm which invented world-beating programmes for sorting and making sense of unstructured documents, extracting meaning from them which can then by harnessed to perform other tasks.
Profit from complexity
This has found a tremendous niche in the business and legal compliance procedures of many of the world's big financial organisations, who simply can't do without it.
Autonomy's profits for the third quarter were up 20% on revenues which soared by 51% over the same period a year ago.
Autonomy was first floated on the stock market in 1998 at 30p, the shares now stand at £14.
Beating recession isn't always about products that are complex, however. Sometimes, just value and availability alone will do the trick.
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The triumph of the sausage roll
Bakery chain Greggs, which pretty much built its success on the humble sausage roll, is ramping its store expansion to about 5% a year, based on an improved supply chain. That will mean adding 60 new shops this year and 70 a year from 2011 onwards.
"This represents a laudable strategy, and one which we suspect will pay back handsomely [in three to five years]," wrote Nick Coulter of Numis Securities in a research report.
The bakers' current results were flat, however, and Coulter said that while there was: "Undoubtedly a great medium term story, [the shares are a] hold for now." Back to the sausage rolls, then.
Others getting better
In fact, all around the world there are companies which trumpet themselves as recession-beaters.
However, in recessionary times, it isn't a surprise that many of these companies are not genuinely shaking off recession, but cutting costs for the sake of caution. That improves profits, but doesn't necessarily market them out as recession beaters.
US drug firm Pfizer, most famous as the maker of Viagra, increased profits by 26% in the third quarter, but sales were 3% lower.
Most of the improved financial performance came from cost cuts, including 6,500 jobs chopped during the year.
Guiding expectations
Cadbury, Britain's premier chocolate maker, produced a better than expected set of results for the third quarter.
Of course, it was expected in the City that it would beat expectations, it was necessary to do so to exact an improved takeover price from Kraft, the giant American food company which wants to buy it.
That tells you all you need to know about the expectations guidance offered by companies to share analysts.
Fully 72% of large US companies that have reported third quarter earnings since the start of the month have exceeded expectations. But few of them are recession beaters.
In fact, most of the improvement in Cadbury's profit margins came from higher prices and a sales mix which favoured high value products.
Actual sales volumes slipped 3%. As a minor treat to make us feel better, chocolate sales aren't really hit by recession, but they aren't racing away either.
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It's about products and services, delivered well
There is nothing inevitable about recession damaging companies. The right product, at the right price, in the right market at the right time will always come up trumps, whatever the state of the broader economy.
Even for a bank, which can so easily inherit the problems of its customers, there are ways to glide through a recession.
"[It's] risk management and nothing else," said Santander's Alfredo Sáenz.
But there's surely some luck too.
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