February 2020

Covid-19 and global trade fears challenge UK corporate reputations, valued at more than £900 billion

Shell, BP, Unilever and Diageo post strongest reputation contributions

The gross value of reputation in FTSE350 companies at the start of 2020 reached £941 billion, supporting 35% of the total market capitalisation, according to Reputation Dividend’s UK 2020 Report launched today (Friday 28^th February).

This is down from previous years, impacted by the emergence of Covid-19 and world trade uncertainty during the Brexit transition and a rancorous US election.

According to Reputation Dividend Founder Simon Cole, “while these are big numbers, the impact of the confidence inspired by reputation has declined. Analysis shows that investors are looking for harder evidence of how companies will succeed in the months and years to come.  As an asset, reputation is in the eye of the beholder, and it may well be in the eye of the storm currently as investors seek shelter in a nervous market.“  

Added Reputation Dividend Director Sandra Macleod: “the key drivers of reputation value are clearly the ‘table stakes’ of financial soundness, quality of management and quality of goods and services. Beyond these 'hygiene factors', while it differs across sectors and individual companies, drivers of incremental value are focusing now on innovation and global competitiveness.”

The UK 2020 Report quantifies the contribution of corporate reputation to the UK’s largest listed companies expressed as the Reputation Contribution or proportion of a company’s market cap attributable to the confidence inspired by its reputation and lists the companies with the 10 most economically influential reputation assets. This is 12^th year since tracking began and has been used by board rooms of leading organisations to benchmark and support prioritisation of operational and narrative messages to protect and grow the value of the intangible asset that is reputation.  Reputation Dividend is the only recognised index of the financial value of corporate reputation as measured as a percentage of market capitalisation

The full study is freely available here.

REPUTATION VALUE ANALYSIS – EXPLAINED

Reputation value analysis reveals the economic impact of corporate reputation in order to help companies manage the assets more effectively. It quantifies the tangible financial impact of corporate reputation by making the direct link to market capitalisation and share price performance.  Analysis is a two-stage process. First, the factors that most influence the investment community, and thus the market capitalisations, of individual companies are prioritised using statistical regression analysis of hard financial metrics, including shareholder equity, return on assets, forecast and reported dividend, earnings, liquidity and company betas and reputation measures.  From there, a combination of metrics are calculated, including the gross economic benefit shareholders derive from reputation assets, the location of value across the individual components of companies’ reputations, the extent to which investment in reputation building is likely to produce returns in value growth, and the relative value potential and risk of individual opportunities.

BACKGOUND

Founded by ex-Interbrand specialists and a team of analysts, Reputation Dividend is the only recognised index of the financial value of corporate reputation as measured as a percentage of market capitalisation. This is the 12th Annual Report, covering some 160 of the largest companies in the UK.  The UK study was run in parallel with its sister US study, and is based on data reported from late 2019 through to the start of 2020. Clients include AB-InBev, Aetna, Agilent, Airbus, Allstate, Amgen, ARM, Arrow, Bayer, eBay, GE, GKN, Hikma, Johnson & Johnson, MetLife, Phillips 66, Serco, Shire, Standard Life, Takeda, United Technologies, Zurich, Xerox.