With Reuter's one-place jump to the top of the table the media sector confirms its status as the best performing of all 18 industry categories. Seven of the sector's nine companies recorded RSW scores well above the median, while average return on equity edged up from 26% to 28% (as against a fall from 17% to 14% for the 400 as a whole). Indeed, Bertelsmann's return of 53.5% proved the highest in the entire list, though in the overall analysis its performance was hindered by low asset growth. Reuters' advance was helped by both strong sales of Instinet, its automated equity dealing system, and last autumn's collapse in the value of sterling. Were it not for Reuters' seemingly prudent policy of hedging against movements on the foreign exchanges, profits would have been higher still. With the exception of Bertelsmann and Polygram, who traded second and third places, the trend in the rest of the sector was downward. Pearson, which posted its third consecutive year of falling profits, recorded the heaviest slide, dropping from 48 to 114. The one new entrant to the sector is now also its largest, France's Matra-Hachette, a combination of a cash-rich defence contractor (last year's 212) and the indebted publisher of Elle magazine (formerly 397). Reed International, though now merged with Holland's Elsevier,is listed separately, slipping back from 103 to 140.
Upheaval among the engineers
For an ostensibly depressed sector, Europe's machinery/equipment manufacturers display a surprising volatility. The biggest upheaval is provided by the arrival of two very different British companies - newcomer TI Group at 54 and Charter at 70 - ahead of Germany's Linde, last year's best performer. TI's acquisition of Dowty last year, through providing lower than expected profits, boosted sales to £1,149 million and produced asset growth of 24.1%, the sector's highest. Charter, the construction, mining and rail equipment group, rose 165 places after posting markedly improved profitability and solidity scores and disposing of its 38.4% stake in platinum refiner Johnson Matthey. Outside Britain, the biggest single gain comes from Germany's Thyssen Industrie, which, on the strength of a 30.9% return on equity, moves up from 237 to 127. Though hit by falling demand in the German automotive market, it has been buoyed by a strong performance from its subsidiaries - Budd in the US and Tallent Engineering in the UK. SAGEM, France's defence and electronics group, similarly manages to avoid the downturn and moves up from 196 to 135. Metals and plastics engineer Glynwed International drops out of the list after a fall in sales took it below the qualifying threshold.
Live wires among the utilities
According to the RSW formula, Britain's privatised utilities, often criticised for their excessive profits and for paying their executives excessive salaries, far outperform their Continental rivals, accounting for 12 of the 16 top companies. Tractebel, Belgium's energy and engineering conglomerate, continues to monopolise the top of list, largely due to the sales growth that followed a series of acquisitions in 1988. When the effect of these is removed next year it is unlikely to feature strongly. Its main challenger is Thames Water, the sole representative of Britain's 10 water companies, which, having lifted sales to £1,043 million and recording a high cash flow and equity gearing, appears at number 20. Most of the ferment in the sector comes from the advance of the regional electricity companies, the villains of the recent energy review, eight of which manage to shrug off tight regulation and depressed demand to find a place in the table's upper reaches. Seeboard, Midlands and Norweb perform particularly well, moving up 50, 62 and 68 places respectively. The generators, assisted by a fall in the price of coal, also gain ground - Powergen appears at 105, while Scottish Power rises 74 places on the back of a 33.4% return on equity, the highest in the sector. British Gas, meanwhile, suffering from tariff reduction, increased competition in the industrial contract market and frequent clashes with its regulator, drops from 45 to 154.
Trade improves overall
Europe's retail and wholesale trade companies record an average RSW score almost double that of last year, making it one of the few industry categories in which overall performance has actually improved. Of the sector's 56 companies, 23 of which are British, 33 move up to higher positions than last year. Among the losers is last year's best performer, catalogue sales group Argos, which slips back to fourth place following a slide in profits. German retailer Douglas and Britain's original discounter, Kwik Save, both improve their relative standing but are in turn eclipsed by Otra, the Dutch wholesaler and distributor (and the sector's smallest company), which arrives at the top of the list with an impressive 48.2% on equity. Iceland, another new entrant, provides the stongest asset growth of any company after an aggressive programme of store openings while Merkur, the Swiss retailer and caterer, records a massive growth in sales of 55.8% following a series of acquistions. Argyll, Sainsbury and Tesco, the big three grocers, then untroubled by the arrival of the hard discounters, all move up, the latter markedly from 116 to 81. Asda, meanwhile, records the sector's steepest fall, from 318 to 84, this being the year it was dragged into heavy loss by an exceptional charge of £452 million - and before Archie Norman's turnaround skills were fully felt. Ratners, last year's number 266 is, unsurprisingly, absent.
Britain continues to eat well
The strong performance of Britain's food and beverage companies appears to confirm the axiom that it is always food sales that are last to be hit by recession (and, conversely, the last to benefit from rising incomes). Indeed, despite the travails of the wider economy,Britain continued to dominate the sector with 17 of a total 33 companies - and nine of these actually improved their rankings on last year (as opposed to just six others who did so among the remaining eight countries). Rothmans, last year's number two, moved up six places to pass France's LVMH and take the number one slot. Though it recorded a lower return on equity, it improved its showing on both growth indices. Elsewhere, the most impressive performance - a rise of 123 places - came from France's Saint Louis, a former sugar company that has steadily moved into a wider range of foods and, with its 40% stake in papermaker Arjo Wiggins Appleton, increasingly resembles a highly diversified industrial group. Similarly, the Dutch food group Wessanen, recently merged with Bols, dramatically improves its ranking - from 260 to 158. The Danish brewer, Carlsberg, makes its first appearance, at 65. There are notable absentees - Ranks Hovis McDougall (formerly 149) following its acquisition by Tomkins (this year's no 18) and Perrier (last year's 185), now part of Swiss giant Nestle which is at number 83.
A blight for chemicals to cope with
Times are notoriously tough in the European chemicals market, with agrochemicals blighted by the continuing reform of the Common Agricultural Policy, bulk chemicals squeezed by falling demand and growing competition from the Far East and pharmaceuticals increasingly hit by government curbs on healthcare spending. Nevertheless, it is still the same four drug giants - Britain's Glaxo and Wellcome, Sweden's Astra and the Anglo-American SmithKline Beecham - that monopolise the very top of the table. Of these, Wellcome is alone in improving its ranking, up five to fifth place, having posted a marginally higher return on equity.Sharp national variations emerge; the big three Swiss firms, Roche, Sandoz and Ciba, all advance on last year, while their German counterparts, Bayer, Hoechst and BASF, all move down, the latter precipitately. The fall of Hoechst, the sector's giant, contrasts strongly with the improved fortunes of France's Roussel Uclaf - in which it has a 54.5% stake - which moves up from 190 to 157. Six of Britain's eight contenders lose ground, with pre-Zeneca ICI providing the sector's sharpest fall after a third successive drop in profits. Fisons, plagued by internal problems, slips back from 44 to 73. The one newcomer, Denmark's Novo Nordisk, proves the sector's sixth-best performer. Montedison (formerly 88), the agrochemical giant at the heart of Italy's Ferruzzi empire, has disappeared.
Transport moves downwards
BAA's sudden appearance at the top of the transport sector, the lowest scoring of all the principal sectors, would appear to contain a salutary lesson for its less successful rivals - that the most lucrative activity for a transport company in the current climate is not moving passengers or freight but in retailing, the area from which BAA, the privatised airport operator, derives the bulk of its profits. Its nearest competitor is Italy's Autostrade (formerly 55), which, having reported plummeting profits and heavy debts, slips back 45 places. There are even greater shifts elsewhere - Wagons Lits, the Belgian travel agency (owned by the higher-placed French hotel group Accor), jumps from 294 to 175, while Bilspedition, Sweden's heavily-indebted freight group, drops from 242 to 396 after a disastrous foray into shipping and property. Most of the downward pressure - 12 of the sector's 17 companies record below average scores - comes from Europe's increasingly liberalised airlines,the bulk of whom struggle to fill their seats. All but one are found at the lower end of the table. The exception, British Airways, maintains its status as best performing carrier, which, despite posting profits up by almost 40%, falls 40 places. Swissair and KLM, potental partners in a cost-saving alliance move in different directions - up to 306 and down to 379 respectively. LEP, the ailing freight forwarding and security group, crawls in at 399th position.
Building is on shaky ground.
Britain provides the buildingsector with both its best and worst performing companies. At the top of the list is Redland, the diversified building materials group, bolstered by a 24% growth in assets. Its advance is secured despite the sector's worst overall sales growth and a lower return on equity than last year. At the bottom is Costain, the debt-ridden mining, engineering and construction group. Like most of its competitors, it has had to make heavy write-downs on its undeveloped land, though its woes have been compounded by its involvement with Eurotunnel and London's beleaguered Spitalfields development. The cumulative effect is an alarming - 104.8% return on equity. Costain aside, few British companies emerge unscathed, with 11 out of 15 recording a fall from last year - Tarmac and Amec, down 114 and 142 places respectively, are the severest examples. The French are suffering an increasingly depressed domestic market. Eiffage, formerly Fougerolle, is one of the few exceptions. Restructuring at both Poliet and Ciments Francais has caused heavy falls, while Bouygues and Colas, its road-building subsidiary, are similarly down. Germany, meanwhile, defies the rest of Europe and continues to enjoy a post-reunification boom from the demand for housing and roads in the new federal states. Heidelberger Zement appears at number 80 while its five other compatriots all move up.