Wage inflation bites Waitrose, Pearson tightens cost base

The parent company presents £11.7bn in turnover, but the prior period is listed as a single day. That renders any unadjusted year-on-year percentage statistically unhelpful, so we will skip the comparison. Looking strictly at the latest period, it is notable that administrative expenses of £3.75bn have fully absorbed the £3.73bn gross profit.

Top-line growth has not translated to the bottom line here. Despite a reduction of 1,800 in average headcount, total staff costs rose by nearly 10%, pushing average pay up 14% to roughly £25.6k per head. That wage inflation, coupled with £2.16bn in administrative expenses, has driven a contraction in operating profit.

A consolidated set of numbers where operating profit outpaced revenue growth. Operating profit jumped 38% to £224.9m, demonstrating that margin can still be found in construction and regeneration. The period also saw an increase in board pay, with directors' remuneration rising 13% to £16.7m.

This is textbook cost control on a flat top line. Revenue barely moved, but a £34m reduction in administrative expenses and a static headcount allowed operating profit to climb 7% to £614m. A steady set of numbers, alongside an audit report that outlined five key audit matters.

This is the sort of operational gearing typically seen in a subsidiary structure. An average headcount of just six is attached to a quarter of a billion pounds in turnover. A reduction in administrative expenses of nearly a million pounds was sufficient to push operating profit up 61% to £5.7m.