Biggest companies sit on growing cash pile, but not oil & gas and utilities.

FT: “The UK’s largest companies by market value are sitting on cash piles of £53.3bn, more than two-fifths higher than the amount of net cash they held last year, according to Capita Asset Services.”
The total for FTSE 100 companies (excluding financials) is more than four times the net cash held on their balance sheets in 2008 before the credit crunch.
Capita says that the change reflects companies’ desire to keep borrowing low and run conservative balance sheets.
Against a backdrop of political unrest in regions such as the Middle East and sluggish eurozone growth, groups have been reluctant to spend on M&A activity. For similar reasons, continental European companies have also increased the amount of cash they hold.
According to the study, FTSE 100 companies held net cash of £37.9bn last year. The average net cash position has risen from £463m in 2013 to £652m, as companies continue to pay down debt.
But striking sectoral differences lie behind the increase in the overall average.
“While oil producers, gas, water and multi-utilities, media and pharmaceutical sectors have all seen a significant drop in their net cash position, this isn’t enough to swing the balance of the overall trend toward net cash accumulation,” says Justin Damer, commercial director of this division of the outsourcing company.
Capita says that the net cash held by oil and gas groups fell almost £8bn, while mining companies increased their cash positions by £11bn.
For example, BP is undertaking a $10bn divestment programme, and in April Bob Dudley, chief executive, said that the group expected to hand surplus cash back to shareholders through buybacks or other mechanisms.
The contrasting position of the miners reflects a change in approach over the past couple of years, as iron ore prices have fallen.
“Through 2011-12 the chief executives of the major miners – except Glencore – were moved on and the new chief executives came in with a mandate to rein in capital spending, reduce operational costs and return cash to shareholders,” says Richard Knights, mining analyst at Liberum.
“So, the reason the net debt position has improved is partly that big capex reduction. Rio Tinto, for example, cut capex from £17.6bn in 2012 to £8bn next year.”
….Deloitte estimates that the 1,200 listed companies in continental Europe have increased their cash piles by almost €50bn in the past year.