We highlight the top UK firms in the world's high-growth regions.
Readers of previous articles in this series will be familiar with the idea that there are problems with investing in the domestic stock markets of developing countries. Corporate governance standards and reporting transparency can be issues.
Moreover, high GDP growth does not necessarily translate into proportional returns for investors because of the way emerging markets firms finance their growth.
An alternative way for UK investors to play emerging markets is to invest in FTSE companies with good exposure to these regions. In this final article of our world tour we highlight a number of such companies, which, for one reason or another, didn't make it into the regional reviews.
Big oil and gas
Some companies do their geographical segmentation on such a broad basis that teasing out the details of their sales in specific developing regions is nigh on impossible. The big oil and gas companies are a case in point.
BP (LSE: BP) has just two geographical segments: 'US' and 'Non-US'. Royal Dutch Shell (LSE: RDSB) and BG (LSE: BG) are a little more discriminating, but all three provide better information on where their assets are located than on where their sales are made. And it's the latter, of course, which is important for assessing which markets are driving a company's growth.
In the case of the oil and gas sector the difficulty is compounded because the big firms invariably have investment fingers in many pies. As Hallucigenia, author of our oil investing series, has put it: 'Don't forget that the likes of BP, Shell … and BG are effectively giant oil and gas investment trusts.'
With these companies you can see that you're getting a fair bit of emerging markets exposure -- BG's Brazilian gas distribution business Comgas, for example, is responsible for just under 12% of group revenues -- but it's very hard to see the full picture.
Media
Advertising group WPP (LSE: WPP) -- in a business sector that didn't make it into any of our regional reviews -- has a broad-based exposure to developing economies, but doesn't quantify its revenues by individual emerging market region.
Last year WPP allotted £2.3bn, representing 27% of its global revenues, to a segment it describes as 'Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, iconically represented by the BRICs and the Next 11 markets (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam).'
Sheesh, geographical revenues by 'iconic representation', it can only be an ad company!
Security
Some firms, which didn't make it into any of our regional hot lists because their revenues are fairly evenly spread across a number of emerging markets, do, in contrast to WPP, quantify their revenues by individual emerging market region.
Security firm G4S (LSE: GFS), formerly known as Group 4 Securicor, which I've written about recently, operates in over 100 countries. It has a 27% exposure to emerging markets via Asia (9%), Middle East (8%), Africa (5%), and Latin America & Caribbean (5%).
Similarly, Invensys (LSE: ISYS), a global technology company, which provides automation, control and monitoring solutions to a range of industries from oil refineries to railways, has a 25% exposure to emerging markets spread across Asia & Pacific (15%), Africa & Middle East (5%) and Latin America (5%).
British brands abroad
The UK's flag-carrier airline British Airways (LSE: BAY), currently suffering from strike action and a pension headache, generates 10% of its revenues from 'Africa, Middle East and Indian sub-continent', a similar percentage from 'Far East and Australasia', and also has Latin America and Caribbean revenues subsumed in its broader 'Americas' segment.
Luxury fashion house Burberry (LSE: BRBY) has a distinctive British sensibility and enjoys strong, international brand-recognition. Its last interim results show over 90 Burberry stores in emerging markets, generating 10% of the group's sales, a percentage which more than doubles if you include Asia & Pacific's developed markets, such as Japan and Hong Kong.
Burberry is targeting further penetration of emerging markets, and developments since the half-year end include a net six franchise stores opened in China, Saudi Arabia and Lebanon, and the establishment of a joint venture in India, subject to government approval.
Two-tone phones
Telecommunications company Cable & Wireless is in the midst of a demerger. Trading in shares of Cable & Wireless Communications (LSE: CWC) commenced on Monday, while the demerger of Cable & Wireless Worldwide is expected to become effective on Friday.
The two new companies both offer emerging markets exposure, but of rather different kinds.
'Worldwide' has a fairly conventional geographical spread for a UK global firm: the UK is its largest market, but it also has revenues from Europe and the US, as well as Asia & Pacific, and Middle East & Africa.
'Communications' has a quirkier tone, consisting of four regional operations: the Caribbean, Panama, Macau, and Monaco & Islands.
Over and out
So, there you have it: a few final emerging markets aristocrats from the UK market's 200 biggest companies to bring our globe-trotting tour to a close. Hasta luego, tuonane baadaye, sampai nanti.
More from this series:
The author owns shares in BP, Shell and G4S.
