Next Tuesday’s Half Year Results A Great Advert For WPP?
Spreadex | Aug 29, 2018 12:44
It’s been a turbulent year for the FTSE 100 firm. Starting at an opening price of £13.43 it had spiked to a 6 month peak of £14.76 in mid-February, boosted by decent numbers from its peers. It got into trouble following its own annual figures at the beginning of March, however, as it posted a 0.9% decline in revenue, its worst year for growth since 2009.
The fallout from that release eventually left the stock at a sub-£11, 5 year low by the start of April, with the shock departure of CEO and founder Martin Sorrell and news that Ford (NYSE:F) was taking bids from other firms for a portion of its business preventing a proper recovery. Yet it did actually bounce back by the end of the month thanks to a well-received Q1 update (more on that below), rallying above £13.50 towards the end of May.
Since then the rocky waters haven’t abated, the stock at one point returning to £11.50 in mid-July. Late May saw the company lose HSBC (LON:HSBA) as a client of its Mindshare media agency, while in June Sorrell beat his former employers to Dutch ad firm MediaMonks. WPP (LON:WPP) now sits at a current trading price of £13.07.
Going back to those first quarter figures, on the surface things looked pretty ugly, with reported revenue down 4% to £3.555 billion. However, strip out currency headwinds and revenue rose 2%, with like-for-likes up 0.8%. The company also won net new business of $1.737 billion in billings. Importantly it also stated that its clients had ‘expressed their continued support for and confidence in’ WPP in the aftermath of the Sorrell departure.
In terms of next week’s half year results, investors are going to want to see the continuation of that revenue growth (once currency headwinds are stripped out) alongside an improvement on 2017’s headline interim pre-tax profit of £793 million. Any word on who will be taking over as CEO – with joint-COO Mark Read the frontrunner – will be more than welcome.
WPP has a consensus rating of ‘Hold’ alongside an average target price of £14.89.
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