Performance Review of Two Stocks Listed on the LSE: WPP Plc and Foxtons Group Plc

Summary

  • WPP Plc's revenue declined by 7.6% year-on-year to £2.4 billion during Q3 FY20.
  • Public Relations is the best-performing business segment.
  • Foxton Group Plc's revenue was £28.5 million for Q3 FY20.
  • The sales commission pipeline is at its optimum levels in the last three years.

WPP Plc (LON: WPP) and Foxtons Group Plc (LON: FOXT) are LSE listed stocks in the consumer discretionary industry and the real estate industry, respectively. Shares of WPP and  FOXT were down by 1.49% and 0.58%, respectively, from the last closing price (as on 02 November 2020, before the market close at 1:50 PM GMT).

Will WPP Plc survive during the second wave of Covid-19?

WPP Plc is the FTSE 100 listed creative transformation company using the power of creativity to build a better future for the clients, people and communities. The Company operates in 3 business segments - Global Integrated Agencies, Public Relations & Specialist Agencies.

Client sector mix

(Source: Company presentation) 

 

Q3 FY20 trading update as reported on 29 October 2020

(Source: Company update)

  • For Q3 FY20 ending on 30 September 2020, the Company has seen marginal improvement due to the rise in economic activity. Revenue in Q3 FY20 plunged by 7.6% to £2.4 billion. All three business segments have witnessed a slight recovery in their income.
  • Global Integrated agencies segment has shown decent recovery in Q3 FY20 and reported a decline of 6.7% in revenue less pass-through costs, while the reduction was 15.7% for Q2 FY20. VMLY&R remained the best performing global agency.
  • Public Relations has proven to be the best performing business segment showing a decline in revenue of just 2.9% year-on-year in Q3 FY20 while the decline was 7.5% in Q2 FY20. Specialist Agencies segment was down 13.9% year-on-year showing little recovery from the second-quarter levels where the revenue fell by 16.3%.
  • Regarding the financial position, net debt was £2.3 billion on 30 September 2020, compared to £4.6 billion on 30 September 2019. It has been reduced by £2.3 billion due to proceeds from Kantar transaction.

Recent Developments

  • On 26 October 2020, the Company appointed Ya-Qin Zhang as Non-Executive Director with effect from 1 January 2021. He is the world-known technologist, scientist and entrepreneur.
  • On 5 October 2020, the Company appointed Tom Illube as an Independent Non-Executive Director with immediate effect. Tom is the founder and CEO of AIM-listed Crossword Cybersecurity Plc.

H1 FY20 results (ended 30 June 2020) as reported on 27 August 2020

In H1 FY20, the Group's revenue less pass-through cost declined by 9.5% year-on-year to £4.66 billion from £5.19 billion in H1FY19. Diluted EPS from operations was down by 45% from 28 pence in H1 FY19 to 15.4 pence in H1 FY20. Public Relations remained the best-performing business segment backed by high demand from clients for strategic stakeholder communications. VMLY&R and Wunderman Thompson were the two best-performing agencies. Net debt was reduced by £1.50 billion to £2.70 billion as of 30 June 2020.

 

(Source: Company presentation)

Share Price Performance Analysis of WPP Plc

(Source: Refinitiv, created by Kalkine Group)

Shares of WPP Plc were trading at GBX 607.2 and were down by 1.49% against the previous closing price (as on 02 November 2020, before the market close at 1:50 PM GMT). WPP's 52-week High and Low were GBX 1,085.50 and GBX 450.00, respectively. WPP Plc had a market capitalization of around £7.56 billion.

Business Outlook

The Company has remained cautious regarding tightening of covid-19 restrictions and gloomy global outlook. Hence, they are making significant investments in employee support services focusing on the mental strength and well being of their employees. The Company is forecasting a revenue decline in the range of -8.5% and -10.7% for FY20 and operating margin to be in the range of 11.4% and 12.5% assuming no further lockdowns in any of the major markets.

 

Is Foxtons Group Plc's capitalizing on stamp duty relief advantage?

Foxtons Group Plc is the FTSE All-Share listed holding company. The operating business segments are - sales, lettings and mortgage broking. The Company earns the commission from all its three business segments.

Upcoming Event -The Company will issue a pre-close trading update in January 2021.

Q3 FY20 trading update as reported on 29 October 2020

As per the update released on 29 October 2020, the Company has reported the Group revenue of £28.5 million for Q3 FY20, which has been down by 10% year-on-year.  Similarly, revenues for the first nine months of FY20 have declined by 18% year-on-year and reached £68.9 million.

 

  • Lettings – Revenue for Q3 FY20 declined by 8% year-on-year to £19.5 million while volume has returned to pre covid levels. The average revenue per tenancy has reduced due to the noticeable reduction in the number of overseas student tenants and corporate relocations.

 

  • Sales - Revenue for Q3 FY20 declined by 18% year-on-year to £6.90 million. However, sales activities have been significantly improved from the levels of the prior year, driven by a spike in demand post lockdown and stamp duty relief.

 

  • Mortgage - Revenue for Q3 FY2 increased by 4% year-on-year to £2.20 million, driven by increased levels of refinancing activities.

 

The financial position is strong having, the cash balance of £43.2 million as VAT deferral and, lease deferral will be repaid in the remaining part of the year. The Group does not have any external debt.

 

H1 FY20 results (ended 30 June 2020) as reported on 28 July 2020

In H1 FY20, The Group's revenues have declined by 22% year-on-year to £40.4million. Revenue of all three business segments, Lettings, Sales and Mortgage Broking declined year-on-year by 21%, 28% and 9%, respectively. The Company is having a robust cash balance of £40.5 million as on 30 June 2020 reflecting successful equity fundraising happened in April 2020.

(Source: Company Presentation)

Share Price Performance Analysis of Foxtons Group Plc

(Source: Refinitiv, created by Kalkine Group)

Shares of Foxtons Group Plc were trading at GBX 33.80 and were down by close to 0.58% against the previous closing price (as on 02 November 2020, before the market close at 1:50 PM GMT). FOXT's 52-week High and Low were GBX 98.00 and GBX 27.00, respectively. Foxtons Group Plc had a market capitalization of around £112.23 million.

Business Outlook

The Company has made significant progress driven by increased levels of economic activity. Stamp Duty relief has acted as a massive booster for the sales business segment and, sales commission pipeline has reached at its optimum levels in the last three years. The Company is very cautious regarding the London residential market due to economic uncertainty impacting the letting business.

 

 

 


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