WPP Plc

WPP Plc (LON: WPP) is a London-headquartered holding company, which is a world leader in communications services and offers national and multinational clients a comprehensive range of communications services. The operations of the group are organised into four reportable segments, namely Global Integrated Agencies, Data Investment Management, Public Relations, and Specialist Agencies.

Recent News
On 5th December 2019, WPP announced the completion of the transaction to sell 60 per cent of its global data, research, consulting and analytics business, Kantar to Bain Capital Private Equity.

Financial Highlights – Q3 Financial Year 2019 (30^th September 2019,
In the third quarter of 2019, the company’s reported revenue rose by 5.2 per cent (AER basis) to £3,291 million. On a year to date basis, the company’s reported revenue rose by 2.8 per cent (AER basis) to £9,659 million. The group saw improvements in the main markets and sectors in Q3 FY2019. The company’s net new business for the nine months period stood at USD 3.9 billion for the period. The company witnessed significant improvement from its North American and Chinese business in the third quarter.

Share Price Performance

Daily Chart as at2^nd January 2020, before the market close (Source: Thomson Reuters)

On 2^nd January 2020, WPP Plc shares were trading at GBX 1,081.00 at the time of writing before the market close (at 11:15 AM GMT), up by 1.36% against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,085.50/GBX 791.00.The company’s stock has given investors 13.19 per cent of a positive return in the last month.

Conclusion
The growth in Q3 FY2019 is encouraging, but the company is focused on delivering the longer-term goals and know there will be twists and turns along the way. In FY 2019 guidance, LFL revenue less pass-through costs will decrease by 1.5 per cent to 2 per cent. In 2021, the company’s organic growth will be in line with the peers, free cash flow conversion to be in the range of 80%-90% and headline operating margin, before IFRS impact, of at least 15%. The company is setting out a new plan to return the business to its sustainable growth, and at the end of 2021, the company will implement its three-year strategic plan, which will help the business to grow, which includes disposals, mergers, and simplification of the group structure. The company has shown decent top-line growth in the current period, and while there was some weakness in the healthcare division and mixed performance in customer-packaged goods, it reported a decent growth from customers in the technology sector. The risk in recent time has augmented due to volatility caused by Brexit in the UK and Europe. The group looks to address its performance in the United States and improve results.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 1,066.50 (as on 31^st December 2019).

Redrow Plc

Redrow Plc (LON: RDW) is prominent in the residential housing development in Wales and England. The company’s product range is mainly focused on regional businesses in Greater London and traditional family housing in its apartment schemes.

Financial Highlights – Financial Year 2019 (30^th June 2019, GBP, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 30th June 2019, the company’s revenue rose by 10 per cent to £2.1 billion against the £1.9 billion in FY2018. As a result, the company delivered a record profit before tax of £406 million, a surge from £380 million in FY2018. The company’s basic earnings per share for the year 2019 rose by 8 per cent at 92.3 pence against the 85.3 pence in FY2018. In FY2019, the reported return on capital employed remained flat at 28.5 per cent. Return on equity for the year 2019 reduced to 26.5 per cent against the 28 per cent in FY2018. The operating cash inflow generated for the period was £371 million.

Share Price Performance

Daily Chart as at2^nd January 2020, before the market close (Source: Thomson Reuters)

On 2^nd January 2020, Redrow Plc shares were trading at GBX 755.84 at the time of writing before the market close (at 11:40 AM GMT), up by 1.46% against the previous day closing price. Stock's 52 weeks High and Low are GBX 767.92/GBX 477.50.The company’s stock has given investors 14.39 per cent of a positive return in the last month. The company’s stock has given investors 25.83 per cent of a positive return in the last three months.

Conclusion
The trading for the first 18 weeks of the current financial year has stayed encouragingly strong despite relatively weak demand in the wider housing market and ongoing Brexit uncertainty. In the first 18 weeks to 1st November 2019, the value of net private reservations increased by 2 per cent to £598 million, excluding a £119.5 million PRS sale at Colindale Gardens. On a like-for-like basis, the sales rate per week per outlet stood at 0.67, excluding the PRS sale. For the first eighteen weeks of the financial year 2020, the average selling price of private reservations, excluding the PRS sale, was almost the same from the previous year.

The company’s outlet progress continues to be affected by a careful approach to land acquisition and planning delays. Presently, the company is working from 128 outlets. Overall, the order book increased by 8% to £1.3 billion. The balance sheet stays strong.The company is well-positioned with its robust order book for the future, a dedicated team and an outstanding product to deliver for the future. The company is on course to attain another set of good results.

Therefore, based on the above rationale, we have given a "Hold" recommendation at the closing price of GBX 745 (as on 31^st December 2019).

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