WPP Aunz Ltd (ASX: WPP)

WPP Details

Lowered the earnings per share guidance: WPP Aunz, Australasia’s leading marketing communications services group, witnessed a stock price plunge of over 12% on October 23, 2017 as the group provided its 2017 earnings guidance update and indicated for full year 2017 result to be below guidance of mid-single digit growth in earnings per share. The revised guidance excludes the potential impact of any non-cash impairment charges that may be required and amortisation of the goodwill which resulted from the merger. The group’s net sales are now expected to have an increase of 0% to 2% only.
 

Outlook (Source: Company Reports)
 
The group result for September month has also been below expectations and WPP has indicated that new business wins are supporting the advertising, media and digital business while soft economic conditions led to some client cutbacks in research and production. On the other hand, the balance sheet and operating cashflows have been said to be positive and the leverage ratio is expected to be within the range of 1.5x to 2.0x at 31 December 2017. The group in its half year result had highlighted for a 28.9% rise in revenue from ordinary activities while net profit was up 2.4%. We give a “Hold” recommendation at the current price of $0.95

Woolworths Ltd (ASX: WOW)

WOW Details

Exit from the Home Improvement business: Woolworths will be holding its Annual General Meeting on 23 November 2017 at the Melbourne Convention and Exhibition Centre, and the items of business will include a resolution on change of company’s name to Woolworths Group Ltd. The group recently completed the sale of 100% of the shares in Hydrox Holdings Pty Ltd to Home Investment Consortium Company Pty Ltd (Home Consortium), and this helped the group’s complete exit from the Home Improvement business. The group stated that the terms of the sale were consistent with disclosures in Woolworths’ 2017 Annual Report and previous announcements. WOW has been moving from turnaround to transformation of its business and had reported a mixed result for 52-weeks ending June 2017. While the NPAT and earnings per share slipped 3.6% and 5.1%, respectively, dividend per share of 84 cents was up 9.1%. Improvements in Voice of Customer (VOC) scores in Australian Food, with store-controllable VOC of 81% in June 2017 were reported. Further, sales momentum in Australian Food, with Q4’17 Easter adjusted comparable sales growth of 6.4% and H2’17 EBIT rise of 13% were reported. The group is also making efforts for accelerating growth from digital and improving the customer home delivery and store pick up experiences in Food and Drinks. Challenges do prevail in terms of Amazon’s entry but efforts on generating sustainable performance in Food, evolving drinks business, and transforming into a lean retailer are expected to support the stock performance. We give a “Buy” on the stock at the current price of $25.46

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