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News & Tips: Footasylum, WANdisco, WPP & more

Retailer's shares down close to 50 per cent this morning
September 3, 2018

With the latest on Indonesia's rupiah, Italy and this morning's market movements, here's the The Trader's report.

IC TIP UPDATES:

WANdisco’s (WAND) shares fell more than a tenth this morning on a half-year trading update to June. The live data company secured $9m of total bookings, down from $10.2m a year earlier. Its WANdisco Fusion product secured $6.2m of big data bookings, down from $7m. Meanwhile, source code management bookings were $2.8m, down from $3.2m.  Still, there was $18m cash on the balance sheet, and WANdisco’s “robust and strengthening sales pipeline” gives management confidence in achieving full-year market expectations. Its relationship with IBM “significantly expanded”; the associated original equipment manufacturer royalty rose to 50 per cent from 30 per cent. Recommendation under review.

Shares in retailer Footasylum (FOOT) are down close to 50 per cent this morning after the group was forced to cut its FY2019 earnings guidance – again. Gross margins are still under significant pressure, particularly as poor footfall on the high street during July and August led to disappointing store sales. As a result, full-year revenues will come up short, which combined with rising costs and internal investments will put pressure on cash profits. Analysts at Liberum have cut cash profit forecasts by more than 64 per cent. We remain sellers.

KEY STORIES:

The UK water companies have today published their business plans for the upcoming regulatory cycle. Pennon (PNN) and Severn Trent (SVT) have both opted for outcome delivery incentives of -3 per cent to +2.6 per cent, indicating confidence with their willingness to risk higher penalties for the chance of higher returns. United Utilities (UU), meanwhile, has opted for a -2 per cent to +2 per cent range. Pennon has indicated it will rebase dividends “reflecting lower returns to 2025, while SVT is targeting a base regulatory dividend of 5 per cent. However, Ofwat must still publish assessments on the plans, and is expected to do so in January, so investors should not regard these plans as set in stone just yet.

Hurricane Energy (HUR) is one of the big movers this morning, after Centrica-owned Spirit Energy farmed-in to two of the North Sea independents licences. Together with Spirit, Hurricane has agreed a five phase work programme targeting first oil from the Lincoln and Warwick fields in 2020. Hurricane will now be carried $387m by Spirit, and sees its shares rise more than 13 per cent today, to a 14 month high.

Peer-to-peer lending platform Funding Circle has announced plans for an IPO on London’s main market, in a bid to raise gross proceeds of £300m. Management intends to use the proceeds to enhance its balance sheet, with Danish billionaire Anders Povlsen – who also had holdings in Asos (ASOS) and Numis (NUM) – agreeing to buy a 10 per cent stake.    

Annual results from veterinary pharma specialists Dechra (DPH) were in-line with expectations but that was not enough to please the investors who had sent the group’s share price up to record highs so far this year. This morning, Dechra’s share price was down more than 15 per cent on fears that continued growth may rely on further acquisitions, while brokers Stifel and Numis have trimmed their forecasts.

Full year adjusted cash profits are expected to ahead of previous expectations at publisher Future (FUTR). Chief executive Zillah Byng-Thorne says the group benefited from World Cup related campaigns and a number of larger than expected product launches.

OTHER COMPANY NEWS:

Vertu Motor (VTU) shares are up marginally this morning following the release of a pre-close trading update. It’s a brief note to say the least, but the car retailer has confirmed it is trading in line with expectations ahead of the release of interim results on 10 October.

Beleaguered media group WPP (WPP) has appointed a new chief executive just in time for its financial results (which are due out tomorrow). Mark Read - who will take up the top job immediately - previously led the group’s largest agency, Wunderman.