There are not many corporate names that always seem to report on a Friday but advertising giant WPP (WPP) and financial behemoth Royal Bank of Scotland (RBS) are two of them. I guess it might lead to an extra few column inches in the press over the resulting 24 hours. I said on (inevitably Friday) 1st March about WPP that 'I don't have enough confidence yet of the future vision. Technical adherents may like to have a go if the share breaks above the nine quid level but for me I am still not sure whether the first half revenue decline is ultimately going to be the good or the bad part of 2019'. The latest quarterly comments do not add that much extra useful colour, with like-for-like revenues down 2.8% but still 'continued progress in implementing three-year turnaround plan'.
Geographically, WPP's US business was the area which took a real hit with 'the impact of assignment losses among automotive, pharmaceutical and FMCG clients' but otherwise business life progress was either side of zero...meh. And a similar thought could be made about the share price progress, where - despite broader markets being up - WPP shares have only risen a tad above the aforementioned 'nine quid' level. Still a work-in-progress...although at least it is continuing to chivvy down debt and also noted 'the previously announced sale process of Kantar is progressing well'. Sensible stuff in an industry which is clearly still changing fast with new competitors - including old boss Martin Sorrell - lurking.
Advertising is a business that is linked to the business cycle and you can certainly say the same about banking. RBS' numbers were actually alright in the wider scheme of things and slightly beat hopes due to lower exceptional costs – well conduct and restructuring expenditures have been so high over the last decade or so. However profits were still down compared to the first quarter of last year not helped by continuing trends such as ultra-low interest rates. Net interest margins - traditionally how banks make money - continued to falter (down to 1.80% from 1.95% in the previous quarter) and then again there was the 'great uncertainty' associated with Brexit meaning 'growth (is) more challenging in the near term'. Back to banking and its link with the economic cycle.
General progress on cost cuts, increased use of digital apps and capital generation continues apace. Tangible net asset value edged up to 289p a share meaning the share is now trading at around x0.8 tangible book value. For a boring retail bank that is probably cheap if economies do not roll over...but there is your call. Certainly you can understand why the CEO - who has battled through complex restructurings to get the group to this point of profitability/paying dividends/reduced government stake and related - has decided to move on after a number of years dealing with the hassles of government, legacy matters and the competitive economy naturally. I still like RBS as an investment and - for my sins do hold the stock- but I get it if you say 'meh'. Maybe investors would be more fired up if they were not pacing through numbers when their minds are half on the weekend!
Filed under: WPP, RBS, Audioboom, Xeros, Cadwalladr, Challenger Acquisitions, Chris Bailey
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