WPP and Rightmove

“A mixture of corporate results, a dip in sterling and a recovery rally in the resources sector helped the FTSE 100 to a decent start on Friday after a tricky week for the index. “Sentiment was helped by better than expected Chinese manufacturing figures with a solid increase in new orders,” says Russ Mould, investment director at AJ Bell.

WPP

“Expectations had been set pretty low for media giant WPP so its perhaps not a great surprise that performance is better than advertised.

“What’s expected for 2019 is modestly more positive than previously thought and 2018 numbers were also marginally better than some pretty bleak guidance.

“All of which suggests chief executive Mark Read has at least got some skill at expectations management. The harder bit might be achieving a tangible improvement in the advertising company’s fortunes, after all the company is still expecting revenue and margins to decline this year amid the loss of several major clients and it is less than a year since founder Martin Sorrell left in such acrimonious circumstances.

“Read’s task is made even more difficult by the uncertain economic backdrop. Advertisers are particularly exposed to fluctuations in the economy because companies will increase spending on ads when they are feeling positive and scale back during tougher times.

“WPP outlined its long-term strategy in December which involves simplifying and integrating a business which historically was made up of lots of individual agencies. Job cuts inevitably form part of the picture too.

“And the company also signaled its intention to sell its Kantar market research business, though there is no update on that today.”

Rightmove

“Property listings website Rightmove enjoys an enviable position. Estate agents subscribe to Rightmove in order to put the properties they are looking to sell on the site.

“Because Rightmove has the most listings it is the one most prospective property buyers go to when looking for their next home. This makes it a must-have product for estate agents and results in significant pricing power.

“It explains why the company was able deliver double-digit growth in revenue, profit and cash flow against a stalling property market in 2018. Average monthly revenue per estate agent rising 9% to more than £1,000 per year.

“Unsurprisingly, given its ability to squeeze more out of them year after year, Rightmove is not that popular with agents, who have backed an alternative venture in OnTheMarket. But although this platform has achieved some traction, it shows little sign of unseating the dominant player in the market any time soon.

“Investor reaction to today’s results reinforce the old adage that it is better to travel than arrive, with the shares enjoying a strong start to the year ahead of these numbers.

“Rightmove claims not to be affected by the property cycle except in ‘extreme’ conditions and there may also be some nervousness that the Brexit uncertainties flagged by the firm could push us towards those extremities.”

These articles are for information purposes only and are not a personal recommendation or advice.