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The Expert View: WPP, ITE and Informa

Our daily roundup of analyst commentary on shares, also including Mortgage Advice Bureau and Ferguson.

by Michelle McGagh on Apr 05, 2018 at 05:00

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Key stats
Market capitalisation£13,578m
No. of shares out1,266m
No. of shares floating1,222m
No. of common shareholdersnot stated
No. of employees133931
Trading volume (10 day avg.)4m
Profit before tax£2,590m
Earnings per share124.04p
Cashflow per share167.76p
Cash per share188.31p

WPP faces succession issue, says AJ Bell

Advertising giant WPP (WPP) faces a succession issue whatever the outcome of an investigation into chief executive Martin Sorrell over alleged personal misconduct, says AJ Bell. WPP has announced an independent investigation but that ‘the allegations do not involve amounts which are material to WPP’.

‘It is hard to know what the company would look like under different leadership,’ said AJ Bell investment director Russ Mould.

‘Sorrell has been at the helm of the business since it was a wire shopping basket manufacturer…He used the business as an acquisition vehicle and made his first really big splash with a $566 million hostile takeover of New York-based agency J Walter Thompson in 1987,’ said Mould.

‘Even if this probe does not amount to anything, the company needs to confront the succession issue sooner rather than later given Sorrell turns 73 in February.’

The shares fell 2% to £10.95 yesterday.

Key stats
Market capitalisation£420m
No. of shares out270m
No. of shares floating265m
No. of common shareholdersnot stated
No. of employees1393
Trading volume (10 day avg.)m
Profit before tax£30m
Earnings per share-3.13p
Cashflow per share3.77p
Cash per share8.66p

Peel Hunt upgrades ITE on share price fall

Peel Hunt has upgraded trade conference organiser ITE (ITE) on the back of share price weakness.

Analyst Malcolm Morgan upgraded his recommendation from ‘reduce’ to ‘hold’ with a target price of 160p on the stock, which has suffered a period of share price weakness. The shares were flat at 38.2p yesterday.

Morgan said a trading update ahead of interims showed inline growth of 8% and forward bookings currently stood at 85% of current consensus forecast.

He added that political tensions around Russia were a worry for the company, which puts on large events in Moscow, but ‘we understand that ITE has seen no change in booking patterns for [a] deterioration [in relations]’.

‘While there remains risk to any western company operating in Russia, in aggregate there is little cross-border sales from the US or UK into Russia,’ he said.

Key stats
Market capitalisation£5,837m
No. of shares out824m
No. of shares floating823m
No. of common shareholdersnot stated
No. of employees7539
Trading volume (10 day avg.)4m
Profit before tax£584m
Earnings per share27.34p
Cashflow per share50.85p
Cash per share6.66p

Informa acquisition is beneficial to business, says Liberum

Liberum believes publishing and events company Informa’s (INF) acquisition of UBM will benefit the business overall.

Analyst Ian Whittaker retained his ‘buy’ recommendation and increased the target price from 855p to 900p. The shares rose 2p to 709.8p yesterday.

‘We now include in Informa estimates the impact of the UBM acquisition, which we think will pass regulatory scrutiny,’ he said.

‘Overall, we like the acquisition for the impact it has on Informa’s business, although we are concerned over the quality of some of the UBM business.

‘We do have some structural concerns around 20% of UBM’s business, namely fashion, but UBM’s larger events are generally performing well.’

Key stats
Market capitalisation£316m
No. of shares out51m
No. of shares floating31m
No. of common shareholdersnot stated
No. of employees141
Trading volume (10 day avg.)m
Profit before tax£14m
Earnings per share23.18p
Cashflow per share23.59p
Cash per share44.40p

Shore Capital: Mortgage Advice Bureau planning for growth

The appointment of Ben Thompson as managing director of Mortgage Advice Bureau (MAB1) puts to bed fears that chief executive Peter Brodnicki is stepping back from the mortgage broker, says Shore Capital.

Analyst Paul McGinnis retained his ‘buy’ recommendation and said he would be updating his ‘fair value’ price of 570p on the shares, which rose 2p to 620p yesterday.

‘We note Brodnicki’s statement that he is ‘looking forward to working closely with [Thompson] to deliver our strategic objectives for the next five years and beyond’, which should allay any investor fears that Brodnicki is stepping back from the business,’ said McGinnis.

‘The message being that this appointment is about growth and increasing the overall capability. As such we welcome the news, with Thompson’s background and experience looking very well matched to MAB’s development plans.’

Ferguson battling headwinds, says The Share Centre

Plumbing supplies firm Ferguson (FERG), previously known as Wolseley, has continued restructuring despite market headwinds and The Share Centre believes the outlook is positive.

Analyst Helal Miah said the UK market ‘remains challenging’ for the group which is why it is restructuring but he ‘remains positive on the outlook of the firm’.

‘An increased demand for bathroom repair and maintenance combined with recent tax cuts in the US will boost earnings and potentially increase the market share,’ he said.

He added that prospects in the US and Canada were good and ‘the recovery in industrial markets has resulted in positive forecasts that profits for the year will be in line with expectations’.

‘The future for Ferguson looks positive; with continued geographical expansion and a dedicated restructuring programme geared towards improving customer service, maintaining market share and margins, cutting costs and cash generation,’ said Miah. ‘We therefore recommend Ferguson as a ‘buy’ for medium-risk investors.’

The shares fell 1% to £52.06 yesterday.

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  • Ferguson Plc (FERG.L)
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  • Informa PLC (INF.L)
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  • ITE Group PLC (ITE.L)
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  • Mortgage Advice Bureau (Holdings) PLC (MAB1.L)
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