Profit warnings usually catch investors unaware — but the clues are often there, if you read the wording in company updates carefully enough.
In this article, I’ll explain why I think Senior (LSE:SNR), William Hill (LSE: WMH), Computacenter (LSE: CCC) and Ladbrokes (LSE: LAD) are likely to deliver profits below current forecasts this year.
Senior
Shares in defence and aerospace engineering firm Senior fell by 6% in the first hour of trading on Thursday. Why?
The classic giveaway was that the firm said that although the board’s expectations for full-year profit were unchanged, they were “more second half weighted than historically”.
In other words, profits are expected to fall short of expectations in the first half, and the firm hopes to be able to make up the shortfall in the second half. However, Senior’s comments suggest to me that this is unlikely: the firm says demand is likely to be weaker than expected in its aerospace division, which is the company’s biggest.
William Hill
This week’s trading update from William Hill triggered a 3.5% slide in the bookmaker’s share price.
The news wasn’t great: win margins were below expected levels during the first quarter, which included a £14m loss from the company’s largest ever loss-making week.
The firm warned that the shortfall from this loss has not yet been made up, and also said that recent changes to planning guidelines could slow the firm’s expansion programme.
Conspicuously, there was no mention of full-year expectations.
Ladbrokes
Fellow bookmaker Ladbrokes has just got a new boss, Jim Mullen.
In the firm’s first-quarter update, Mr Mullen announced that he would complete his review of the business “quickly” and would present the changes he intends to make in June, “earlier than planned” — all of which sounds like bad news, to me.
The final warning note was Mr Mullen’s comment that shareholders should expect him to focus on “the medium term” — suggesting to me that the near term could be pretty dire.
Computacenter
IT infrastructure firm Computacenter appears to be going through a sticky patch. The outlook statement in the firm’s first quarter update was a masterpiece of contradiction.
For example, the firm said that “2015 should be a year of progress for Computacenter” but “the business is not without its challenges”.
Like William Hill, Computacenter made no mention of full-year expectations, suggesting it isn’t confident of meeting them.
Today’s best buy?
Although I believe these four companies are decent business, I’m not sure now is the right time to buy.
