This is the time of year when a lot of companies unveil their performance in the prior year. Last week saw quite a few FTSE 100 and FTSE 250 firms unveil their annual results for 2024.
Some, it has to be said, were much more impressive than others.
Ocado: some promise, but a long way to go
One FTSE 250 firm that reported its results, only to be met by a big share price fall in response, was Ocado (LSE: OCDO).
The results were what we have come to expect from the business.
Lots of talk about potential? Yes. Explanations of how the business is gearing up for long-term performance? Yes.
Profits? No.
The loss-making firm continues to burn cash.
For now, I still regard its capital-intensive business model as unproven when it comes to profitability. So, for now, I am avoiding the shares.
But while I have long been bearish about the prospects for Ocado, the results did also provide a few potentially promising points to chew over.
One is ongoing solid growth: both the retail joint venture with Marks & Spencer and the outsourcing services business offered to retailers globally continue to grow revenues at pace. That could lay the foundations for long-term success.
I was also struck by the company’s forecast that it will turn cash flow positive within the next couple of years. I will believe it when I see it, but that could be a game changer for the FTSE firm’s investment case.
So, although I am avoiding Ocado shares for now, I will be keeping an eye on its business performance.
WPP: adapting to a changing world
Who would want to be in advertising right now?
Some clients are spending less, whole markets like China are weak, and AI threatens to replace a lot of what has traditionally been done by ad agencies.
When agency network WPP (LSE: WPP) unveiled its full-year results, the share price dropped like a lead bomb in response.
In some ways I understand that.
Revenues are set to decline. The company has reduced its workforce by thousands. That is not typically a sign of strength.
But that partly reflects its increased use of AI. AI is a threat to some of WPP’s creative activities — but I also reckon it could help the firm cut costs substantially. That could be good for profits.
Meanwhile, WPP has a huge business, a large global client base, and is one of the advertising industry leaders.
It kept its annual dividend per share, but given the weakened share price, that equates to a dividend yield of 6.1%. That is well in excess of the current FTSE 100 average.
I did not think WPP’s results were too bad but its shares got hammered by the City and sunk to a four-year low.
That could potentially offer me an attractive buying opportunity.
But I am still wondering whether I am missing something other investors are very worried about, so I am eyeing WPP as a potential addition to my portfolio — but do not yet plan to make a move.
