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Wilmington – adjusted profit “broadly in line with market expectations”, so why a share price slump?

By Steve Moore | Friday 6 July 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


A trading statement from risk & compliance, professional and healthcare information, education and networking services company Wilmington (WIL) commences “following the completion of the year, Wilmington expects that full year adjusted profit before tax will be broadly in line with market expectations”. So why a current 25% share price fall, to 180p, on the back of the announcement?

I note firstly that “broadly in line” = slightly behind, and then also that even it was only achieved due to cost reduction actions - revenue “lower than previously expected at around £122m” (+1%, though -3% on an underlying basis). Particularly noted was “the Healthcare division continued to be a challenge in the second half” and “a small decline in Investment Banking with the Law businesses flat over the course of the year”.

The latter was though “helped by a strong second half performance” and it is stated Healthcare sales activity showed signs of improving over the second half. However, overall, against the company committed to achieving “mid-single digit” revenue growth levels, “the board now expects that group revenue growth for the current financial year just started will be in the low single digit percentage range”.

This didn’t bode well since meaningful cost reductions aren’t usually a sustainable path – and indeed in Wilmington’s case “certain of these actions were one-off in their nature and are not expected to benefit the current financial year”. There’s then worse - with that “underlying costs will rise this year”, that with there also “inflationary pressures, the full year impact of the new London HQ and IT infrastructure implemented last year”. As a result, “the board expects there will be a reduction in profit for the current financial year compared with the prior year which will be in the high single digit range”.

It also though “continues to believe that the investments recently made and the actions taken will yield the benefits planned” - this however after it has admitted “the board recognises that benefits from the significant actions taken over the last year are taking longer to materialise than previously expected”. Hmmm!

With uncertainty still in terms of the outlook and also net debt of still around £40 million, I’d suggest this presently not one to own.


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