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WPP Aunz (ASX:WPP) reports quarterly sales drop but reaffirms guidance

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The WPP Aunz Ltd (ASX: WPP) share price remains unchanged today despite the company announcing a trading update on its financial performance. At the time of writing, the marketing company’s shares are swapping hands for 65 cents apiece.

How did WPP Aunz perform for Q1 FY21?

WPP Aunz shares are going nowhere during late-afternoon trade as investors appear mixed on the Q1 FY21 trading update.

For the quarter ending March 31, WPP Aunz reported net sales of $144 million, a decline of 5.2% on the prior corresponding period. Management stated that the result reflected a continued impact from COVID-19. Net sales margin increased 7.1%, opposed to a loss of 2.5% recorded in Q1 FY20.

Although the above metrics fell, a number of transformative initiatives and associated reduction in cost base led to improved earnings. Headline earnings before interest and tax (EBIT) came to $10.2 million for the quarter. This compares to a $3.8 million loss in EBIT over the Q1 FY20 period. Headline earnings refers to only the profits (or losses) generated by core day-to-day operations and investment activities and does not include other ancillary transactions.

Net debt stood at $116.2 million, a significantly increase from the $17.2 million recorded at the end of the calendar year. WPP Aunz reaffirmed that cash collection remains strong, and that the increase in net debt is from a partial unwind of net working capital.

Outlook for remainder of FY21

Looking ahead, WPP Aunz confirmed that it is on track to meet its previously stated guidance. It believes there will be a material improvement in profitability as the economic environment strengths from the COVID-19 fallout.

For the remainder of FY21, WPP Aunz is forecasting net sales to reach between $630 million to $650 million. Headline EBITDA is expected to hit around $100 million and $110 million, with headline EBIT achieving $85 million to $95 million.

WPP Aunz managing director and CEO Jens Monsees hailed the company’s progress, saying:

We are pleased with our results for the quarter which were very much on track with our expectations and reflect the benefits of the transformation of our business in the last 12 months. The results are a credit to our whole team who have embraced change in our business while also working through a global pandemic.

WPP Aunz share price snapshot

Over the past 12 months, the WPP Aunz share price has gained more than 200%, but has slipped 6% year-to-date. The company’s shares recorded a 52-week high of 74 cents in the middle of last month.

Based on the current share price, WPP Aunz has a market capitalisation of roughly $553.9 million.

Editor’s Note: This article originally incorrectly stated that net sales margin fell in Q1 2021. A correction was made on 12 April 2021 to reflect that net sales margin increased by 7.1% in the quarter. 

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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