As yesterday’s strategy update at WPP (WPP) shows times are tough in the advertising and marketing world, which faces a tricky combination of structural and cyclical challenges.
However, today’s 11-month trading update from Huntsworth (HNT), demonstrates in turn that companies operating in the right niches of the market can thrive.
The healthcare focused marketing and communications play is up 9.8% to 106.5p as it guides for 2018 profit to be ‘at least’ in line with the consensus forecast of £29.4m. The company is also promising ‘good growth’ in 2019. Analysts have responded by upping their forecasts.
Huntsworth has a specific health business which is split into three further divisions, focusing on professional communications within the healthcare sector, the marketing of drugs and the provision of live experiences and interactive content.
It also has a communications arm, which encompasses three separate PR and public affairs agencies, Grayling, Citigate Dewe Rogerson and Red. The communications business accounted for around 23% of operating profit in the first six months of 2018.
WHAT’S BEHIND THE ROBUST PERFORMANCE
The company is benefiting from its big exposure to the US healthcare sector which according to Numis accounts for two-thirds of sales and around 80% of profit.
Berenberg analyst Charles Weston notes the stock ‘provides investors with exposure to a structural growth segment of the pharmaceutical value chain’.
Weston adds: ‘We expect to nudge up our 2019 earnings forecasts by circa 2% on an organic basis, and by a further circa 2% to factor in the Navience acquisition in September.’
His counterpart at Numis Steve Liechti hikes his own earnings forecast for 2019 by 2% to 8p. He says: ‘Trading update for the 11 months to the end of November looks positive with Health agencies still in good growth mode and recent acquisitions integrating well.'
