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WANdisco: Disappointing results raise question marks on future performance

Publication Date: 15 Nov 2018 - By Manika Premsingh By Manika Premsingh
Actionable
Differentiated

Equity Fundamental Equity EU ex-UK UK Telecom & Media

IT solutions, cloud and distributed computing company WANdisco (LON:WAND) has had a challenging second half of 2018 so far, financially speaking. At end of UK trading hours on Friday, 9 November, the company’s share price stood at 360p, the lowest in 52 weeks. Price had been falling almost steadily since peaking in June, but the results for the six months up to June 30, 2018 (H1 2018) only added fuel to fire.

Revenues of the dually headquartered company [in Sheffield, UK and San Ramon, California], came in at $5.7m for the period, a significant decline from the $9.7m earned during H1 2017. It also continued to show operating losses, much like those noted during the previous year. 

Given the fact that the poor performance was witnessed despite a positive outlook for 2018, indicates that the company was neither expecting nor prepared for rocky times ahead.

The question that then arises is: Should investors consider WANdisco at all?

There are plenty of reasons to maintain faith in the company, despite the recent challenges. For one, 2017 was a good year for the company. Revenues grew by a whole 73% to $19.6m, compared to the previous year. It also significantly reduced its loss levels to 0.6m by 92% from 2016, while its cash position strengthened to $27.4m, up by a whole 262% from the previous year.

WANdisco has also made news recently on account of securing a $1m contract with an unnamed Chinese client, which contributed to some improvement in share price. A pickup in revenue generation is exactly the boost that WANdisco needs at the present point in time.

The AIM-listed company, which provides collaboration software and cloud solutions, also benefits from being sector agnostic, since its fortunes are not tied to those of any one sector.

It has clients across industries like automotive, entertainment, healthcare, utilities, retail, manufacturing, telecommunications, developer collaboration, financial services, and the government. Given the company’s widespread presence in a fast growing sector, WANDisco has a potentially promising future ahead.

The fact that the company is in the process of restructuring its revenue inflow towards a more stable, recurring direction is also positive, since this will help in avoiding the slump seen in H1, 2018.  Further, despite the disappointing first half results, WANDisco also remains optimistic about the future, stating in its results’ announcement that The Company has a robust and strengthening sales pipeline which underpins the Board’s continued confidence in achieving full year market expectations.”

Conclusion: The question, however, remains – why did the company underperform in H1 in the first place? For investors who like to play safe, waiting till the full-year 2018 results are out maybe a good strategy to ensure that WANDisco indeed has better times ahead.

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

Manika Premsingh

 

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