The tragic Covid-19 crisis has changed the way we live and we work in a vast number of ways. It’s damaged the long-term profits outlook for a great many UK shares. But it’s opened up new opportunities for others.
Take iomart Group (LSE: IOM) as an example. This IT services business provides a broad range of cloud-computing solutions that enables people to work from anywhere. And so it stands to make big profits from the growth of flexible working following coronavirus-related lockdowns in 2020 and 2021.
A recent survey of chief information offers by Enterprise Technology Research suggests that the number of remote workers around the globe will more than double in 2021. It indicates that around 34.4% of respondents’ workforces will work remotely this year. That’s up from 16.4% before the pandemic.
Profits to rebound?
There are reasons why the spike in remote working could run out of steam, however. There’s been a rise in cyber crime during Covid-19, a continuation of which could discourage companies from investing in their cloud computing capabilities. Another is the fact that many firms could roll back their flexible working practices if it’s deemed inefficient or if other employee-related issues emerge.
City analysts reckon iomart’s earnings will slip 10% in this fiscal year (ending March 2021). But they reckon annual earnings will rebound 7% in financial 2022. Earnings can exceed this, of course. But they can also fall short, depending on trading conditions. Today this UK share trades on a forward price-to-earnings (P/E) ratio of 24 times. It’s an elevated reading that could prompt a sharp share price reversal if business performance deteriorates.
Another strong UK share
Another consequence of the pandemic is that animal adoption rates have gone through the roof. Many breeders and animal shelters now have colossal waiting lists as people have sought companionship during the pandemic. That aforementioned growth of homeworking has also boosted pet numbers as people who otherwise wouldn’t have taken on an animal companion have gone for it.
All this bodes well for sellers of pet products and services like Pets At Home (LSE: PETS). This particular UK share is the one-stop-shop for all of a pet’s needs. It provides everything from food to pet litter, toys and kennels, all the way through to supplying veterinary services.
There are a couple of threats hanging over UK animalcare shares like Pets At Home. Firstly, a tough economic recovery could cause shoppers to scale back non-essential purchases for their furry friends. The possible end of Covid-19 lockdowns could also prompt a sharp fall in pet demand from rescue centres and the like.
City brokers reckon Pets at Home’s earnings will drop 7% in the financial year to March 2021. But they expect them to bounce by 39% in fiscal 2022. This leaves the company trading on a very-high forward P/E ratio of 38 times, putting it in the same danger of a share price fall as iomart. I still think this is a top UK share to buy today, though, given the surge in animalcare spending even before Covid-19 kicked off.