As per the latest reports release by Reuters, WPP, the world’s biggest advertising company, has recovered to 2019 business levels a year ahead of plan as clients rush to benefit from a global economic recovery from the pandemic, driving quarterly revenue growth to a record high. The owner of the Ogilvy, Grey and GroupM agencies said on Thursday underlying net sales surged 19.3 percent in the second quarter. That boosted the first-half total to 4.90 billion pounds ($6.82 billion), up 11 percent year-on-year and up 0.5 percent on 2019.
WPP upgraded its full-year underlying sales forecast to growth of 9-10%, from a mid-single digit percentage previously, with a headline operating margin towards the upper end of its 13.5%-14.0% guidance range. The British group’s shares, up 58% in the last year, were 3% higher in early deals, topping the FTSE 100 index.
Detailing about the recovery, Chief Executive Mark Read told Reuters, “Clients are seeing a strong economic outlook for the second half of the year and into next year, and they’re choosing to invest in their brands. They’re shifting a lot of money into digital media. We’re seeing continued growth in public relations and public affairs given the importance of employee communications and corporate reputation.
He further added, “Notable wins on the creative side of the business included Absolut vodka and Sam’s Club, while on the media side it had picked up Bumble and JP Morgan Chase. We’re really focused on hiring top creative and technology talent, but we are having to reward our people. Last year was a tough year for many of our people, and so we are putting through salary increases as the year goes on and that’s putting some pressure on costs. It’s within our budgets, but we are reinvesting in people this year.”
H1 and Q2 financial highlights
- H1 reported revenue 9.8%, LFL revenue 16.1% (Q2 26.4%)
- H1 revenue less pass-through costs 5.0%, LFL revenue less pass-through costs 11.0% (up 0.5% on H1 2019)
- Q2 LFL revenue less pass-through costs 19.3%: US 12.6%, UK 31.8%, Germany 20.3%, Greater China 1.4%, Australia 8.4%, India 30.0%
- Q2 LFL revenue less pass-through costs on 2019 1.3%: US 1.8%, UK 1.1%, Germany 6.3%, Greater China -1.7%, Australia -13.6%, India -2.6%
- Strong new business performance: $2.9 billion net new billings in H1
- H1 headline operating margin 12.1%, up 3.9 pt on prior year with strong top-line growth supporting significant reinvestment in incentives
- H1 headline operating margin pre incentives up 7.8 pt to 17.0%
- Net debt at 30 June 2021 £1.5 billion, down £1.2 billion year-on-year reflecting good working capital management
Strategic progress, shareholder returns and outlook
- Shifting business mix: growth areas of experience, commerce and technology represented 26% of revenue less pass-through costs in H1
- Launch of Choreograph, future-ready data and analytics company
- M&A to simplify and grow: buy-in of WPP AUNZ minorities; technology acquisitions in Brazil and UK; Kantar agreed to acquire Numerator
- Continued recognition of creativity and effectiveness: most creative company at Cannes, collecting 190 Lions including 12 Grand Prix, 1 Titanium, 28 Gold, 57 Silver and 92 Bronze
- Industry-leading commitment to net zero carbon emissions across entire supply chain by 2030
- £248m share buyback in H1, £350m planned for H2; 12.5p 2021 interim dividend declared, +25%
- Full year 2021 LFL revenue less pass-through costs growth now expected to be 9-10%; headline operating margin towards the upper end of the 13.5-14.0% range
Elated upon WWP’s progress, Read said, “I’m delighted with our performance in the first six months of the year, at a time when COVID continues to take a toll on many countries. The like-for-like revenue less pass-through costs growth rate of 19.3% in the second quarter is our highest on record, as clients reinvest in marketing, particularly in digital media, ecommerce and marketing technology. We have returned to 2019 levels in 2021, a year ahead of our plan, with good momentum into 2022.
“We’ve also made very good strategic progress. Our recognition as the most awarded company at the 2021 Cannes Lions Festival reflects our investment in creative talent and the strength of our creative work over the past two years. Our focus on data, commerce and technology, through strategic acquisitions, organic investments and the launch of Choreograph, has supported a strong new business performance. Key assignment wins include AstraZeneca, Bumble, JP Morgan Chase and Pernod Ricard,” he added.
Speaking about how WPP has managed to tackle this challenging period, Read shared, “In procurement, property and shared services, we are making strong progress as part of our overall transformation programme. We have significantly increased our incentive pools in the first half, to reflect the tremendous contribution of our people in these challenging times, and in line with our intention to reinvest in talent announced at our Capital Markets Day in December 2020.”
Talking about the future focused approach for company’s growth, Read said, “We expect our strategy to translate into benefits for all of our stakeholders: a powerful, modern offer to support our clients’ growth; a great place for our people to work; a positive contribution to communities and the environment; and good financial returns for shareholders, with the interim dividend raised 25% and £600 million of share buybacks planned in 2021.”
