WPP Reports $11.8B In Sales In The First Six Months Of 2022, But Aussie Ops Prove A Drag

WPP has increased its annual net sales outlook after strong client spending in travel, tech and healthcare sectors boosted pretax profits in the first half of 2022.

The world’s largest advertising group announced it made £6.8 billion ($A11.8 billion) in half-year sales and reported a 10.2 per cent increase from the previous year. Pretax profit in the first half of 2022 surged 12 per cent to £562 million ($A981 million) up from £502 million ($A876 million) a year earlier.

Despite the positive numbers, WPP’s shares fell back 6.9 per cent to 830.03 pence after its first half numbers on Friday.

The US was the group’s strongest performing market, while Australia was its weakest

WPP won $US3.4 billion in new business for the first six months of 2022, with Audi, Mars and Nationwide all adding to its client list.

It also upgraded its headline operating profit margin by about 0.5 percentage points, despite costs increasing on the back of a 16.7 per cent rise in staff costs.

The rise was due to WPP boosting staff numbers by 11,000 since 30 June last year, taking it to 115,000 employees globally at the same date in 2022, as it built its workforce back up from the pandemic.

It now expects like-for-like net sales to grow between six and seven per cent for the rest of the year, up from an already upgraded forecast of 5.5 per cent-6.5 per cent.

Highlights included:

•  Client demand strong across most segments and regions

•  H1 reported revenue up 10.2 per cent, LFL revenue 8.7 per cent (Q2 9.3 per cent)

•  H1 revenue less pass-through costs up 12.5 per cent, LFL revenue less pass-through costs up 8.9 per cent (up 9.4 per cent on H1 2019)

• Q2 LFL revenue less pass-through costs up 8.3 per cent: US 10.4 per cent, UK 6.2 per cent, Germany 11.5 per cent, China 6.1 per cent (affected by lockdowns), Australia 3.2 per cent.

• Strong new business performance: $US3.4 billion net new billings in H1

•  H1 headline operating profit margin 11.6 per cent, down 0.5pt on prior year as expected, as a result of higher personnel costs and a return to business travel

•  Trade working capital cash outflow £232 million ($A405 million) year-on-year; still expected to be around flat year-on-year at year-end

•  Adjusted net debt at 30 June 2022 £3.1 billion ($A5.4 billion), up £1.6 billion ($A2.8 billion)year-on-year after £1.1 billion ($A1.9 billion) of share buybacks since June 2021

Commenting on the numbers, WPP CEO Mark Read (lead image) said: “We have enjoyed a strong first half, with broad-based growth across our creative, media and public relations businesses. This reflects the improved competitive position of our creative businesses, with their growing capabilities in commerce, experience and technology, our continued strength in media and the resurgence in demand for strategic communications advice from our public relations agencies.

“Our services are business-critical – driving growth, building brands, innovating and helping clients navigate an increasingly complex marketing environment. As major advertisers increasingly look to integrate their marketing investments, we are well positioned to serve the world’s largest companies, demonstrated by our success with Coca-Cola, which we are now onboarding at pace. The second quarter saw significant assignment wins from Audi, Audible, Danone and Nationwide.

“Our commitment to creativity was recognised at Cannes Lions in June where WPP was awarded the most creative company, recognising the quality of our work in all areas, spanning film, digital, media, commerce and creative business transformation. It’s a testament to our investment in creativity and the talent of our people, and I am committed to making WPP the most creative company in the world.

“Our clients are continuing to invest in WPP’s services, which reflects our attractive industry exposure in technology and healthcare, our broad global footprint, and the importance of what we do for their businesses. The actions we have taken over the last four years leave WPP much better positioned with a more uncertain economic environment ahead,” Read said.