Sales at WPP have returned to pre- pandemic levels a year ahead of schedule after advertisers boosted their spending.
The FTSE 100 marketing conglomerate said yesterday that advertising had recovered much more rapidly than expected as vaccination programmes boosted the world’s largest economies.
WPP recorded its strongest growth on record in the second quarter, as companies replenished their marketing budgets after making sharp cuts last spring. Net revenues climbed by 11 per cent to £4.9 billion in the first half and headline pre-tax profits rose by 82 per cent to £502 million.
Advertisers are investing heavily in digital marketing after consumers turned to online shopping, social media and digital entertainment during the pandemic, WPP said.
Mark Read, its chief executive, hailed “the strongest recovery in the market in a century”, one that reflected “the investments clients are making in marketing, ecommerce and data and analytics”. The pandemic had laid the ground for a permanent shift in people’s behaviour, said Read, who cited research from Ofcom, the communications regulator, showing that the time British adults spent watching Netflix and Amazon almost doubled last year.
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Citing recent research from its own Group M agency, WPP said that the global advertising market was on course to grow by 19 per cent this year. Digital media spending would jump by 26 per cent, compared with an earlier 15 per cent estimate, it said. Other channels would “grow or stabilise”, with print newspapers and magazines set to decline.
WPP is the world’s largest advertising and marketing group, employing more than 100,000 people globally. Its shares rose 2.7 per cent, or 25¾p, to 966¾p on the back of its robust results, boosting its market value to about £11.3 billion. In recent years, WPP has been forced to reboot its business as Google and Facebook have upended the advertising industry. Read, 54, has merged several of WPP’s agencies to combine digital and data capabilities with its creative teams to satisfy clients’ changing demands.
Since the start of the pandemic, WPP has lured new business by helping companies to build ecommerce and digital offerings. During the first half it signed new contracts with AstraZeneca, Bumble, Hyatt, JP Morgan Chase and L’Oréal.
It expects its revenue to grow by between 9 per cent and 10 per cent this year, an upgrade on its previous guidance for mid-single-digit growth. It forecast headline operating profit margins at the upper end of its previous 13.5 per cent to 14 per cent range.
Like-for-like sales in North America rose by 7.5 per cent to £1.8 billion in the first half, with revenues up 16.9 per cent at £680 million. Continental Europe rose 15 per cent to £1.1 billion, with the rest of the world rising 10.5 per cent.
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WPP bought back £248 million of its own shares in the first half and plans to acquire £350 million more by the end of the year. It has raised its interim dividend by a quarter to 12.5p a share.
The group’s net debt fell by £1.2 billion to £1.5 billion by the end of June. Its borrowings peaked at more than £5 billion in 2017. Read succeeded Sir Martin Sorrell as the chief executive the following year.
