Strong start to the year across the
business; continued investment in growth; LFL growth guidance
raised to 5.5-6.5%
WPP (NYSE: WPP) today reported its 2022 First Quarter Trading
Update.
£ million
% reported1
% LFL2
First Quarter
Revenue
3,091
6.7%
8.1%
Revenue less pass-through costs
2,574
10.3%
9.5%
- Q1 revenue +6.7%; LFL revenue +8.1%
- Q1 LFL revenue less pass-through costs +9.5%
- Top five markets Q1 LFL revenue less pass-through costs: USA
+8.9%, UK +8.1%, Germany +16.1%, China +11.9%, India +25.1%
- LFL revenue less pass-through costs by business sector: Global
Integrated Agencies +8.6% (GroupM +12.8%, ex GroupM +5.6%), Public
Relations +14.1%, Specialist Agencies +13.0%
- $1.8 billion net new business won, including Mars, JDE Peet’s,
Sky
- Launch of Everymile, our commerce-as-a-service proposition;
acquisition of Village Marketing; merger of Mediacom and Essence,
and creation of GroupM Nexus
- £362 million of share buybacks in Q1
- 2022 guidance raised: LFL revenue less pass-through costs
growth now expected to be 5.5-6.5%, up from around 5%
Mark Read, Chief Executive Officer of WPP, said:
“The year has started very well with continued momentum from
2021 resulting in strong growth across all businesses and regions.
Demand is strong for our services, particularly in digital media,
ecommerce, data and marketing technology.
“The war in Ukraine has created an appalling humanitarian
crisis. We continue to support our people in Ukraine, many of whom
are now displaced, with financial and practical assistance. Our
partnership with the UNHCR on their emergency fundraising appeal
has generated $150 million to date, including over $1.3 million
from our employee match-funding programme. On 4 March, we announced
that we would exit the Russian market, and we have now reached
agreement to divest our businesses there.
“We continue to see strong demand for our services from our
clients and to invest in the many opportunities for growth driven
by the digital transition, including Choreograph and the recent
launch of Everymile. As a result of a strong first quarter, we now
expect our growth to be in the range of 5.5% to 6.5%, up from
around 5% at the start of the year. We remain very mindful of the
impact of the broader macroeconomic environment on our business and
will respond quickly to any changes as the year progresses.”
Overview
The year has started strongly, continuing the positive momentum
built up through 2021. Revenue in the first quarter was up 6.7% at
£3.1 billion. On a constant currency basis, revenue was up 6.4%
year-on-year. Like-for-like growth, excluding the impact of
currency, acquisitions and disposals, was 8.1%.
Revenue less pass-through costs in the first quarter was up
10.3% year-on-year to £2.6 billion, and up 10.0% on a constant
currency basis. Excluding the positive net impact from acquisitions
and disposals, like-for-like growth was 9.5%.
Ukraine
Our 200 people in Ukraine have shown extraordinary resilience
and bravery in the face of the horrific attack on their country,
and we continue to be inspired by their example and the outpouring
of support from their colleagues in the region and worldwide. We
are in constant contact with our leaders in Ukraine to provide
financial and other forms of practical assistance for our
employees.
WPP has partnered with UNHCR, the UN Refugee Agency, to run an
emergency fundraising appeal to help people forced to flee their
homes in search of safety in other parts of Ukraine or neighbouring
countries, raising over $150 million so far, including over $1.3
million from our employee match-funding programme.
The Board of WPP concluded early in March that WPP's ongoing
presence in Russia would be inconsistent with our values as a
company and we have subsequently reached agreement to divest our
businesses there. Russia represented approximately 0.6% of WPP’s
revenue less pass-through costs in 2021.
Operational and strategic progress
We saw strong growth across all business sectors and regions, as
client demand for our integrated offer remained very positive. We
are benefiting from our excellent new business performance in 2020
and 2021, with the onboarding of Coca-Cola being a significant
focus. In new business reviews so far this year, we extended our
relationship with Mars becoming their global media partner, added
digital to our Sky media remit, won the global creative account for
JDE Peet’s and were appointed strategic communications partner by
Migros, with a focus on commerce strategy, data and content. We
also won new assignments with Samsung and Square.
Our agencies continue to be recognised in awards and accolades.
In the 2022 WARC rankings, WPP topped the holding company rankings
for media and effectiveness, and MediaCom, Mindshare and Ogilvy
were all ranked top in their categories. MediaCom was also named
Adweek’s 2022 Global Media Agency of the Year for the second
consecutive year. Grey won Gold at the International ANDY Awards
for their Widen the Screen campaign for Procter & Gamble, and
was also recognised in Advertising Age’s A List 2022 along with
Cartwright and DAVID.
We further enhanced our offer to clients through continued
investment in a number of new platforms. This week we announced the
launch of Everymile, a new digital commerce managed service that
will offer brands a fully outsourced direct-to-consumer (DTC)
ecommerce solution.
In February Hogarth, WPP’s specialist global creative content
production company, announced the launch of The Metaverse Foundry,
a global team of over 700 people dedicated to delivering brand
experiences for clients in the metaverse from design to
execution.
We continue to transform GroupM, our media investment business,
to accelerate innovation for clients and further simplify its
operations. Yesterday we announced that Essence and MediaCom will
merge to form EssenceMediacom, a new agency offering combining
Essence’s digital and data-driven model with MediaCom’s scaled
multichannel audience planning and strategic media expertise. We
are also bringing together Finecast, Xaxis, and GroupM Services -
GroupM’s global community of activation experts - to form GroupM
Nexus, the world’s leading media performance organisation. In
addition, Mindshare will complete its merger with global
performance agency Neo.
During the first quarter we introduced GroupM Premium
Marketplace, a unified programmatic marketplace supported by global
partnership agreements with Magnite and PubMatic that will increase
media buying transparency and efficiency. GroupM Premium
Marketplace will provide clients with direct access to high-quality
publisher inventory across connected TV, digital video and display,
underpinned by new standards for performance measurement, further
reducing opportunities for fraud and inventory misrepresentation in
the media supply chain.
We recently strengthened our commitment to the creator economy
through the acquisition of Village Marketing, the industry leader
in influencer marketing in North America. Village Marketing has 150
employees and was specifically created with the vision of building
brands in a social media and mobile first world. It has led
creative campaigns for some of the foremost consumer brands of the
last decade, including Equinox, Nike, Netflix and SoulCycle.
Regional review
Revenue less pass-through costs analysis
£ million
Q1 2022
Q1 2021
+/(-) % reported
+/(-) % LFL
N. America
1,015
886
14.6%
8.7%
United Kingdom
352
321
9.8%
8.1%
W. Cont Europe
507
492
3.2%
8.9%
AP, LA, AME, CEE
700
635
10.1%
11.9%
Total Group
2,574
2,334
10.3%
9.5%
North America saw like-for-like revenue less pass-through
costs up 8.7%. Growth in the USA was +8.9%, driven mainly by
GroupM, Hogarth and Brand Consulting.
In the United Kingdom, like-for-like revenue less
pass-through costs was up 8.1%, with Landor & Fitch, H+K, AKQA
Group and Hogarth being the strongest performers.
Western Continental Europe like-for-like revenue less
pass-through costs grew by 8.9%. Germany, Denmark and Spain all
performed strongly, while France, Italy and the Netherlands have
been slower to recover.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe like-for-like revenue less
pass-through costs was up 11.9%. The strongest growth was in Latin
America, driven by Brazil. Asia Pacific also grew double-digits,
supported by good performances in China and India.
Business sector review
Revenue less pass-through costs analysis
£ million
Q1 2022
Q1 2021
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
2,106
1,947
8.2%
8.6%
Public Relations
262
206
27.4%
14.1%
Specialist Agencies
206
181
14.0%
13.0%
Total Group
2,574
2,334
10.3%
9.5%
Prior year figures have been restated to reflect the
reallocation of a number of businesses between Global Integrated
Agencies and Specialist Agencies. This increases Global Integrated
Agencies’ Q1 2021 revenue less pass-through costs by £13 million
and reduces Specialist Agencies’ by the same amount.
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 8.6%, with GroupM (approximately 36% of
WPP revenue less pass-through costs in Q1) up 12.8%. Excluding
GroupM, Global Integrated Agencies was up 5.6%, with Hogarth the
strongest performer. AKQA Group, Ogilvy and Wunderman Thompson all
recorded good growth, and VMLY&R also continued to grow despite
a strong prior period.
Public Relations like-for-like revenue less pass-through
costs was up 14.1%, continuing its very strong momentum of the last
18 months. H+K, BCW and Finsbury Glover Hering, now merged with
SVC, all achieved double-digit like-for-like growth.
Specialist Agencies like-for-like revenue less
pass-through costs was up 13.0%, again showing sustained growth
from 2021 and despite lapping a very strong prior period. Most of
the larger agencies recorded double-digit like-for-like growth.
Balance sheet highlights
Average net debt in the first three months of 2022 was £1.6
billion, compared to £1.0 billion in the first quarter of 2021, at
2022 exchange rates, an increase of £0.6 billion. Net debt at 31
March 2022 was £2.6 billion, compared to £0.9 billion on 31
December 2021, at 2022 exchange rates, an increase of £1.7 billion,
driven largely by seasonal net working capital movements and share
purchases. We spent £405 million on share purchases in the first
quarter, of which £362 million were share buybacks and £43 million
were purchases into the employee benefit trust.
Outlook
The year has started strongly, with performance well ahead of
our expectations in the first quarter, and client demand for our
services remaining strong as we enter the second quarter. This
underpins our confidence and supports our continued investment in
expanding our offer to drive long-term growth through platforms
such as Choreograph in data, Finecast in connected TV and Everymile
in D2C commerce.
Our updated guidance takes into account the strong first quarter
performance and the impact of the current outlook for the global
economy on our business. Given the uncertain global environment, we
remain ready to respond to any changes in the economy as the year
progresses.
- Like-for-like revenue less pass-through costs of 5.5-6.5%
(previously around 5%)
- Headline operating margin improvement targeted at around 50
bps, excluding the impacts of M&A and foreign exchange
- Capex £350-400 million
- Trade working capital expected to be flat year-on-year
- Foreign exchange rate benefit of 2.0-2.5% on reported revenue
less pass-through costs from the movement in sterling
year-on-year
- Mergers and acquisitions benefit of 0.5-1.0% to revenue less
pass-through costs
- Around £800 million of share buybacks in 2022, of which £362
million was completed in the first quarter
Cautionary statement regarding forward-looking
statements
This document contains statements that are, or may be deemed to
be, “forward-looking statements”. Forward-looking statements give
the Company’s current expectations or forecasts of future events.
An investor can identify these statements by the fact that they do
not relate strictly to historical or current facts.
These forward-looking statements may include, among other
things, plans, objectives, beliefs, intentions, strategies,
projections and anticipated future economic performance based on
assumptions and the like that are subject to risks and
uncertainties. These statements can be identified by the fact that
they do not relate strictly to historical or current facts. They
use words such as ‘anticipate’, ‘estimate’, ‘expect’, ‘intend’,
‘will’, ‘project’, ‘plan’, ‘believe’, ‘target’, and other words and
similar references to future periods but are not the exclusive
means of identifying such statements. As such, all forward-looking
statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond the control of the
Company. Actual results or outcomes may differ materially from
those discussed or implied in the forward-looking statements.
Therefore, you should not rely on such forward-looking statements,
which speak only as of the date they are made, as a prediction of
actual results or otherwise. Important factors which may cause
actual results to differ include but are not limited to: the impact
of outbreaks, epidemics or pandemics, such as the Covid-19 pandemic
and ongoing challenges and uncertainties posed by the Covid-19
pandemic for businesses and governments around the world; the
unanticipated loss of a material client or key personnel; delays or
reductions in client advertising budgets; shifts in industry rates
of compensation; regulatory compliance costs or litigation; changes
in competitive factors in the industries in which we operate and
demand for our products and services; our inability to realise the
future anticipated benefits of acquisitions; failure to realise our
assumptions regarding goodwill and indefinite lived intangible
assets; natural disasters or acts of terrorism; the Company’s
ability to attract new clients; the economic and geopolitical
impact of the Russian invasion of Ukraine; the risk of global
economic downturn; technological changes and risks to the security
of IT and operational infrastructure, systems, data and information
resulting from increased threat of cyber and other attacks; the
Company’s exposure to changes in the values of other major
currencies (because a substantial portion of its revenues are
derived and costs incurred outside of the UK); and the overall
level of economic activity in the Company’s major markets (which
varies depending on, among other things, regional, national and
international political and economic conditions and government
regulations in the world’s advertising markets). In addition, you
should consider the risks described under Item 3D ‘Risk Factors’ in
the Group’s Annual Report on Form 20-F for 2021, which could also
cause actual results to differ from forward-looking information.
Neither the Company, nor any of its directors, officers or
employees, provides any representation, assurance or guarantee that
the occurrence of any events anticipated, expressed or implied in
any forward-looking statements will actually occur. Accordingly, no
assurance can be given that any particular expectation will be met
and investors are cautioned not to place undue reliance on the
forward-looking statements.
Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse Regulation, the UK
Listing Rules and the Disclosure and Transparency Rules of the
Financial Conduct Authority), the Company undertakes no obligation
to update or revise any such forward-looking statements, whether as
a result of new information, future events or otherwise.
Any forward-looking statements made by or on behalf of the Group
speak only as of the date they are made and are based upon the
knowledge and information available to the Directors on the date of
this document.
__________________________ 1 Percentage change in reported
sterling vs prior year from continuing operations. 2 Like-for-like.
LFL comparisons are calculated as follows: current year, constant
currency actual results (which include acquisitions from the
relevant date of completion) are compared with prior year, constant
currency actual results from continuing operations, adjusted to
include the results of acquisitions and disposals for the
commensurate period in the prior year. Both periods exclude results
from Russia.
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