Strong Q3 performance; LFL revenue less
pass-through costs +3.8% year-on-year and acceleration of growth on
2019 at +10.9%; update to full year guidance
WPP (NYSE: WPP) today reported its 2022 Third Quarter Trading
Update.
£ million
+/(-)% reported1
+/(-)% LFL2
Third Quarter
Revenue3
3,573
10.3
2.7
Revenue less pass-through costs
2,986
13.1
3.8
Year to date
Revenue
10,329
10.2
6.6
Revenue less pass-through costs
8,496
12.7
7.1
- Q3 revenue +10.3%; LFL revenue +2.7%
- Q3 LFL revenue less pass-through costs +3.8%
- Acceleration of growth on 2019 levels +10.9% (Q2 +9.7%, Q1
+9.2%)
- Top five markets: USA +4.5%, UK +4.2%, Germany -8.7% (+3.3%
excluding the impact of Covid-related contract in prior year),
China -9.0%, India +10.7%
- Other major growth markets: Brazil +19.7%, Canada +7.7%
- By business sector: Global Integrated Agencies +4.3% (GroupM
+4.7%, ex GroupM +4.0%), Public Relations +5.8%, Specialist
Agencies -3.9% (+8.6% excluding Covid-related contract above)
- $1.7 billion net new business won in Q3 and $5.1 billion net
year-to-date
- £692 million of share buybacks year-to-date, total of £800
million to be completed in 2022
- Full year 2022 guidance updated: LFL revenue less pass-through
costs growth raised to 6.5-7.0% (previously 6.0-7.0%); headline
operating margin up 30 to 50 bps (previously up around 50 bps)
Mark Read, Chief Executive Officer of WPP, said:
“WPP continues to show strong momentum, reflecting broad-based
growth across our agencies, markets and industry sectors and the
investment by our clients in marketing, ecommerce and digital
transformation. Our performance on a three-year basis has continued
to improve each quarter during 2022.
“Our new business success reflects the quality of our creative
work, our strength in media and our ability to deliver integrated
solutions to clients. During the quarter we achieved $1.7 billion
of net new business, including assignments with Nestle, Samsung and
SC Johnson. Our leading scale and differentiated offer were
exemplified by GroupM which led COMvergence’s new business and
retention global rankings in the first half of 2022.
“Our growth over the year has been strong with full year
like-for-like revenue less pass-through costs now upgraded to
6.5-7.0%. We have continued to invest in our people and in data and
technology to support this growth, resulting in headline operating
margin now expected to be up 30 to 50 bps. We are on track with the
£300m transformation savings and will continue to manage our costs
with discipline.
“We enter the last quarter of the year with confidence, based on
the leading competitive position of our businesses, our client
momentum and the knowledge that the actions we have taken to
strengthen WPP leave us well placed to support our clients in
navigating the economic uncertainties ahead.”
Overview
The business has performed well in the third quarter, continuing
the positive momentum built up through the first half of the year.
Revenue in the third quarter was up 10.3% at £3.6 billion. On a
constant currency basis, revenue was up 1.4% year-on-year.
Like-for-like growth, excluding the impact of currency,
acquisitions and disposals, was 2.7%.
Revenue less pass-through costs in the third quarter was up
13.1% year-on-year to £3.0 billion, and up 4.0% on a constant
currency basis. Excluding the positive net impact from acquisitions
and disposals, like-for-like growth was 3.8%.
Operational and strategic progress
Clients and partners
Client demand remained healthy across all services as our
clients continue to invest in their marketing, ecommerce and
digital transformation.
We have won $5.1 billion of net new business in the first nine
months of the year, up on the $4.6 billion in the same period in
2021. Significant wins and retentions include Nestlé Germany media,
Samsung European CRM, Discover media, H&R Block creative and
the consolidation of SC Johnson’s global creative and shopper
marketing account. Coca-Cola continues to be onboarded at pace;
most recently, Coca-Cola-owned Costa Coffee appointed OpenX from
WPP to lead its global brand strategy.
Industry recognition and awards
We are proud that our creative excellence and depth of
capabilities have been recognised in the latest Q3 Forrester Waves.
VMLY&R was named a leader in Marketing Creative and Content
Services and WPP was named a leader among Global Marketing Services
providers, in recognition of the strength of our offering, strategy
and market presence.
On the media front, GroupM led COMvergence’s new business and
retention global Group rankings in the first half of 2022,
reflecting the company’s leading scale and differentiated offering.
Within media agencies, Mindshare and Wavemaker ranked first and
second respectively.
Investment for growth
We continue to invest in the long-term growth of our business
across commerce, data, technology and media.
We acquired four businesses including Newcraft, a data-first
European ecommerce consultancy based in Netherlands; Corebiz, a
Latin American ecommerce agency specialising in VTEX
implementation; JeffreyGroup, a leading corporate communications,
public affairs, and marketing consulting firm in Latin America; and
Passport Brand Design, a leading brand design agency based in the
United States.
Transformation programme
We continue with our actions to deliver efficiency savings to
invest in our people, accelerate growth and improve margins. In
property, we opened our new Dusseldorf campus during the quarter.
By the end of the year, we aim to open three further campuses,
taking the total to 38 campuses that can accommodate around half
our people. We have made progress in our shared services and IT
transformation, with finance shared services now live in twelve
markets. Our procurement team continue to leverage our global scale
to consolidate our spend with suppliers; during the quarter this
included working with our HR teams to consolidate spend with
freelance and contractor agencies. We remain on track to deliver
£300 million of efficiency savings by the end of 2022.
People
WPP is focussed on attracting, retaining and promoting
exceptional, diverse talent. In July we launched the Making Space
initiative, giving our people a company-wide break along with a
series of events across our campuses and offices to inspire and
reconnect. We have partnered with The One Club for Creativity to
launch ONE School UK, a free 16-week online programme designed to
open doors to a career in advertising for talented UK-based Black
creatives. In addition, we launched the second year of the
VisibleStart course, a programme providing career options and
training for women over 45.
During the quarter we announced the internal promotions of Karen
Blackett to President of WPP in the UK and Devika Bulchandani to
Global Chief Executive Officer of Ogilvy. We are also pleased to
announce the appointment of Juan Pedro Moreno as President of WPP’s
business in Spain, aligning with WPP’s country leadership structure
in other major markets. We also appointed Laura Maness as the new
Global Chief Executive Officer of Grey and Wendy Lund as Chief
Client Officer for Health and Wellness.
Environment
WPP is committed to achieving net zero carbon emissions across
our supply chain – including our $60 billion of media investments –
by 2030. Supporting this, GroupM released its media decarbonisation
report in July, which provides a framework to measure and reduce
ad-based carbon emissions; an important first step to standardise
and accelerate carbon reduction across different media
channels.
Regional review
Revenue less pass-through costs analysis
£ million
Q3 2022
Q3 2021
+/(-) % reported
+/(-) % LFL
N. America
1,222
975
25.5
4.7
United Kingdom
381
362
5.1
4.2
W. Cont Europe
547
562
(2.7)
(2.1)
AP, LA, AME, CEE
836
741
12.8
6.9
Total Group
2,986
2,640
13.1
3.8
North America saw like-for-like revenue less pass-through
costs up 4.7%, with strong growth in the US and Canada where both
markets are up double digits on 2019 levels. Growth in the US was
up 4.5% or 11.0% on 2019 levels, mainly driven by strength in
GroupM and Hogarth, our media and production businesses.
In the United Kingdom, like-for-like revenue less
pass-through costs was up 4.2% and saw a strong acceleration in its
three-year LFL growth rate, from 7.3% in Q2 to 13.9% in Q3. Ogilvy,
GroupM and H+K saw the highest growth in the quarter.
Western Continental Europe like-for-like revenue less
pass-through costs fell by 2.1% in the quarter although achieved an
acceleration in its three-year LFL growth rate from 10.0% in Q2 to
12.4% in Q3. Performance in Germany was down 8.7% year-on-year in
Q3 due to the prior year boost from a Covid-related contract.
Excluding this, Germany grew 3.3% and Western Continental Europe
grew 2.5%. While France remains below 2019 levels, the other main
markets showed growth.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe like-for-like revenue less
pass-through costs was up 6.9%. The highest growth region was Latin
America, led by Brazil which grew 19.7%, the sixth consecutive
quarter of double-digit growth. Asia Pacific grew more slowly with
strong growth in India, up 10.7% offset by a significant slowdown
in China. China was down 9.0% in the third quarter, a deceleration
from the second quarter, as Covid-related lockdowns have restricted
activity.
Business sector review
Revenue less pass-through costs analysis
£ million
Q3 2022
Q3 2021
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
2,458
2,190
12.3
4.3
Public Relations
296
231
28.0
5.8
Specialist Agencies
232
219
6.1
(3.9)
Total Group
2,986
2,640
13.1
3.8
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’ Q3 2021 revenue less pass-through costs by £5 million and
reduces Specialist Agencies’ by the same amount.
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 4.3%. GroupM, which was approximately 37%
of WPP revenue less pass-through costs in the third quarter, grew
4.7% in Q3 and showed an improving three-year trend from 15.9% in
Q2 to 20.0% in Q3. Excluding GroupM, Global Integrated Agencies was
up 4.0%. Hogarth was the standout performer in the quarter, while
Ogilvy and AKQA also saw strong growth.
Public Relations like-for-like revenue less pass-through
costs was up 5.8% and up 19.1% over 2019. BCW, H+K and FGS Global
continued to perform well, reflecting the strong demand from
clients for strategic advice in a heightened political
environment.
Specialist Agencies like-for-like revenue less
pass-through costs was down 3.9%, and up 17.1% over 2019. Excluding
the impact of the Covid-related contract in Germany, growth was
8.6% year-over-year, fuelled by CMI, our healthcare media business,
which grew double-digits.
Balance sheet highlights
Average adjusted net debt4 in the first nine months of 2022 was
£2.8 billion, compared to £1.5 billion in 2021, at 2022 exchange
rates, an increase of £1.3 billion. Adjusted net debt at 30
September 2022 was £3.5 billion, compared to £1.6 billion on 30
September 2021, or £1.7 billion at 2022 exchange rates, an increase
of £1.8 billion.
Share purchases of £735 million were made in the first nine
months of the year, of which £692 million related to share buybacks
and £43 million were purchases into the employee benefit trust.
Outlook
We are confident in the resilience of our business, our strategy
and our long-term growth potential. Our updated guidance takes into
account the strong third quarter performance, ongoing investment in
our people, inflationary pressures and the impact of the current
outlook for the global economy.
We therefore raise revenue guidance and adjust expectations for
headline operating profit margin progress for the full year. Our
guidance for 2022 is:
- Like-for-like revenue less pass-through costs growth of
6.5-7.0% (previously 6.0-7.0%)
- Foreign exchange rate benefit of around 7.0% to reported
revenue less pass-through costs from the movement in sterling
year-on-year
- Mergers and acquisitions benefit of around 0.3% to revenue less
pass-through costs
- Headline operating margin improvement targeted at 30 to 50 bps
(previously around 50 bps)
- Capex £350-400 million
- Trade working capital expected to be flat year-on-year;
£300-£400 million outflow expected on non-trade working capital,
largely driven by the high 2021 bonus paid out in 2022
- Around £800 million of share buybacks in 2022, of which £692
million was completed in the year-to-date
- Average adjusted net debt / headline EBITDA slightly below the
guidance range of 1.5x - 1.75x
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.
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, adjusted to include the results of acquisitions and
disposals for the commensurate period in the prior year.
3
Certain businesses have been reclassified
to associates as the Group no longer controls them. In addition,
certain media billings recognised as revenue earlier were
re-assessed under IFRS 15: “Revenue from Contracts with Customers”
and have been excluded from revenue, but have no impact on revenue
less pass-through costs. There are no adjustments to previously
reported revenue in the first three quarters of 2021. The
adjustments were recorded for the first time for full-year 2021
reporting.
4
Adjusted net debt excludes lease
liabilities.
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version on businesswire.com: https://www.businesswire.com/news/home/20221025006146/en/
Investors and analysts Anthony Hamilton +44 7464 532903
Caitlin Holt +44 7392 280178 Media Chris Wade +44 20 7282
4600 Richard Oldworth +44 20 7466 5000 Buchanan Communications +44
7710 130 634 wpp.com/investors
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