REG - WPP PLC - First Quarter Trading Update

WPPAnnouncement

27/04/2022 07:16

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RNS Number : 4501J  WPP PLC  27 April 2022

27 April 2022

WPP

First Quarter Trading Update

Strong start to the year across the business; continued investment in growth;
LFL growth guidance raised to 5.5-6.5%

                                  £ million   % reported 1  (#_ftn1)  % LFL 2  (#_ftn2)

 First Quarter
 Revenue                          3,091       6.7%                    8.1%
 Revenue less pass-through costs  2,574       10.3%                   9.5%

 

n Q1 revenue +6.7%; LFL revenue +8.1%

n Q1 LFL revenue less pass-through costs +9.5%

n 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%

n 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%

n $1.8 billion net new business won, including Mars, JDE Peet's, Sky

n Launch of Everymile, our commerce-as-a-service proposition; acquisition of
Village Marketing; merger of Mediacom and Essence, and creation of GroupM
Nexus

n £362 million of share buybacks in Q1

n 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."

 

 

For further information:

 

Investors and analysts

Peregrine Riviere                             +44
7909 907193

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 (http://www.wpp.com/investors)

 

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            +/(-) % reported  +/(-) % LFL

                            Q1 2021
 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            +/(-) % reported  +/(-) % LFL

                                      Q1 2021
 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.

n Like-for-like revenue less pass-through costs of 5.5-6.5% (previously around
5%)

n Headline operating margin improvement targeted at around 50 bps, excluding
the impacts of M&A and foreign exchange

n Capex £350-400 million

n Trade working capital expected to be flat year-on-year

n Foreign exchange rate benefit of 2.0-2.5% on reported revenue less
pass-through costs from the movement in sterling year-on-year

n Mergers and acquisitions benefit of 0.5-1.0% to revenue less pass-through
costs

n 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  (#_ftnref1) Percentage change in reported sterling vs prior year from
continuing operations.

 2  (#_ftnref2) 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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