WPP First-Half Sales Beat Estimates on U.K. BusinessKristen Schweizer
WPP Plc said it’s exceeded its predictions at the start of the year after sales beat analysts’ estimates as the world’s largest advertising agency gained more U.K. business from brands including Vodafone, Pepsi and EBay.
First-half revenue rose 2.7 percent from a year earlier to 5.47 billion pounds ($9.1 billion), London-based WPP said in a statement today. That compared with the average estimate of 5.13 billion pounds, according to data compiled by Bloomberg. WPP’s ad agencies include Young & Rubicam and Ogilvy & Mather.
Chief Executive Officer Martin Sorrell said in June that growth had slowed in fast-growth markets such as Brazil and India, though they were still outperforming more mature markets in the U.S. and Europe. Revenue was lifted by sporting events such as the soccer World Cup. July net sales climbed 2.8 percent on a like-for-like basis bringing the figure to 4 percent for the first seven months.
“We’re strongly ahead of where we thought we’d be at the beginning of the year,” Sorrell said in a phone interview today. Business was strongest from the drinks, travel and airline industries and “less than average” from computer and electronics companies, he said.
The shares rose as much as 3.4 percent, the biggest intraday advance since March 4. The stock was up 1.7 percent at 1,248 pence as of 8:31 a.m. in London, giving WPP a market value of 16.4 billion pounds.
First-half headline profit before interest and taxes declined to 622 million pounds from 637 million pounds a year earlier.
WPP remains the ad world’s leader after peers Publicis Groupe SA and Omnicom Group Inc. abandoned an attempt to merge in May. Sorrell said today U.S. peer Interpublic Group of Cos., the fourth-largest ad company in the world, could be next for consolidation, with possible interest from Japan’s Dentsu Inc. Activist investor Elliott Management Corp. said last month it had amassed a 6.7 percent stake in Interpublic.
U.K. revenue climbed 22 percent to 426 million pounds in the second quarter, and 17 percent in the half.
Billings for the half fell 3 percent to 22.1 billion pounds, hurt by the strength of the U.K. currency. “2014 looks likely to be another demanding year, as a strong United Kingdom pound and weak faster growth market currencies continue to take their toll on our reported results,” WPP said.
WPP is aiming for like-for-like net sales growth of more than 3 percent this year and an operating margin to net sales improvement of 0.3 margin points on a constant currency basis in line with full year margin target, it said today.
The U.S. is WPP’s largest market, followed by the U.K. and China.
Global ad revenue is set to exceed half a trillion dollars this year, Magna Global predicted in December. Sporting events including the Sochi Winter Olympics and World Cup will help boost the industry by 6.5 percent to $521.6 billion, the media-research company said.