WPP: PR and public affairs outperforms amid trading recovery in new era

PR and public affairs was WPP's strongest performing sector in Q2 2018, as the group reported its first quarter of like-for-like growth in more than a year amid changes at the top of the company.

Mark Read: strategy review will address structure, under-performing operations, and positioning for the future
Mark Read: strategy review will address structure, under-performing operations, and positioning for the future

WPP - which yesterday confirmed Mark Read’s appointment as CEO – said like-for-like revenue in its PR and public affairs arm rose six per cent in the second quarter of 2018, against growth of 1.1 per cent in Q1 (figures exclude pass-through costs). The division includes Burson Cohn & Wolfe, Hill+Knowlton, Finsbury and Buchanan.

WPP said the performance was "driven by strong growth in both the United Kingdom and Germany through the group's financial public relations businesses and double-digit growth in Latin America and the Middle East".

In the half year to 30 June, revenue in the division was £551m ($708m), up 3.5 per cent on a like-for-like basis.

Profitability also improved in the PR and public affairs arm. Profit before interest and tax (excluding costs linked to disposals, restructuring and other factors) in the half year was £85m ($109.2m), up from £80m ($102.8m) in the same period in 2017.

Profit margin in the division also improved, moving from 14 per cent in the first half of 2017 to 15.5 per cent in the corresponding period this year.

Across the group, WPP said Q2 2018 was its first quarter of like-for-like growth since Q1 2017. Like-for-likes rose 2.4 per cent in the quarter – across the half year they increased by 1.6 per cent.

Revenue in the half year fell 2.1 per cent to £7.5bn ($9.6bn), affected by currency headwinds of five per cent – growth was +2.9 per cent excluding currency fluctuations.

Profit before interest and tax fell seven per cent, or -2.3 per cent on a constant currency basis, to £821m ($1.05bn).

The company said like-for-like revenue excluding pass-through costs grew 0.4 per cent in July, in line with growth in the first half. Overall like-for-like revenue was up 2.1 per cent in the month.

Strategy review

Read said this morning that a review of WPP’s strategy is underway. It will address "our structure, our under-performing operations, particularly in the United States, and how we position the company for the future". He said the firm would provide an update by the year end.

Read promised "radical evolution" at the company, in a joint interview with chairman Roberto Quarta by Campaign, published yesterday.

Read said today: "The second quarter of 2018 was WPP’s first quarter of like-for-like growth since Q1 2017, and the company has performed strongly in terms of winning and retaining business over the period.

"At our first quarter trading update we said there was no standing still, and in the last few months we have made progress in a number of important areas.

"We have focused our efforts on providing more effectively integrated solutions to clients and, in competitive pitches, we have won or grown business with clients including Adidas, Hilton, Mars, Mondelez, Shell and T-Mobile.

"We have looked at our offering and begun to focus our portfolio through 15 disposals and divestments, including Globant and AppNexus, generating cash proceeds of £676 million so far this year, which will also strengthen our balance sheet and improve our average net debt to EBITDA ratio.

"And we have accelerated initiatives that will simplify our organisation, making it easier for us to manage and clients to access, with, for example, co-locations opened or announced in New York, Kuala Lumpur, Prague and Toronto.

"The mix of performance by geography and function and a decision to invest in the growing areas of our business resulted in a slightly lower headline PBIT [profit before interest and tax] margin.

"As chief executive, my focus will be on invigorating our company and returning the business to stronger, sustainable growth."

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