WPP upgrades forecasts after mammoth hiring spree

Coca-Cola win helped deliver organic revenue growth of 8.9% in the first six months.

Sprite was part of the global Coca-Cola business that WPP won last November.

WPP, the owner of Ogilvy and Group M, as well as PR firms BCW and Hill+Knowlton Strategies, has become the latest holding company to report strong growth, despite gathering economic clouds, as it reassured markets that “client demand remains healthy across all services."

Reporting its first-half performance today, WPP revealed that net sales (known as revenue less pass-through costs) were up 8.9% organically in the first six months of 2022. On a reported basis, revenue less pass-through costs rose 12.5% compared with H1 2021.

WPP made an operating profit of £539 million ($650 million) between January 1, 2022, and the end of June, up 11.4% year-on-year, and a pre-tax profit of £419 ($505 million), up 6.1% year on year. Headline operating profit rose 8.2%, while headline pre-tax profit increased 12%.

Mark Read, the chief executive of WPP, said: “We have enjoyed a strong first half, with broad-based growth across our creative, media and public relations businesses.”

Its Q2 global organic growth, at 8.3%, was in line with, though not quite as good as, that of many rival groups – Havas having reported 11.5%, Omnicom 11.3%, Publicis Groupe 10.3%. WPP's growth was stronger proportionally than Interpublic, which posted 7.9% organic revenue growth. Dentsu reports on August 12.

WPP followed Publicis, Interpublic and Omnicom in upgrading its full-year 2022 revenue forecast. The group, which owns Wunderman Thompson and EssenceMediacom, raised its previous 5.5% to 6.5% organic growth guidance to 6%-7%.

It also upgraded its headline operating profit margin by about 0.5 percentage points, despite costs increasing on the back of a 16.7% rise in staff costs, excluding incentives. 

The rise was due to WPP boosting staff numbers by 11,000 since June 30 of last year, taking it to 115,000 employees globally at the same date in 2022, as it built its workforce back up from the pandemic.

It also reflected the full-year impact of salary reviews conducted in June 2021. However, the generous cash bonus distribution of the first half of 2021 was reduced by more than half.

That staff costs grew faster than revenues is notable in the context of similar developments at former WPP chief executive Sir Martin Sorrell’s new venture, S4 Capital, which blamed the phenomenon for a profit forecast downgrade.

Although in contrast, WPP upgraded its profit margin forecast. Despite this, the WPP share price fell as much as 7% this morning as investors digested the results.

Read hailed the group’s new-business performance, with Q2 seeing what he said were “significant assignment wins” from Audi, which Ogilvy won in the U.S.), Audible, Danone and Nationwide.

He also highlighted that the group is “onboarding Coca-Cola at pace” after emerging with the lion’s share of business from the soft-drinks group’s monster $4bn integrated review last November.

“During the first half, we unveiled the first consistent, global ad platform for Sprite, with the ‘Heat happens’ campaign, which will be rolled out across 200 markets,” Read said.

While restating his ambition to make WPP “the most creative company in the world”, Read also trumpeted its success in the “high-growth” areas of experience, commerce and technology.

These accounted for 39% of its global integrated agencies revenues, excluding Group M, compared with 35% in 2019.

WPP's PR division posted a 7.3% like-for-like revenue increase in Q2 to about $341 million. 

This story first appeared on campaignlive.co.uk. 

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