WPP posts Q3 sales report, outperforms major rivals

Sir Martin Sorrell’s WPP Plc, released its report for the third quarter sales last week, showing a slightly lower-than-expected 3 per cent quarterly sales rise in the backdrop of geopolitical tensions and a sluggish global economy. But the British group, owner of the JWT and Ogilvy & Mather agencies, reiterated its full-year sales target and outperformed its major rivals.

On an organic sales basis, which includes the full impact of digital billings, WPP was up 7.6%, well ahead of Publicis on 1% and also ahead of Interpublic on 6.3% and Omnicom on 6.5%.

"All in all, whilst clients may be more confident than they were in September 2008, they broadly remain unwilling to take further risks, particularly given multiple geopolitical flash points," the company said in a statement on Friday.

Asia Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe, showed the strongest growth in the third quarter, with constant currency net sales growth of 12.6% and like-for-like growth of 4.4%. In Asia Pacific, all markets, except Japan, showed net sales growth, with double digit growth in India, Indonesia, Malaysia, Philippines and Vietnam.”

• Third quarter reported revenues up 3.1% at £2.763 billion, up 10.8% at $4.609 billion in dollars and up 10.9% at €3.482 billion in euros

• Third quarter constant currency revenues up 10.6%, like-for-like revenues up 7.6%

• Third quarter constant currency net sales up 6.1%, like-for-like net sales up 3.0%

• Nine months reported revenues up 2.8% at £8.232 billion, up 11.1% at $13.744 billion in dollars and up 8.0% at €10.145 billion in euros

• Nine months constant currency revenues up 11.0%, like-for-like revenues up 8.3%

• Nine months constant currency net sales up 6.3%, like-for-like net sales up 3.8%

• Nine months operating margin up 0.4 margin points in constant currency and targeted to be up 0.3 for full year in line with objective

• Average constant currency net debt down by £126 million for the first nine months of 2014 to £2.935 billion

• Net new business of £3.592 billion in first nine months giving leadership in new business league tables as for the last two and three quarter years

• Share buy-backs of £499 million in the first nine months up significantly from £134 million last year and already at the full year target of 3.0% of the issued share capital against 1.4% for the whole of last year
 

Quarter 3 and first nine months highlights

• Reported quarter 3 revenue growth of 3.1%, with constant currency growth of 10.6%, 3.0% growth from acquisitions and -7.5% from currency. The latter reflects the continuing strength of the pound sterling against the US dollar, Euro and many currencies in the faster growth markets, as seen in the final quarter of 2013 and the first half of this year.

• Reported quarter 3 net sales down 1.2% in sterling, but up 6.2% in dollars and 6.3% in euros, with like-for-like growth of 3.0%, 3.1% growth from acquisitions and -7.3% from currency

• Constant currency revenue growth in quarter 3 in all regions and business sectors, with particularly strong growth geographically in North America, the United Kingdom and Asia Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe, and functionally in advertising and media investment management and sub-sectors direct, digital and interactive and specialist communications

• Like-for-like net sales growth in quarter 3 of 3.0%, compared to 4.1% for the first half, with the gap compared to revenue growth similar to the first half, as the scale of digital media purchases in media investment management and data investment management revenues continued

• Operating profits and operating margins in the first nine months in line with target (including a more than target constant currency operating margin improvement of 0.4 margin points) and ahead of last year

• Average net debt for the first nine months decreased by £126m (4%) to £2.935 billion compared to last year, at 2014 constant rates, continuing to reflect an improvement in working capital, the benefit of converting the £450 million Convertible Bond, offset by higher acquisition spending and higher share buy-backs

• Net new business of $1.658 billion in the third quarter and $5.747 billion in the first nine months, again ranking first in net new business tables, as has been the case for the last two and three quarter years. This new business success has accelerated into the last quarter, with a particularly strong recent surge of half-a-dozen or so new business wins across the globe, amounting to approximately more than an additional $1 billion in billings

Current trading and outlook

• FY 2014 quarter 3 preliminary revised forecast | Some softening in preliminary quarter 3 forecast like-for-like revenue and net sales growth from the quarter 2 revised forecast, but net sales growth target of over 3% maintained. Headline net sales operating margin target improvement, as previously, of 0.3 margin points in constant currency

• Dual focus in 2014 | 1. Stronger than competitor revenue and net sales growth due to leading position in both faster growing geographic markets and digital, premier parent company creative position, new business, horizontality and strategically targeted acquisitions; 2. Continued emphasis on balancing net sales growth with headcount increases and improvement in staff costs/net sales ratio to enhance operating margins

• Long-term targets reaffirmed | Above industry revenue and net sales growth due to geographically superior position in new markets and functional strength in new media and data investment management, including data analytics and the application of new technology; improvement in staff cost/net sales ratio of 0.2 or more depending on net sales growth; net sales operating margin expansion of 0.3 margin points or more excluding the impact of currency; and headline diluted EPS growth of 10% to 15% p.a. from net sales growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs

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