WPP first half on track; records over 12% growth in India

WPP has reported a 0.5 per cent dip in its reported billings at £26.533 billion, and down 2.0 per cent in constant currency in the first half of 2019. Estimated net new business billings of $2.934 billion were won in the first half of the year, a return to a strong performance. In the first half, WPP’s top 30 clients accounted for 27 per cent of its revenue less pass-through costs. The Group won new assignments from Ferring, Merck, Pfizer, Walgreens and Walmart in the second quarter.

Reported revenue was up 1.6 per cent at £7.616 billion. Revenue on a constant currency basis was flat compared with last year, the difference to the reported number reflecting the weakening of the pound sterling in the first half, primarily against the US dollar and euro. On a like-for-like basis, which excludes the impact of acquisitions and currency, revenue was up 0.1 per cent in the second quarter, a significant improvement compared with the first quarter de-growth of -1.3 per cent, giving -0.6 per cent for the first half.

Revenue less pass-through costs was down 1.0 per cent in the second quarter on a constant currency basis, and down 1.4 per cent like-for-like, as with revenue, a significant improvement on the first quarter of -2.3 per cent and -2.8 per cent respectively. In the first half like-for-like revenue less pass-through costs was down 2.0 per cent.

Headline EBITDA was down 7.7 per cent to £875 million, down 8.9 per cent in constant currency. Headline operating profit was £730 million, down 6.8 per cent, down 8.0 per cent in constant currency. Headline PBIT was down 8.5 per cent to £751 million from £821 million, down 9.6 per cent in constant currency.

Headline operating margin, which includes the impact of IFRS 16 of +0.5 margin points in the first half, was down 0.8 margin points at 11.9 per cent, down 0.8 margin points in constant currency, and down 1.2 margin points on a like-for-like basis.

During the first half, WPP’s top 20 countries accounted for 87 per cent of revenue less pass-through costs. The group performed strongly in faster growing economies, with India up over 12 per cent and Brazil up over 10 per cent. On the other hand, WPP’s performance in China was -2.8 per cent in H1 with a split of +6.6 per cent in Q1 and -10.1 per cent in Q2, reflecting timing differences and a +9.0 per cent comparative in Q2 2018.

Commenting on the performance, Mark Read, CEO, WPP, said, “WPP’s performance in the second quarter was slightly ahead of our internal expectations but in line with our full-year guidance and three-year strategic targets. Clients are responding well to our new offer, as evidenced by recent wins and expanded assignments including from eBay, Instagram and L’Oréal. An encouraging number of our businesses and markets are achieving good growth.”

He further said, “When the Kantar transaction completes, our disposal programme will have generated proceeds of £3.6 billion, allowing us to return significant amounts to shareholders and reduce our leverage to the low end of the target range.”

“We continue to simplify WPP, with a more integrated offer for our clients, better, more collaborative working environments for our people, and less complicated management structures,” Read concluded.

First half and Q2 financial highlights:

Reported revenue up 1.6%, constant currency revenue flat, LFL revenue down 0.6% (Q2 up 0.1%)
H1 LFL revenue less pass-through costs -2.0%; Q2 -1.4% (Q1 -2.8%)
Q2 LFL revenue less pass-through costs improvements in key markets: USA -5.4%, UK +1.3%
H1 headline operating margin 11.9%, down 1.2 margin points LFL, reflecting revenue less pass-through costs trend; IFRS 16: Leases benefit on reported headline margin 0.5 margin points
Reported profit before tax down 44% driven primarily by a significant H1 2018 exceptional gain that has not been repeated (£117 million impact) and a charge on the revaluation of financial instruments versus a credit in 2018 (£138 million impact)
Average net debt £4.384 billion, down £709 million in constant currency compared with first half of 2018 supported by disposal programme
2019 guidance reiterated: LFL revenue less pass-through costs down 1.5% to 2.0%; headline operating margin to revenue less pass-through costs down around 1.0 margin point on a constant currency basis (excluding the impact of IFRS 16)