Very strong Q3 performance: LFL revenue less
pass-through costs +15.7% year-on-year, and +6.9% on 2019; full
year guidance raised to +11.5-12.0% LFL
WPP (NYSE: WPP) today reported its 2021 Third Quarter Trading
Update.
£ million
+/(-)% reported1
+/(-)% LFL2
Third Quarter
Revenue
3,240
9.1
14.7
Revenue less pass-through costs
2,640
9.9
15.7
Year to date
Revenue
9,373
9.6
15.6
Revenue less pass-through costs
7,539
6.7
12.6
- Q3 revenue +9.1%; LFL revenue +14.7%
- Q3 LFL revenue less pass-through costs +15.7%; +6.9% LFL on Q3
2019
- Top five markets Q3 LFL revenue less pass-through costs: US
+12.4%; UK +16.9%; Germany +34.5%; Greater China +18.0%; Australia
+2.4%
- Top five markets Q3 LFL revenue less pass-through costs on
2019: US +6.2%; UK +9.3%; Germany +32.1%; Greater China -1.7%;
Australia -11.2%
- Continued new business momentum: $1.7 billion won in Q3, $4.6
billion net year-to-date
- Ongoing strategic progress: merger of Finsbury Glover Hering
and SVC, acquisition of Satalia in AI
- Net debt £1.6 billion, down £1.0 billion year-on-year at 2021
exchange rates: continued good working capital management
- £448 million share buyback year-to-date: £600 million completed
by year end; continuation of buyback up to 2021 preliminary
results
- Full year 2021 guidance raised again: LFL revenue less
pass-through costs 11.5-12.0%, headline operating margin slightly
above 14%
Mark Read, Chief Executive Officer of WPP, said:
“Our very strong performance goes well beyond a cyclical
recovery, with like-for-like growth over 2019 at 6.9% in the
quarter. Clients across all sectors and geographies are making
significant investments in marketing, particularly in digital media
and ecommerce services. We are now above 2019 levels in all of our
business lines, and with the actions we have taken over the last
three years, we are even better positioned for growth.
“Our reshaped offer - which combines creativity with technology
and data, through Choreograph, with the largest global media
platform in GroupM - is proving its value for existing and new
clients. This is reflected in the continuation of our longstanding
and successful partnership with Unilever, and the growth of our
relationship with Bayer. In addition, we are delighted to have won
new assignments with Beiersdorf, L’Oréal, Sainsbury’s and TD
Bank.
“We have also made strategic progress, creating the world’s
leading board-level communications firm through the merger of
Finsbury Glover Hering and SVC, and acquiring Satalia, a specialist
in artificial intelligence. We continue to return excess capital to
shareholders, buying back 4% of our shares so far this year. With
strong client demand, a clear strategic direction and a strong
balance sheet, we are well positioned to continue our momentum into
2022 and beyond.”
Overview
During the third quarter, the global communications market
continued to grow strongly, and this trend was widely reflected
across WPP. Our strength in media combined with our focus on
digital, commerce and data is delivering very positive momentum in
the business. We achieved double-digit growth in like-for-like
revenue less pass-through costs in 15 of our top 20 markets and
most of our agency networks. On a two-year basis, performance was
led by GroupM (37% of WPP in Q3) which was up 14.6% like-for-like,
and VMLY&R, which also grew double-digits. Our key agency
networks, and most of our markets, delivered an improving two-year
trend in Q3 compared to Q2.
In new business, we continued to perform well. Most importantly,
we retained our long-term partnership with Unilever in media after
a thorough review. Including the business won in China last year,
we have expanded our remit with Unilever. We also grew our
relationship with Bayer, adding the key markets of Germany, Russia
and China to our existing media responsibilities. During the
period, we won new assignments from Beiersdorf, L’Oréal,
Sainsbury’s, TD Bank and Under Armour among others.
At the same time, we made strong strategic progress through
mergers and acquisitions, transforming existing businesses within
WPP and bringing in new capabilities to scale across the
company.
- In July, Kantar completed the acquisition of Numerator, which
blends proprietary data, including a digital panel of over one
million US consumers, with advanced technology to create unique
insights that help companies understand their customers in real
time and identify growth opportunities. The transaction makes
Kantar a leader in shopper insights in the US and Canada,
consistent with its market position in 45 other markets.
- In August, we acquired Satalia, a global leader in enterprise
AI and one of the UK's fastest-growing technology companies, with
clients including BT, DFS, DS Smith, PwC, Gigaclear, Tesco and
Unilever. Combining machine learning and optimisation, it builds
technologies that help clients apply AI to their business. Satalia
will join Wunderman Thompson Commerce and strengthen the global
ecommerce consultancy's technology proposition. It will also act as
a hub of AI expertise across WPP.
- In October, we announced the merger of Finsbury Glover Hering
with SVC to create the world’s leading strategic communications
firm, with deep expertise in government affairs, corporate
reputation, crisis management and financial communications. The new
combined group will comprise approximately 1,000 professionals
operating from 25 offices in Asia, Europe, the Middle East and the
United States, including its global headquarters in New York. Pro
forma combined 2020 revenue was more than $330 million.
Revenue in the third quarter was up 9.1% at £3.2 billion, and up
14.3% on a constant currency basis. Net changes from acquisitions
and disposals had a negative impact of 0.4% on growth, leading to a
like-for-like performance, excluding the impact of currency and
acquisitions, of 14.7%.
Revenue less pass-through costs in the third quarter was up 9.9%
year-on-year to £2.6 billion, and up 15.3% on a constant currency
basis. Net changes from acquisitions and disposals had a negative
impact of 0.4% on growth, leading to a like-for-like performance,
excluding the impact of currency and acquisitions, of 15.7%.
Regional review
Revenue analysis
£ million
Q3 2021
Q3 2020
+/(-) % reported
+/(-) % LFL
N. America
1,143
1,087
5.2
11.8
United Kingdom
494
426
16.0
17.1
W. Cont Europe
676
587
15.1
21.1
AP, LA, AME, CEE3
927
869
6.7
12.8
Total Group
3,240
2,969
9.1
14.7
Revenue less pass-through costs analysis
£ million
Q3 2021
Q3 2020
+/(-) % reported
+/(-) % LFL
N. America
975
922
5.6
12.2
United Kingdom
362
311
16.4
16.9
W. Cont Europe
562
493
14.0
21.5
AP, LA, AME, CEE
741
675
9.9
15.6
Total Group
2,640
2,401
9.9
15.7
North America saw like-for-like revenue less pass-through
costs up 12.2% in the third quarter, with strong growth in both the
US and Canada. The US in particular saw a strong acceleration in
its two-year LFL growth rate, from 1.8% in Q2 to 6.2% in Q3, driven
mainly by GroupM.
In the United Kingdom, like-for-like revenue less
pass-through costs was up 16.9% and achieved an acceleration in its
two-year LFL growth rate from 1.1% in Q2 to 9.3% in Q3. AKQA Group
and VMLY&R performed particularly strongly.
Western Continental Europe like-for-like revenue less
pass-through costs grew by 21.5%. Performance in the region
accelerated strongly, driven by Germany where broad-based growth
was further boosted by a COVID-related contract. Italy continued to
perform strongly while Spain and France also recovered to 2019
levels like-for-like.
Asia Pacific, Latin America, Africa & the Middle East and
Central & Eastern Europe like-for-like revenue less
pass-through costs was up 15.6%. Latin America was comfortably the
strongest region, led by Brazil. Asia Pacific continued to recover
more slowly, with China, Australia and several other markets still
below 2019 levels.
Business sector review
During 2020, we announced that we would bring together Grey and
AKQA under the AKQA Group, brought Geometry and GTB into
VMLY&R, and International Healthcare into VMLY&R and
Ogilvy. As a result AKQA, Geometry, GTB and International
Healthcare are now reported within Global Integrated Agencies,
having previously been reported within Specialist Agencies. 2020
comparable revenue and revenue less pass-through costs figures have
been adjusted by a total of £229 million and £211 million
respectively to reflect this change.
Revenue analysis
£ million
Q3 2021
Q3 2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
2,748
2,545
8.0
13.1
Public Relations
245
219
11.7
17.4
Specialist Agencies
247
205
20.7
32.7
Total Group
3,240
2,969
9.1
14.7
Revenue less pass-through costs analysis
£ million
Q3 2021
Q3 2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
2,185
2,016
8.3
13.5
Public Relations
231
210
10.4
16.0
Specialist Agencies
224
175
27.9
41.5
Total Group
2,640
2,401
9.9
15.7
Global Integrated Agencies like-for-like revenue less
pass-through costs was up 13.5%. GroupM (37% of WPP’s revenue less
pass-through costs in the third quarter) was up 19.0%
like-for-like, and up 14.6% like-for-like over 2019, reflecting
strong structural growth in digital and commerce media. VMLY&R
was the next best performer, growing double-digits like-for-like
year-on-year and over 2019. All the other agencies showed an
improving two-year trend compared to the second quarter.
Public Relations like-for-like revenue less pass-through
costs was up 16.0%, and up 12.6% over 2019. Demand for board-level
strategic communications advice remains strong, and Specialist PR
was again the best performer. Both BCW and H+K Strategies
maintained strong momentum, with growth accelerating from the
second quarter.
Specialist Agencies, with like-for-like revenue less
pass-through costs up 41.5%, and up 21.8% on 2019, was again the
best performing sector within WPP. Our Brand Consulting businesses
continue to perform very well, as does CMI, our specialist
healthcare media business. Growth for the sector was boosted by the
COVID-related contract in Germany.
Balance sheet highlights
Average net debt in the first nine months of 2021 was £1.6
billion, compared to £2.5 billion in 2020, at 2021 exchange rates,
a decrease of £0.9 billion. Net debt at 30 September 2021 was £1.6
billion, compared to £2.3 billion on 30 September 2020, or £2.6
billion at 2021 exchange rates, a decrease of £1.0 billion.
Share purchases of £458 million were made in the first nine
months of the year, of which £408 million related to share
buybacks. As of 27 October 2021 the total share buyback had reached
£448 million.
2021 outlook
As a result of our continued strong business momentum in Q3, we
are further raising our guidance for 2021:
- Like-for-like revenue less pass-through costs growth of
11.5-12.0% (previously 9-10% growth)
- Headline operating margin slightly above 14% (previously
towards the upper end of the range of 13.5-14.0%)
- Capex £450-500 million
Our current projections for foreign exchange movements imply
around a 5 percentage point drag to reported revenue less
pass-through costs from the strength of sterling year-on-year. As
previously guided, we anticipate a small net trade working capital
outflow for 2021 of £200-300 million, reflecting some normalisation
from the very strong position at the end of 2020.
We expect to complete the £600 million share buyback in
December. Given the strength of our balance sheet and strong cash
generation, we anticipate continuing the buyback at a similar rate
up to the date of our 2021 preliminary results, provisionally
planned for late February 2022, at which point we will lay out our
capital allocation plans for the coming year in more detail.
Appendix
Regional Review
Revenue analysis – Nine Months Year-to-Date
£ million
9M 2021
9M 2020
+/(-) % reported
+/(-) % LFL
N. America
3,327
3,264
1.9
10.7
United Kingdom
1,421
1,184
20.1
20.1
W. Cont Europe
2,017
1,680
20.0
22.7
AP, LA, AME, CEE
2,608
2,424
7.6
14.8
Total Group
9,373
8,552
9.6
15.6
Revenue less pass-through costs analysis – Nine Months
Year-to-Date
£ million
9M 2021
9M 2020
+/(-) % reported
+/(-) % LFL
N. America
2,792
2,779
0.5
9.1
United Kingdom
1,042
897
16.2
16.9
W. Cont Europe
1,612
1,412
14.1
17.2
AP, LA, AME, CEE
2,093
1,981
5.7
12.3
Total Group
7,539
7,069
6.7
12.6
Business Sector Review
During 2020, we announced that we would bring together Grey and
AKQA under the AKQA Group, brought Geometry and GTB into
VMLY&R, and International Healthcare into VMLY&R and
Ogilvy. As a result AKQA, Geometry, GTB and International
Healthcare are now reported within Global Integrated Agencies,
having previously been reported within Specialist Agencies. 2020
comparable revenue and revenue less pass-through costs figures have
been adjusted by a total of £705 million and £646 million
respectively to reflect this change.
Revenue analysis – Nine Months Year-to-Date
£ million
9M 2021
9M 2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
7,918
7,270
8.9
15.0
Public Relations
695
666
4.3
10.8
Specialist Agencies
760
616
23.5
27.9
Total Group
9,373
8,552
9.6
15.6
Revenue less pass-through costs analysis – Nine Months
Year-to-Date
£ million
9M 2021
9M 2020
+/(-) % reported
+/(-) % LFL
Global Integrated Agencies
6,254
5,913
5.8
11.8
Public Relations
660
636
3.9
10.3
Specialist Agencies
625
520
20.1
24.9
Total Group
7,539
7,069
6.7
12.6
Cautionary statement regarding forward-looking
statements
This document contains statements that are, or may be deemed to
be, “forward-looking statements”. Forward-looking statements give
the Group’s current expectations or forecasts of future events. An
investor can identify these statements by the fact that they do not
relate strictly to historical or current facts. They use words such
as ‘anticipate’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’,
‘plan’, ‘believe’, ‘target’ and other words and terms of similar
meaning in connection with any discussion of future operating or
financial performance.
These forward-looking statements may include, among other
things, plans, objectives, projections and anticipated future
economic performance based on assumptions and the like that are
subject to risks and uncertainties. As such, actual results or
outcomes may differ materially from those discussed in the
forward-looking statements. Important factors which may cause
actual results to differ include but are not limited to: the
unanticipated loss of a material client or key personnel, delays or
reductions in client advertising budgets, shifts in industry rates
of compensation, regulatory compliance costs or litigation, natural
disasters or acts of terrorism, the Company’s exposure to changes
in the values of other major currencies (because a substantial
portion of its revenues are derived and costs incurred outside of
the UK) and the overall level of economic activity in the Company’s
major markets (which varies depending on, among other things,
regional, national and international political and economic
conditions and government regulations in the world’s advertising
markets). In addition, you should consider the risks described
under Item 3D ‘Risk Factors’ in the Group’s Annual Report on Form
20-F for 2020 and any impacts of the COVID-19 pandemic which could
also cause actual results to differ from forward-looking
information. In light of these and other uncertainties, the
forward-looking statements included in this document should not be
regarded as a representation by the Company that the Company’s
plans and objectives will be achieved. Other than in accordance
with its legal or regulatory obligations (including under the
Market Abuse Regulation, the UK Listing Rules and the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however, consult any
additional disclosures that the Group may make in any documents
which it publishes and/or files with the SEC. All readers, wherever
located, should take note of these disclosures. Accordingly, no
assurance can be given that any particular expectation will be met
and investors are cautioned not to place undue reliance on the
forward-looking statements.
Any forward looking statements made by or on behalf of the Group
speak only as of the date they are made and are based upon the
knowledge and information available to the Directors on the date of
this document.
_______________________________
1 Percentage change in reported
sterling.
2 Like-for-like. LFL comparisons are
calculated as follows: current year, constant currency actual
results (which include acquisitions from the relevant date of
completion) are compared with prior year, constant currency actual
results, adjusted to include the results of acquisitions and
disposals for the commensurate period in the prior year.
3 Asia Pacific, Latin America, Africa
& Middle East and Central & Eastern Europe.
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Investors and analysts Peregrine Riviere +44 7909 907193
Caitlin Holt +44 7392 280178 Fran Butera (US) +1 914 484 1198
Media Chris Wade +44 20 7282 4600 Richard Oldworth, +44
7710 130 634 Buchanan Communications +44 20 7466 5000
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