# WPP Q2 like-for-like revenue growth rate of 19.3% is highest on record - Link: https://www.directorstalkinterviews.com/wpp-q2-like-for-like-revenue-growth-rate-of-19.3-is-highest-on-record/4121014669 - Published: 2021-08-05T07:33:41+01:00 - Author: Amilia Stone **[WPP PLC](https://www.directorstalkinterviews.com/ftse-company/wpp-plc/wpp.l)**( LON:WPP) has announced its 2021 Interim Results. **Key figures – continuing operations** | £ million | H1 2021 | +/(-) % reported^([1]) | +/(-) % LFL^([2]) | H1 2020**^([3])** | | Revenue | 6,133 | 9.8 | 16.1 | 5,583 | | Revenue less pass-through costs | 4,899 | 5.0 | 11.0 | 4,668 | |   |   |   |   |   | | Reported: |   |   |   |   | | Operating profit/(loss) | 484 | n/m^([4]) | – | (2,751) | | Profit/(loss) before tax | 394 | n/m | – | (3,177) | | Diluted EPS (p) | 20.6 | n/m | – | (262.0) | | Dividends per share (p) | 12.5 | 25.0 | – | 10.0 | |   |   |   |   |   | | Headline**^([5])**: |   |   |   |   | | Operating profit | 590 | 54.4 | – | 382 | | Operating profit margin | 12.1% | 3.9pt* | – | 8.2% | | Profit before tax | 502 | 81.9 | – | 276 | | Diluted EPS (p) | 28.7 | 86.4 | – | 15.4 | _* Margin points_ **H1 and Q2 financial highlights** * H1 reported revenue 9.8%, LFL revenue 16.1% (Q2 26.4%) * H1 revenue less pass-through costs 5.0%, LFL revenue less pass-through costs 11.0% (up 0.5% on H1 2019) * Q2 LFL revenue less pass-through costs 19.3%: US 12.6%, UK 31.8%, Germany 20.3%, Greater China 1.4%, Australia 8.4%, India 30.0% * Q2 LFL revenue less pass-through costs on 2019 1.3%: US 1.8%, UK 1.1%, Germany 6.3%, Greater China -1.7%, Australia -13.6%, India -2.6% * Strong new business performance: $2.9 billion net new billings in H1 * H1 headline operating margin 12.1%, up 3.9 pt on prior year with strong top-line growth supporting significant reinvestment in incentives * H1 headline operating margin pre incentives up 7.8 pt to 17.0% * Net debt at 30 June 2021 £1.5 billion, down £1.2 billion year-on-year reflecting good working capital management **Strategic progress, shareholder returns and outlook** * Shifting business mix: growth areas of experience, commerce and technology represented 26% of revenue less pass-through costs in H1 * Launch of Choreograph, future-ready data and analytics company * M&A to simplify and grow: buy-in of WPP AUNZ minorities; technology acquisitions in Brazil and UK; Kantar agreed to acquire Numerator * Continued recognition of creativity and effectiveness: most creative company at Cannes, collecting 190 Lions including 12 Grand Prix, 1 Titanium, 28 Gold, 57 Silver and 92 Bronze * Industry-leading commitment to net zero carbon emissions across entire supply chain by 2030 * £248m share buyback in H1, £350m planned for H2; 12.5p 2021 interim dividend declared, +25% * Full year 2021 LFL revenue less pass-through costs growth now expected to be 9-10%; headline operating margin towards the upper end of the 13.5-14.0% range > **Mark Read, Chief Executive Officer, WPP:** > “I’m delighted with our performance in the first six months of the year, at a > time when COVID continues to take a toll on many countries. The like-for-like > revenue less pass-through costs growth rate of 19.3% in the second quarter is > our highest on record, as clients reinvest in marketing, particularly in digital > media, ecommerce and marketing technology. We have returned to 2019 levels in > 2021, a year ahead of our plan, with good momentum into 2022. > “We’ve also made very good strategic progress. Our recognition as the most awarded > company at the 2021 Cannes Lions Festival reflects our investment in creative > talent and the strength of our creative work over the past two years. Our focus > on data, commerce and technology, through strategic acquisitions, organic investments > and the launch of Choreograph, has supported a strong new business performance. > Key assignment wins include AstraZeneca, Bumble, [JP Morgan](https://www.directorstalkinterviews.com/company/news/funds) > Chase and Pernod Ricard. > “In procurement, property and shared services, we are making strong progress as > part of our overall transformation programme. We have significantly increased > our incentive pools in the first half, to reflect the tremendous contribution > of our people in these challenging times, and in line with our intention to reinvest > in talent announced at our Capital Markets Day in December 2020. > “We expect our strategy to translate into benefits for all of our stakeholders: > a powerful, modern offer to support our clients’ growth; a great place for our > people to work; a positive contribution to communities and the environment; and > good financial returns for shareholders, with the interim dividend raised 25% > and £600 million of share buybacks planned in 2021.” **First half overview** **Market environment** The market recovery in the first half of the year has been much faster than expected. Successful vaccination programmes in our major markets have accelerated the easing of restrictions, stimulating economic activity. As the global recovery gathered pace, GroupM made a significant upward revision of its advertising forecasts, predicting that the global advertising economy will grow by 19% in 2021 (excluding US political advertising). Much of this growth is expected to be captured by digital media, as the underlying trends accelerated by the pandemic, such as the shift to ecommerce and digitisation of media, have continued in the first half of 2021. GroupM forecasts show digital media spend increasing by 26% in 2021, a major uplift from the 15% estimated in December 2020. Spend on television advertising is expected to grow by 9%, as marketers continue to rely on the medium’s reach advantage to reinforce the strength of their brands. Most other advertising channels are expected to stabilise or grow during 2021, aside from magazines and newspapers where spend is expected to decline.   The recovery has been broad-based across all major markets as economies have begun to stabilise, supported by government stimulus and vaccination roll-outs. Based on GroupM forecasts, advertising spend in the UK will grow by 24% in 2021 driven by the economic recovery. Better than 20% growth in advertising spend is also forecast in Brazil and China. The US advertising market is expected to grow by 17% in 2021, or 22% excluding political spend. **Performance and progress** Revenue in the first half was £6.1 billion, up 9.8% from £5.6 billion in the first half of 2020, and up 16.1% like-for-like. Revenue less pass-through costs was £4.9 billion, up 5.0% from £4.7 billion in the first half of 2020, and up 11.0% like- for-like. We have seen a strong recovery in the first half of the year, with LFL growth in revenue less pass-through costs across all sectors and most major markets. On a two-year basis we are 0.5% ahead of 2019 performance for the first half in terms of LFL revenue less pass-through costs, having been slightly below 2019 levels in the first quarter of the year. The nature of our work for clients has continued to evolve. We have seen very strong demand from clients for commerce services. GroupM commerce billings increased 61% year-on-year in the first half. Our expertise in commerce was recognised in March, when Forrester named WPP a Leader among commerce services providers in the Forrester Wave™: Commerce Services, Q1 2021 report. Further highlighting our pivot to digital, GroupM’s proportion of digital billings has increased from 41% in 2020 to 43% in the first half of 2021. Our PR business has performed strongly (LFL revenue less pass-through costs +7.4%), as WPP agencies remain a critical partner and advisor to our clients. We have seen high demand for purpose-related communications, as our clients have sought advice on how to engage with their own stakeholders on [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news) issues, and we see this as a significant opportunity for growth. In terms of client sector performance, we have seen a sustained strong performance from our clients in the consumer packaged goods, technology and healthcare & pharma sectors, which together represent around 54% of our revenue less pass-through costs for designated clients. In the first half these sectors saw LFL revenue less pass- through costs growth of 11.3%, 14.5% and 13.4% respectively. Compared to 2019, their growth rates were 7.2%, 12.7% and 10.8%.   We have had a good performance in terms of new business, with $2.9 billion of net new business billings won in the first half. The performance of our integrated agencies, the strength and scale of our global footprint and the collaboration between agencies have continued to attract and retain clients. Key assignment wins include AstraZeneca, Bumble, Hyatt, JP Morgan Chase, L’Oréal, Pernod Ricard and Sam’s Club, and key retentions include the US Navy. During the period, we continued to invest in strategically important areas. We announced the acquisitions of DTI, a digital innovation and software engineering business in Brazil, and NN4M, a leading mobile commerce partner for global brands. In addition, our 40% associate Kantar agreed to acquire Numerator, a technology-driven consumer and market intelligence company. Our commitment to creativity is now being reflected more widely in our work and awards. WPP was named the most creative company of the year at the Cannes Lions International Festival of Creativity in June, reflecting the investments we have made in creativity and the strength of our talent. Our agencies collected a total of 190 Lions, including a Titanium Lion and 12 Grand Prix, with winners representing 38 different countries. We announced the appointment of Rob Reilly as Global Chief Creative Officer in January 2021, reinforcing our commitment to drive creativity across WPP. We are making good progress on our transformation programme, as we lay the foundations for realising structural efficiencies in a number of areas. In property, where our campus strategy is well-advanced, we are on track to occupy 32 campuses by the end of 2021, with new cities this year including Detroit, Jakarta and Milan. The adoption of more hybrid working practices will further amplify the benefits of our campuses, and total establishment costs are expected to be below 6% of revenue less pass-through costs this year. In shared services, we are establishing global and regional hubs, and have already deployed units from four markets into these locations. In Enterprise IT, our benchmarking work has identified significant opportunities as we develop plans to reduce the gap between our cost of IT and the industry benchmark. In procurement, we are pursuing an extensive programme to consolidate our supplier base and re-tender existing supply arrangements to tackle the significant opportunities within our £2 billion of annual indirect spend. We have also made further structural and organisational changes which simplify WPP and improve the way we go to market and serve clients. We have established Choreograph, a new global data company, bringing together the specialist data units of GroupM and Wunderman Thompson into a single company with global reach, accessible to all WPP clients and companies, and recently announced the appointment of Brendan Moorcroft as CEO. In addition, we have combined separate operations into a single brand research and analytics platform under BAV, creating the leading source of brand analytics on over 60,000 brands worldwide. This will enable us to better integrate brand data into our data analytics offer across WPP companies. Finally, we completed the transaction to take 100% ownership of WPP AUNZ, further simplifying the group structure. **Purpose and ESG** Environmental, social and governance issues are an increasingly important topic for all our stakeholders, particularly our clients and our people. WPP is at the heart of many of the pressing issues that we face as a society and the actions and judgements we make as a business are critically important. WPP’s purpose is to use the power of creativity to build better futures for our people, our planet, our clients and our communities. In June, we hosted an ESG event for stakeholders, to set out our commitments and highlight the progress we have made across the four pillars of our purpose statement. Putting purpose at the heart of our business makes WPP a more attractive employer for our people. In order to attract, retain and grow top talent we have continued to invest in our people strategy to ensure WPP is an employer of choice for all. This year we launched our first quarterly Pulse survey, an employee listening tool designed to better understand the sentiment of our people and highlight the areas we need to focus on. WPP is committed to real progress on diversity, equity and inclusion, and this year for the first time we have incorporated diversity and sustainability metrics into the compensation schemes for senior leaders. We have also increased our incentive pools, as part of our plan to reinvest savings in attracting and retaining talent. Earlier this year, we announced our new commitments to reduce carbon emissions from our own operations to net zero by 2025 and across our supply chain by 2030. Our net zero pledges are backed by equally ambitious science-based reduction targets, which have been verified by the Science-Based Targets initiative. We have committed to reducing our absolute Scope 1 and 2 emissions by at least 84% by 2025 and reduce Scope 3 emissions by at least 50% by 2030, both from a 2019 base year. Many of our clients are making great progress on reducing their own emissions and we will continue to support them to reach their targets. We have been recognised for our creativity in ESG-related work at the Cannes Lions International Festival of Creativity including a Titanium Grand Prix for Telenor work by Ogilvy in the mobile category, using technology to alleviate inequalities in Pakistan. In addition we won two design Grand Prix for AKQA’s work with H&M pioneering an in-store recycling system and Superunion’s work with Notpla, designing a sustainable alternative to plastic packaging. WPP’s global scale and reach puts us in a unique position to build global partnerships and make a positive contribution to the communities in which we operate. This year, through the WPP India Foundation we set up a COVID relief fund, providing ambulances on call, organising oxygen concentrators, and supporting a vaccination drive for all our people and their families across India. **2021 guidance** Performance in the first half of 2021 has been strong, and we are confident of further good growth in the second half. As a result, we are raising our guidance for 2021 as follows: – Organic growth (defined as like-for-like revenue less pass-through costs growth) of 9-10% (previously mid-single-digits %), returning to 2019 levels a year ahead of plan – Headline operating margin towards the upper end of the range of 13.5-14.0% – Capex £450-500 million In addition, our current projections for foreign exchange movements imply 4-5 percentage point drag to reported revenue less pass-through costs from the strength of sterling year-on-year. We also anticipate a net working capital outflow for 2021 of £200- 300 million, reflecting some normalisation from the very strong position at the end of 2020. **Medium-term guidance** At our Capital Markets Day in December 2020, we set out our new medium-term financial targets that will allow us to invest in talent, incentives and technology, improve our competitive position and deliver sustainable long-term growth. These were: – Recovery to 2019 revenue less pass-through costs levels by 2022 – 3-4% annual growth in revenue less pass-through costs from 2023, including M&A benefit of 0.5-1.0% annually – 15.5-16.0% headline operating margin in 2023 – Dividend: intention to grow annually with a pay-out ratio around 40% of headline diluted EPS – Average net debt/EBITDA maintained in the range 1.5-1.75x WPP now expect to recover to 2019 levels of revenue less pass-through costs on a like-for-like basis in the current year. The rest of these targets remain unchanged. Share on: