WPP has released a trading update for the first quarter of 2015, with revenue growing by 8.3 per cent.
The announcement from WPP:
- Reported revenue up 8.3% at £2.783 billion in sterling, down 1.1% at $4.211 billion in dollars and up 20.9% at €3.753 billion in euros reflecting volatile exchange rates
- Constant currency revenue up 7.4%, like-for-like revenue up 5.2%
- Constant currency net sales up 5.0%, like-for-like net sales up 2.5%
- First quarter profits and margin well above target
- Share buy-backs continue above target rate with 10.5 million shares or 0.8% of share capital purchased in first quarter
- Constant currency net debt at 31st March 2015 up £218 million on same date in 2014, with average net debt in first quarter of 2015 up by £185 million over same period in 2014 reflecting strong acquisition and buy-back activities
- Recent new business activity and net new business wins continue as clients react to past and potential changes in the agency industry’s structure
WPP’s 1st Quarter highlights
- Revenue growth of 8.3%, with constant currency growth of 7.4%, like-for-like growth of 5.2%, 2.2% growth from acquisitions and 0.9% from currency, reflecting the weakness of sterling against the US dollar, partly offset by the strength of sterling, primarily against the euro.
- Net sales growth of 6.0% in sterling (down 3.2% in dollars and up 18.3% in euros), with constant currency growth of 5.0%, like-for-like growth of 2.5%, 2.5% growth from acquisitions and 1.0% from currency
- Like-for-like revenue growth in all regions and business sectors, except data investment management, characterised by particularly strong growth geographically in the United Kingdom and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and functionally in advertising and media investment management and sub-sectors direct, digital and interactive and healthcare
- Like-for-like net sales growth of 2.5%, with all regions and sectors, including data investment management, showing growth. The gap compared to revenue growth is similar to the first quarter of 2014, reflecting the scale of digital media purchases in the media investment management and data investment management direct costs
- Constant currency average net debt in the first quarter increased by £185m (7%) to £2.734 billion compared to the same period in 2014, continuing to reflect the significant incremental net acquisition spend and share re-purchases of £331 million in the twelve months to 31 March 2015, compared with the previous twelve months, more than offsetting the improvements in working capital seen in the second half and final quarter of last year
- Net new business of almost exactly $1.0 billion in the first quarter, compared to $1.275 billion in the first quarter last year.
Current trading and outlook
- FY 2015 quarter 1 preliminary revised forecasts | Similar to budget, with like-for-like revenue and net sales growth up over 3%. Headline net sales margin target of 0.3 margin points improvement on a constant currency basis
- Dual focus in 2015 | 1. Stronger than competitor revenue and net sales growth due to leading position in faster growing geographic markets and digital, premier parent company creative and effectiveness position, new business, horizontality and strategically targeted acquisitions; 2. Continued emphasis on balancing revenue and net sales growth with headcount increases and improvement in staff costs/net sales ratio to enhance operating margins
- Long-term targets | 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 costs/net sales ratio of 0.2 per annum or more depending on net sales growth; net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20%; and headline diluted EPS growth of 10% to 15% per annum from revenue growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs