WPP Third Quarter Trading Update 2014

31 October, 2014



  • 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

Revenue analysis *
£ million 2014 ∆ reported ∆ constant1 ∆ LFL2 Acquisitions 2013
First half 5,469 2.7% 11.3% 8.7% 2.6% 5,327
Third quarter 2,763 3.1% 10.6% 7.6% 3.0% 2,680
First nine months 8,232 2.8% 11.0% 8.3% 2.7% 8,007


Net Sales analysis *
£ million 2014 ∆ reported ∆ constant1 ∆ LFL2 Acquisitions 2013
First half 4,792 -1.9% 6.4% 4.1% 2.3% 4,884
Third quarter 2,418 -1.2% 6.1% 3.0% 3.1% 2,447
First nine months 7,210 -1.7% 6.3% 3.8% 2.5% 7,331

* Disclosure of revenue and net sales figures necessary to more accurately show underlying trends, given the significant increase in both on-line media buying as principal, together with pass-through costs for data investment management

1 Percentage change at constant currency exchange rates
2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals



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



For further information:

Sir Martin Sorrell }
Paul Richardson }
Chris Sweetland } +44 20 7408 2204
Feona McEwan }
Chris Wade }

Kevin McCormack }
Fran Butera } +1 212 632 2235

This announcement has been filed at the Company Announcements Office of the London Stock Exchange and is being distributed to all owners of Ordinary shares and American Depository Receipts. Copies are available to the public at the Company's registered office.
 
The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act of 1995 introduced in the United States of America. This announcement may contain forward-looking statements within the meaning of the US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the Company's independent auditors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings by the Company with the Securities and Exchange Commission. The statements in this announcement should be considered in light of these risks and uncertainties.


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