WPP Interim Results 2014

26 Aug 2014

  • Reported revenues up 2.7% at £5.469 billion in sterling, up 11.3% at $9.135 billion in dollars and up 6.5% at €6.663 billion in euros
  • Constant currency revenues up 11.3%, like-for-like revenues up 8.7%
  • Constant currency net sales up 6.4%, like-for-like net sales up 4.1%
  • Reported billings down 3.0% at £22.060 billion ravaged by sterling strength, but up 5.7% in constant currency
  • Reported net sales margin of 13.0%, flat with last year, up 0.3 margin points on a constant currency basis and up 0.3 margin points like-for-like in line with the full year margin target
  • Headline reported profit before interest and tax £622 million, down 2.4%, but up 9.0% in constant currency
  • Headline profit before tax £532 million up 1.5%, up 15.6% in constant currency
  • Profit before tax £491 million up 15.0%, up 33.7% in constant currency
  • Reported profit after tax £396 million up 25.6%, up 47.9% in constant currency
  • Headline diluted earnings per share 29.2p up 2.8%, up 17.1% in constant currency
  • Reported diluted earnings per share 27.0p up 25.6%, up 47.7% in constant currency
  • Dividends per share 11.62p up 10%, a pay-out ratio of 40% versus 37% last year
  • Share buy-backs upped significantly in line with target to £390 million in the first half, up from £133 million last year, equivalent to 2.3% of the issued share capital against 1.0% last year
  • Targeted dividend pay-out ratio of 45% likely to be achieved this year well ahead of schedule
  • Including all associates and investments, revenues total over $24 billion annually and people average over 179,000

Key figures
£ Million H1 2014 ∆ reported1 ∆ constant2 H1 2013
Billings 22,060 -3.0% 5.7% 22,736
Revenue 5,469 2.7% 11.3% 5,327
Net sales 4,792 -1.9% 6.4% 4,884
Headline EDITDA 3 733 -2.7% 8.1% 753
Headline PBIT 4 622 -2.4% 9.0% 637
Net sales margin 5 13.0% - 0.3% 6
Profit before tax 491 15.0% 33.7% 427
Profit after tax 396 25.6% 47.9% 315
Headline diluted EPS 7 29.2p 2.8% 17.1% 28.4p
Diluted EPS 8 27.0p 25.6% 47.7% 21.5p
Dividends per share 11.62p 10.0% 10.0% 10.56p

First-half and Q2 highlights

  • Reported billings decreased by 3.0% to £22.060bn, but up 5.7% in constant currency
  • Reported revenue growth of 2.7%, with like-for-like growth of 8.7%, 2.6% growth from acquisitions and -8.6% from currency, reflecting 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. Quarter two growth has seen significant improvement over the first quarter of the year
  • Reported net sales down 1.9% in sterling (up 6.3% in dollars and 1.8% in euros), with like-for-like growth of 4.1%, 2.3% growth from acquisitions and -8.3% from currency
  • Constant currency revenue growth in all regions and business sectors, characterised by 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 of 4.1%, an improvement over the first quarter, with the gap compared to revenue growth widening further in the second quarter, as the scale of digital media purchases in media investment management and data investment management revenues increased
  • Reported headline EBITDA down 2.7%, with constant currency growth of 8.1%, delivered through strong like-for-like organic net sales growth and by 0.3 margin points improvement, with operating costs up 6.2%, rising less than net sales
  • Reported headline PBIT decreased slightly by 2.4%, but up 9.0% in constant currency with both constant currency and like-for-like net sales margin, a more accurate competitive comparator, increasing by 0.3 margin points, in line with the Group’s full year target
  • Reported headline diluted EPS up 2.8%, up 17.1% in constant currency, enabling the payment of a 10% higher interim ordinary dividend of 11.62p, giving a pay-out ratio of 40% compared with 37% last year. The Group’s targeted pay-out ratio is 45% over the next two years, which is likely to be achieved in 2014 well ahead of schedule
  • Average net debt decreased by £348m (+11%) to £2.765 billion compared to last year, at 2014 constant rates, reflecting improvements in working capital and also the benefit of converting the £450 million Convertible Bond in mid-2013
  • Creative and effectiveness excellence recognised again in 2014 with the award of the Cannes Lion to WPP for the most creative Holding Company for the fourth successive year since the award’s inception and another to Ogilvy & Mather Worldwide for the third consecutive year as the most creative agency network. In another rare occurrence in our industry, Grey was named Global Agency of the Year 2013 by both US trade magazines Ad Age and Ad Week. For the third consecutive year, WPP was awarded the EFFIE as the most effective Holding Company
  • Clear number one position in all net new business tables for the last two and a half years
  • Strategy implementation accelerated even in a dead POG world as sector targets for fast growth markets and new media raised from 35-40% to 40-45% over next five years

Current trading and outlook

  • July 2014 | July net sales were up 2.8% like-for-like, against a strong comparative growth rate in 2013 of 4.1%. All regions and sectors were positive, and showed a similar pattern to the first half, albeit slightly lower overall. Cumulative like-for-like net sales growth for the first seven months of 2014 is now 4.0%
  • FY 2014 quarter 2 revised forecast | Increase in like-for-like revenue growth from the quarter 1 revised forecast, as the scale of digital media purchases increased, with net sales growth similar at over 3% and a stronger first half and a similar second half. 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; 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

1 Percentage change in reported sterling
2 Percentage change at constant currency rates
3 Headline earnings before interest, tax, depreciation and amortisation
4 Headline profit before interest and tax
5 Headline profit before interest and tax, as a percentage of net sales
6 Margin points
7 Diluted earnings per share based on headline earnings
8 Diluted earnings per share based on reported earnings

In this press release not all of the figures and ratios used are readily available from the unaudited interim results included in Appendix 1. Where required, details of how these have been arrived at are shown in the Appendices.

Download Appendix 1 of WPP Interim Results 2014 (pdf)