26th Aug 2015 08:51
LONDON (Alliance News) - Media buying giant WPP PLC Wednesday posted a sharp rise in pretax profit for its first half, boosted by exceptional gains and an improved operating performance, and reiterated guidance of net sales growth of over 3% for 2015.
WPP proposed a dividend of 15.91 pence, up 37% from 11.62 pence a year before. The significant jump in dividend is a result of WPP revising its dividend pay-out ratio target to 50%, to be achieved by 2017. It said it now seems likely it will achieve this target by the end of 2016, one year ahead of target.
The company posted a rise in pretax profit of GBP710 million for the half year to end-June, up 45% from GBP491 million a year before, boosted by exceptional gains on the sale and revaluation of some of the company's associates and investments.
On a 'headline' basis, stripping out impairment, amortisation, gains on the sales of investments and subsidiaries and other exceptional costs, pretax profit rose GBP596 million, up 12% from GBP532 million.
Revenue rose 6.8% to GBP5.84 billion from GBP5.47 billion a year before at actual exchange rates. At constant currency, revenue rose 6.4%, as the company saw strong growth in North America, the UK, Asia Pacific, Latin American, Africa and the Middle East, and Central and Eastern Europe.
On a like-for-like basis, meaning at constant currency and excluding the effect of acquisitions and disposals, revenue rose 7.3% in North America and 4.6% in the UK, slower than the growth it had seen in the first quarter.
Western Continental Europe saw like-for-like revenue growth of 4.6%, as a sharp decline in Greece and weaker performances in Austria, Belgium, France and Turkey were offset by stronger performances in Germany, Italy, Spain, Sweden, the Netherlands and Switzerland.
In Asia Pacific, Latin America, African and the Middle East and Central and Eastern Europe, like-for-like revenue was up 1.1% during the period. Latin America, Africa and the Middle East showed an improved performance compared to the first quarter, but South East Asia, Australia and Central & Eastern Europe slowed. Greater China and Singapore were tougher, WPP noted, but India and some of the 'Next Eleven' countries grew strongly.
Reported billings rose 5.0% to GBP23.16 billion from GBP22.06 billion. WPP said it continues to benefit from consolidation trends in the industry.
Sales growth for the first half was 2.3%, slightly reduced from the 2.5% growth WPP reported in its first quarter. It continues to expect like-for-like revenue and net sales growth of over 3% for the full year. WPP's like-for-like net sales were up 3.7% in July, whilst like-for-like revenue rose 5.0%, which it said indicates a likely stronger third quarter.
The marketing services company said that "2015 looks to be another demanding year, although a weaker UK pound against a stronger US dollar may continue to provide some modest currency tailwind, which may be now more than offset by a stronger pound against the euro and the fast growth market currencies."
However, 2016 may provide a further lift to the industry, WPP said, noting its "maxi-quadrennial status - enlivened by the visually-stunning Rio Olympics and Paralympics, by the less visually-stunning United States Presidential Election and, last but not least, the UEFA EURO 2016 Football Championships."
In the longer term, WPP said it continues to target above industry revenue and net sales growth. It highlighted "continued caution" as the watchword for businesses in 2015, as they continue to focus on costs rather than revenue growth, despite clients being "certainly" more confident than they were in the 2008 financial crisis.
Geopolitical issues remain top of business leader's concerns, WPP noted, highlighting concerns over the ongoing crisis in Ukraine, tensions in the Middle East and North Africa, Greece potentially leaving the Eurozone - and after the Conservatives' outright win of the UK general election - a potential European Union referendum.
Concerns about China, aggravated by the recent devaluation of the yuan and stock market decline, and about Brazil, remain, but WPP said it remains "unabashed bulls of both".
Shares in WPP were down 0.4% at 1,356.00 pence Wednesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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