23rd Feb 2023 11:01
(Alliance News) - WPP PLC said it saw a strong performance across all its major agencies in 2022 on Thursday, with both revenue and profit seeing double-digit rises.
Russ Mould, investment director at AJ Bell, said as advertising spending is "directly tied" to the economic backdrop, investors can take some wider encouragement from WPP's "unexpectedly sunny outlook."
The London-based advertising and communications company said revenue in 2022 rose 13% to GBP14.43 billion from GBP12.80 billion in 2021.
Revenue less pass-through costs rose 14% to GBP11.80 billion, which came in line with Shore Capital's forecast, but was slightly higher than Shore-cited FactSet Research Systems market consensus of GBP11.7 billion.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said WPP's revenue growth was helped by a return to more normal global marketing spending, including an increase in TV advertising towards pre-pandemic levels.
"As a media giant, WPP has been stung by a global slowdown in marketing spending brought on my enormous geopolitical and economic stress. By all accounts, this looks to be reversing, which has fed into strong growth at the end of the year. To top it off, momentum hasn't only been achieved, it's being harnessed," she said.
Pretax profit jumped 22% to GBP1.16 billion from GBP951 million, as operating profit increased by 11% to GBP1.36 billion from GBP1.23 billion a year ago.
Chief Executive Mark Read said the firm delivered "strong growth" in the year, despite macroeconomic challenges. He said this reflected the "priority placed by [its] clients on investing in communications, customer experience, commerce, data and technology."
"Over the past three years, WPP has grown like-for-like net sales at a compound average rate of 3.2%, including 3.3% in North America, while improving our headline operating profit margin by 40 basis points. We enter 2023 in a strong financial position, with good momentum from new business and the many opportunities ahead of us."
Looking ahead, WPP expects like-for-like revenue less pass-through costs growth of 3% to 5% in 2023.
AJ Bell's Russ Mould cautioned that, "before anyone gets too excited", investors should remember that growth is still set to decelerate in 2023, just "not as much as analysts had feared."
"While Mark Read is unlikely to receive too many garlands for his performance, given the shares are lower than when he started as CEO in 2018, he does deserve credit for stabilising the business in the wake of founder Martin Sorrell's acrimonious departure and seeing it through the pandemic and a continuing structural shift in the advertising market. If he can get WPP to deliver robust performance when the backdrop is challenged, he will hope to impress when economic conditions move more in its favour," Mould said.
Shares in WPP were up 3.8% at 1,055.00 pence on Thursday morning in London. Over the past 12-months, the stock is down 10%.
Roddy Davidson at Shore Capital said he remains "bullish" on WPP's ability to harness its "deep digital skill set, extensive resources, and comprehensive global offering" to add "substantial" value to its blue-chip client base and to "capitalise on a positive medium-term advertising spend backdrop."
By Heather Rydings, Alliance News senior economics reporter
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