7th Aug 2024 14:59
(Alliance News) - WPP PLC delivered a mixed earnings report, with strength in the North America region offset by weakness elsewhere, with the advertising firm also cutting yearly guidance.
The London-based firm said pretax profit jumped 66% to GBP338 million in the six months that ended June 30 from GBP204 million a year before.
Revenue edged up 0.1% to GBP7.23 billion from GBP7.22 billion.
WPP maintained its interim dividend at 15.0 pence per share.
Total headline operating costs were reduced by 3.7% to GBP4.95 billion from GBP5.15 billion, while adjusted net debt fell 2.9% to GBP3.4 billion from GBP3.5 billion.
Chief Executive Officer Mark Read said: "Our second quarter performance delivered sequential improvement in net sales with continued growth in GroupM, Ogilvy and Hogarth and sequential improvement at Burson, VML and our Specialist Agencies.
"Importantly, we also saw North America return to growth in the second quarter. That said, we have seen pressure in China and in our project-related businesses which, together with an uncertain macro environment, has led us to moderate our expectations for the full year."
Staff costs, excluding incentives, fell 3.3% to GBP3.84 billion from GBP3.97 billion reflecting higher wage inflation, offset by action taken to lower headcount.
Establishment costs were down 11% to GBP242 million, IT costs fell 2.6% to GBP341 million, and personal costs were reduced 8.0% to GBP103 million.
The new guidance points to a like-for-like revenue less pass-through costs outcome which ranges from a 1% to flat on-year, trimmed from flat to 1% growth.
"On the trading front, WPP's first half results are mixed, with a notably better performance in the US and India offset by more difficult trading in the UK and China, where the macro backdrop is particularly onerous. There have been some sequential improvements in the second quarter, but not of sufficient scale to lift the full year outlook, where guidance is now for a dip in revenue less pass-through costs of up to 1%," Edison analyst Fiona Orford-Williams commented.
WPP said it agreed to sell its entire majority stake, approximately 50%, in strategic communications and advisory firm, FGS Global Ltd, to an acquisition vehicle with funds managed or advised by private equity firm Kohlberg Kravis Roberts & Co LP.
"This transaction better positions WPP to focus on and invest in its world-class creative, media and corporate and consumer public relations businesses to deliver growth while strengthening the group's balance sheet," WPP said.
The consideration for the sale is USD775 million, payable in cash at completion which is expected before the end of 2024.
Edison analyst Orford-Williams believes the deal could boost WPP's coffers as it looks to invest in technology.
"This will raise around GBP600 million net and bring WPP's net leverage back into its targeted range of 1.50-1.75x. It also emphasises WPP's greater focus on creative transformation and frees up funds for the group's continuing investment in AI," the analyst said.
WPP shares fell 1.9% to 703.26 pence each in London on Wednesday afternoon.
By Eric Cunha, Alliance News news editor
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