Top Stories
WPP boosts sales outlook but falls short of investors’ expectations
Global Banking & Finance Review®
Company
By Sachin Ravikumar and Joice Alves
LONDON (Reuters) -WPP upgraded its annual net sales outlook on Friday thanks to higher client spending but shares in the world’s largest advertising group slid nearly 8% as the news failed to excite investors expecting stronger forecasts.
The results come as investors and analysts look to gauge how advertising will perform against a backdrop of high inflation and slowing global economic growth.
Shares in WPP fell 7.8% to 822.60 pence on the London Stock Exchange by 0845 GMT. The stock has climbed 17.2% over the past month, compared with a 6% advance for the FTSE 100.
WPP now expects like-for-like net sales to grow 6%-7% in 2022, up from an already upgraded forecast of 5.5%-6.5%. It left its headline operating margin outlook unchanged.
Analysts and traders said WPP’s results and outlook, while strong, failed to reflect the momentum seen in much more upbeat results from rival ad group Publicis last month.
“Market participants were unimpressed … because they were somewhat expecting more for such a firm with strong prospects,” said Stephane Ekolo, an equity strategist at Tradition.
“Additionally, the fact that it did not change its margin outlook while raising sales might have raised some red flags, especially when taking into account that rival Publicis did.”
Last month, France’s Publicis raised its full-year guidance for organic growth and operating profit margin after a solid performance across all regions.
Britain’s WPP said like-for-like net sales from the technology sector grew 12% in the first half, helped by a slate of new deals and expansions to existing partnerships.
WPP, owner of the Ogilvy, Grey and GroupM agencies, also said the travel sector was also rebounding strongly, with 23% growth in the first half, although sales still remained below pre-pandemic levels.
Chief Executive Mark Read said he was not particularly worried about a forecast recession in Britain, pointing to client spending holding up across industries and markets. The UK accounts for 13% of WPP’s overall business.
“We’re yet to see any major impact on advertising spend,” he said in an interview. “We are in very close contact with our clients on spending patterns and their investments and consumer spending has held up around the world surprisingly well.”
($1 = 0.8233 pounds)
(Reporting by Sachin Ravikumar and Kate Holton; editing by William James)
Net sales refer to the total revenue from sales after deducting returns, allowances, and discounts. It provides a clearer picture of a company's actual sales performance.
Operating margin is a financial metric that shows the percentage of revenue that remains after covering operating expenses. It indicates how efficiently a company is managing its operations.
Like-for-like sales growth compares the sales performance of a company over a specific period, excluding any new stores or locations opened during that time. It helps assess true growth.
High inflation refers to a significant increase in the prices of goods and services over a period, reducing purchasing power and potentially impacting consumer spending and economic growth.
The London Stock Exchange is one of the largest stock exchanges in the world, where shares of publicly traded companies are bought and sold. It plays a crucial role in global finance.
Explore more articles in the Top Stories category
