WPP 2014 First Quarter Trading Update

25 April, 2014


  • Reported revenues up 1.5% at £2.570 billion in sterling, up 8.7% at $4.257 billion in dollars and up 4.5% at €3.104 billion in euros
  • Constant currency revenues up 9.6%, like-for-like revenues up 7.0%
  • Constant currency gross margin or net sales up 6.1%, like-for-like gross margin or net sales up 3.8%
  • Negative impact of exchange rates on reported revenues at -8.1% in first quarter fully reflecting sterling strength in final quarter of 2013
  • First quarter profits, revenue margin and gross margin or net sales margin above budget
  • Share buy-backs accelerated to £173 million or 1.0% of share capital in first quarter
  • Constant currency net debt at 31 March 2014 down £462 million on same date in 2013, with average net debt in first quarter of 2014 down by £602 million over same period in 2013
  • Recent new business activity and net new business wins surge as clients react to past and potential changes in the agency industry's structure

Quarter 1 highlights

  • Revenue growth of 1.5%, with like-for-like growth of 7.0%, 2.6% growth from acquisitions and -8.1% from currency, fully reflecting the continuing strength of sterling against many currencies, particularly in the faster growth markets, as in the final quarter of 2013. Quarter one of 2014 showed a similar pattern to the final quarter of 2013, with particularly strong like-for-like growth in North America and the United Kingdom and advertising and media investment management and sub-sector direct, digital and interactive
  • Gross margin or net sales growth of -1.8% in sterling (up 5.1% in dollars and up 1.1% in euros), with like-for-like growth of 3.8%, 2.3% growth from acquisitions and -7.9% from currency
  • Like-for-like 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, although the latter region less so and functionally in advertising and media investment management and sub-sector direct, digital and interactive
  • Like-for-like gross margin or net sales growth of 3.8%, with the gap compared to revenue growth widening, as mentioned in the 2013 Preliminary Announcement, as the scale of digital media purchases in the Group’s media investment management and data investment management sectors increased
  • Constant currency average net debt in the first quarter decreased by £602m (20%) to £2.454 billion compared to the same period in 2013, continuing to reflect the improvement in working capital seen in the second half of 2013 and also the benefit of converting the £450 million Convertible Bond in mid-2013
  • Net new business of $1.275 billion in the first quarter, compared to $1.504 billion in the first quarter last year. A recent surge of new business activity and net new business wins reflect significant reviews of client relationships in light of past and potential changes in the structure of the advertising and marketing services industry, although client finance and procurement functions continue to place heavy emphasis on pricing. Competitive responses, particularly by incumbents, are sometimes uneconomic and inadvisable

Current trading and outlook

  • FY 2014 quarter 1 preliminary revised forecasts | Similar to budget, with like-for-like revenue up very strongly and gross margin or net sales growth up over 3%. Headline gross margin or net sales margin target of 0.3 margin points improvement on a constant currency basis
  • Dual focus in 2014 | 1. Stronger than competitor revenue and gross margin or net sales growth due to leading position in faster growing geographic markets and digital, premier parent company creative position, new business, “horizontality” and strategically targeted acquisitions; 2. Continued emphasis on balancing gross margin or net sales growth with headcount increases and improvement in staff costs/gross margin or net sales ratio to enhance margins
  • Long-term targets | Above industry revenue and gross margin or 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 costs/gross margin or net sales ratio of 0.2 per annum or more depending on gross margin or net sales growth; gross margin/net sales operating margin expansion of 0.3 margin points or more; and headline diluted EPS growth of 10% to 15% per annum from revenue growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs


Download full WPP 2014 Quarterly Trading Update (pdf)



For further information:
Sir Martin Sorrell }
Paul Richardson }
Chris Sweetland } +44 20 7408 2204
Feona McEwan }
Chris Wade }

Kevin McCormack }
Fran Butera } +1 212 632 2235
Belinda Rabano } +86 1360 1078 488
www.wppinvestor.com  

This announcement has been filed at the Company Announcements Office of the London Stock Exchange and is being distributed to all owners of Ordinary shares and American Depository Receipts. Copies are available to the public at the Company’s registered office.
 
The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act of 1995 introduced in the United States of America. This announcement may contain forward-looking statements within the meaning of the US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the Company’s independent auditors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings by the Company with the Securities and Exchange Commission. The statements in this announcement should be considered in light of these risks and uncertainties.


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