Bullish WPP says clients still spending on advertising
By Kate Holton
LONDON (Reuters) -British ad group WPP forecast better-than-expected organic growth for 2023 after clients signalled they would spend on marketing through any downturn to prop up sales and justify price rises.
The world's largest advertising holding company has seen its shares rise more than 30% in the last six months as investors came around to the idea that corporate spending may hold up even as the global economy slides.
The owner of the Ogilvy, Grey and GroupM agencies has benefited from an increase in spending from packaged goods groups in the last couple of years, the return of travel spending and the move to advertise on ecommerce platforms.
For 2023 it expects to benefit from the lifting of COVID-19-related restrictions in China and an easing of supply problems within the autos sector, leading to greater spending as rival brands compete once again, particularly to sell electric vehicles.
"There had been some fears that clients would stop spending in Q4 but actually we delivered 6.4% growth, we actually accelerated a bit," Chief Executive Mark Read told Reuters.
"The outlook is pretty good, clients tell us they want to continue investing in marketing. In a much more complex world, and in a world where clients try to support price increases and in some way re-evaluated the value of marketing during COVID, they're looking to spend".
The British company reported a 6.9% rise in its key metric for 2022 - like-for-like revenue less pass-through costs - compared with a forecast range of between 6.5% and 7.0%.
For 2023 it forecast growth of 3%-5%, more positive than many analysts had expected before the results, with Citi forecasting flat growth and flat margins.
French rival Publicis was similarly upbeat earlier this month, saying that client spending on digital marketing had helped it to beat expectations for 2022.
In China, Read said he expected the business to show growth in the second and third quarters, after it enjoyed a solid performance in the first quarter of 2022, helped by booming demand in areas like outbound travel and electric vehicles.
Generally Read said the company had benefited from the explosion of marketing opportunities for clients, including TikTok, the arrival of adverts on Netflix and retail platforms.
"While there will no doubt be challenges, the continued need for major companies to build brands, sell products, reinvent and transform their business, understand their data, invest in technology and exploit the potential of AI remains, as does their need for modern partners who can help them navigate this new world," he said.
It won $5.9 billion of net new business, including from the likes of Audible, Danone, SC Johnson and Verizon. Citi analysts said they expected consensus forecasts to move up. Its share rose 4%, giving it a market cap of 11.4 billion pounds ($13.7 billion).
($1 = 0.8312 pounds)
(Reporting by Kate Holton; editing by William James, Sarah Young and Jon Boyle)