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WPP ups guidance for third time after ‘blowout’ quarter

·3-min read
WPP CEO Mark Read  (WPP)
WPP CEO Mark Read (WPP)

Advertising holding company WPP has upgraded its guidance for the third time in a year as it benefits from a booming advertising market.

WPP, which owns creative agencies, ad firms, and PR businesses, said it was now expecting revenue growth of 11.5% to 12% in 2021. The market had been expecting growth of between 8% and 11%.

WPP is benefiting from continued momentum in the ad market. Revenue less pass through cost, the company’s preferred measure, was up 15.7% in the third quarter - well above forecasts of 9.5% growth. Analysts at Citi called it a “blowout” performance.

“Our very strong performance goes well beyond a cyclical recovery, with like-for-like growth over 2019 at 6.9% in the quarter,” CEO Mark Read said.

The business is seeing double digit growth in all of its top five markets, including blockbuster growth of 34.5% in Germany.

“Clients across all sectors and geographies are making significant investments in marketing, particularly in digital media and ecommerce services,” Read said. “We are now above 2019 levels in all of our business lines, and with the actions we have taken over the last three years, we are even better positioned for growth.”

Shares jumped 45p or 4.7% to 1011p. The stock was helped by an earnings and target price upgrade from JPMorgan.

Read told the Standard companies in the UK were “reinvesting in their brand”, with most sectors now advertising at or above 2019 levels. Notable campaigns WPP worked on include the launch of Sky Glass, the broadcaster’s new connected TV. WPP expanded its mandate with German pharma giant Bayer in the quarter and won new deals with the likes of Beiersdorf, L’Oréal, Sainsbury’s and TD Bank.

Changes in data laws and rules for Apple’s iPhone have also prompted demand for WPP’s services.

Like all advertising companies, WPP works closely with Facebook to run ads. Read said WPP’s clients were “concerned” about recent media and politician scrutiny of Facebook. Leaked documents suggested the company prioritized profits over user safety, although Facebook strongly denies the claims.

“Clients are concerned and are watching the situation very carefully,” Read said. “They are concerned to ensure that it’s safe to advertise on.”

Read said WPP had “good momentum” going into the final months of 2021. Morgan Stanley said whether blockbuster growth continued would be a “key debate”.

“Investors are likely to question whether we are starting to see a normalization of growth following the post-COVID recovery,” analyst Omar Sheikh wrote.

WPP saw revenue fall nearly 10% last year as it sunk to a £2.8 billion loss. But the company returned to revenue growth in April and by August Read was hailing the strongest recovery in the ad market for the last century.

WPP has spent £448 million on share buybacks so far this year and reiterated plans to take that total to £600 million by the end of the year.

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