WPP upgrades forecasts after mammoth hiring spree

WPP, the owner of Ogilvy and Group M, has become the latest holding company to report strong growth, despite gathering economic clouds, as it reassured markets that “client demand remains healthy across all services”.

Reporting its first-half performance today, WPP revealed that net sales (known as revenue less pass-through costs) were up 8.9% organically, to £5.5 billion in the first six months of 2022. On a reported basis, revenue less pass-through costs rose 12.5% compared with H1 2021.

WPP made an operating profit of £539 million between 1 January 2022 and the end of June, up 11.4% year and year, and a pre-tax profit of £419 million, up 6.1% year on year. Headline operating profit rose 8.2%, while headline pre-tax profit increased 12%.

Mark Read, the chief executive of WPP, said: “We have enjoyed a strong first half, with broad-based growth across our creative, media and public relations businesses.”

Its Q2 global organic growth, at 8.3%, was in line with, though not quite as good as, that of many rival groups – Havas having reported 11.5%, Omnicom 11.3%, Publicis Groupe 10.3%. WPP's growth was stronger proportionally than Interpublic, which posted 7.9% organic revenue growth. Dentsu reports on 12 August.

WPP followed Publicis, Interpublic and Omnicom in upgrading its full-year 2022 revenue forecast. The group, which owns Wunderman Thompson and EssenceMediacom, raised its previous 5.5%-6.5% organic growth guidance to 6%-7%.

It also upgraded its headline operating profit margin by about 0.5 percentage points, despite costs increasing on the back of a 16.7% rise in staff costs, excluding incentives, to £3.8 billion.

The rise was due to WPP boosting staff numbers by 11,000 since 30 June last year, taking it to 115,000 employees globally at the same date in 2022, as it built its workforce back up from the pandemic.

It also reflected the full-year impact of salary reviews conducted in June 2021. However, the generous cash bonus distribution of the first half of 2021, totalling £200 million, was reduced to £93.5 million.

That staff costs grew faster than revenues is notable in the context of similar developments at former WPP chief executive Sir Martin Sorrell’s new venture, S4 Capital, which blamed the phenomenon for a £30 million profit forecast downgrade.

Although in contrast, WPP upgraded its profit margin forecast. Despite this, the WPP share price fell as much as 7% this morning as investors digested the results.

Read hailed the group’s new-business performance, with Q2 seeing what he said were “significant assignment wins” from Audi, which Ogilvy won in the US), Audible, Danone and Nationwide.

He also highlighted that the group is “onboarding Coca-Cola at pace” after emerging with the lion’s share of business from the soft-drinks group’s monster $4 billion integrated review last November.

“During the first half, we unveiled the first consistent, global ad platform for Sprite, with the ‘Heat happens’ campaign, which will be rolled out across 200 markets,” Read said.

While restating his ambition to make WPP “the most creative company in the world”, Read also trumpeted its success in the “high-growth” areas of experience, commerce and technology.

These accounted for 39% of its global integrated agencies revenues, excluding Group M, compared with 35% in 2019.