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WPP gives a compelling pitch

Strip out deleterious currency effects and WPP achieved gains across all its regions and sectors in the first half
August 27, 2014

The stubbornly strong pound “ravaged” headline billings at global advertising behemoth WPP (WPP). But strip out currency headwinds and the group - which employs over 179,000 people in 110 countries – grew sales across all its regions and business sectors, with overall operating profit up close to 17 per cent.

IC TIP: Buy at 1.252p

Those gains reflect industry consolidation and gradual improvements in advertising spending. Still-frosty continental Europe trailed other regions, with sales growth of below 4 per cent, compared to over 17 per cent growth in the UK and 15 per cent in emerging markets. WPP’s advertising and media investment management segment is faring particularly well, with like-for-like sales up 19 per cent to £1.3bn.

The group's strategy has been to focus on fast-growth markets and new media, which it eventually expects to account for 40-45 per cent of net sales. It has also emphasised inter-segment cooperation, with more than a third of new first-half assignments stemming from the work of two or more of its subsidiaries.

One concern is that like-for-like net sales growth slowed in July to 2.8 per cent, from 4.1 per cent a year ago. But WPP expects to achieve at least 3 per cent organic growth this year, and may have appeased investors by almost tripling its first-half share buybacks to £390m.

Broker Numis expects pre-tax profits of £1.49bn, giving EPS of 82p, up from £1.46bn and 80.8p last year.

WPP (WPP)
ORD PRICE:1,252pMARKET VALUE:£16.5bn
TOUCH:1,250-1,252p12-MONTH HIGH:1,391pLOW: 1,162p
DIVIDEND YIELD:2.8%PE RATIO:16
NET ASSET VALUE:550p*NET DEBT:39%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20135.342722.310.56
20145.549127.711.62
% change+3+15+24+10

Ex-div: 08 Oct

Payment: 10 Nov

*Includes intangible assets of £11.1bn, or 845p a share