Shares in WPP (WPP) climbed 6 per cent to an all-time high on the back of a resilient first-half performance. The advertising giant's investments in technology and emerging markets drove underlying net sales and operating profits up across its divisions and territories, propelling overall adjusted pre-tax profits up 12 per cent to £690m.
The drop in statutory earnings (see table) reflects one-off gains of £203m in the comparative period, as well as a £122m write-off mostly related to a troubled investment. WPP - which counts Apple, Nike and Coca-Cola among its clients - benefited from higher advertising spending across most of its major sectors and territories. Moreover, industry consolidation helped it to secure major assignments with new and existing clients.
Underlying net sales grew nearly 5 per cent in the main advertising and media investment management business. Recent technology investments helped WPP's agencies, which include Ogilvy & Mather Worldwide, to net £1.93bn in new business, an increase of nearly a half. The branding division made similar progress as digital demand offset patches of weak trading in the US and Asia-Pacific, while the PR segment shone in the US, Germany and emerging markets. And tighter cost control meant the data investment management business rallied in the second quarter.
Despite widespread economic uncertainty and Brexit worries, underlying net sales climbed 3 per cent in the UK and 4 per cent in both western continental Europe and North America. They also grew strongly in India and other Asian nations. In a bid to fuel further gains, management ploughed £226m into 36 growth investments and acquisitions. It also bought back £197m-worth of shares and hiked the dividend.
Broker Numis raised its forecasts and now expects adjusted pre-tax profits of £1.94bn for the full year, giving EPS of 111p, rising to £2.16bn and 127p in 2017 (£1.62bn and 93.6p in 2015).
| WPP (WPP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,854p | MARKET VALUE: | £23.8bn | |
| TOUCH: | 1,853-1,854p | 12-MONTH HIGH: | 1,857p | LOW: 1,273p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 664p* | NET DEBT: | 47% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 5.84 | 710 | 43.7 | 15.91 |
| 2016 | 6.54 | 425 | 19.1 | 19.55 |
| % change | +12 | -40 | -56 | +23 |
Ex-div: 6 Oct Payment: 7 Nov *Includes intangible assets of £14.3bn, or 1,116p a share | ||||
