It might seem odd that WPP (WPP) reporting a 2 per cent fall in like-for-like revenue (less pass-through costs) at the half-year stage sent shares up by 8 per cent. But as the embattled advertising giant navigates a three-year turnaround plan, what investors picked up on was the slower rate of decline. While the first three months of the year saw a 2.8 per cent drop, this had slowed to 1.4 per cent in the second quarter with a return to growth in the UK and narrower losses in North America. That's progress of sorts.
Accounting for 35 per cent of group sales (minus pass-through costs), North America is both the largest and weakest performing region as it continues to feel the impact of client losses from 2018. Although there was a 6.9 per cent like-for-like revenue decrease to £2.2bn, this reflects an improvement from the 8.5 per cent tumble in the first quarter. Chief executive Mark Read points to this pattern as a stabilisation of the business but the group still expects overall like-for-like revenue less pass through costs will fall for the full year, guiding to a 1.5-2 per cent contraction. A return to growth is targeted by the end of 2021.
Net debt has come down by 10 per cent on the back of £304m in disposal proceeds, but it still stands at an eye-watering £4.3bn. With the proposed sale of a 60 per cent stake in market research group Kantar to Bain Capital announced last month, around $1.9bn (£1.6bn) will be used to service this debt whilst $1.2bn will be returned to shareholders. There was a free cash flow outflow of £513m during the period though the group insists this is consistent with seasonal media buying activity which is weighted towards the second half. In 2018, an outflow of £209m at the half year stage reversed to a £1.1bn inflow by year end.
Bank of America Merrill Lynch expects adjusted cash profits of £2.2bn and EPS of 97.8p for the full year, falling to £2bn and 97.4p in 2020.
WPP (WPP) | ||||
ORD PRICE: | 979p | MARKET VALUE: | £ 12.4bn | |
TOUCH: | 978.4-979.4p | 12-MONTH HIGH: | 1,324p | LOW: 791p |
DIVIDEND YIELD: | 6.1% | PE RATIO: | 17 | |
NET ASSET VALUE: | 763p* | NET DEBT: | 43% |
Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2018 | 7.49 | 847 | 53.8 | 22.7 |
2019 | 7.62 | 478 | 25.0 | 22.7 |
% change | +2 | -44 | -54 | - |
Ex-div: | 03 Oct | |||
Payment: | 04 Nov | |||
*Includes intangible assets of £15bn or 1,192p a share |