WPP shares fell in early trading today as the ad holding giant posted Q4 and full year 2021 figures roughly in line with its peers.
Its version of organic revenue – like-for-like revenue less pass-through costs came in at 10.8% in Q4 2021, a little down on the full year 12.1%, slightly ahead of rivals Publicis, Omnicom and Interpublic. On a two-year basis organic revenue has increased just 2.9%.
In Q4 by market organic revenue rose 11.7% in the US, UK +9.9%, Germany +3.4%, Greater China +13.6% with Australia falling 2.2%.
WPP’s once-battered balance sheet is looking much healthier with free cash flow of £1.3bn and net debt a manageable £O.9bn. WPP is forecasting around 5% growth in 2022, in line with its peers.
The company says the growth areas of experience, commerce and technology now account for around 38% of revenue outside media behemoth GroupM, the strongest group performer with organic growth of 16.1%.
WPP returned a welcome, if unspectacular, pre-tax profit of £951m compared with a £2.8bn loss in 2020 (2020 saw big write-offs.)
CEO Mark Read (above) says: “It has been an outstanding year for WPP. Our top-line growth, driven by strong demand for our services in digital marketing, media, ecommerce and technology, has resulted in our fastest organic growth for over 20 years. As a result, we are two years ahead of our plan, hitting our 2023 revenue target in 2021.
“As clients seek to accelerate their growth and transform how they reach customers, the depth, breadth and global scale of our offer – which combines creativity with technology and data, through Choreograph, and the largest global media platform in GroupM – is proving its value for existing and new clients. The talent, dynamism and commitment of our people have also shone through.
“Our extensive partnership with The Coca-Cola Company, the expansion of our work with Google and the continuation of our longstanding relationship with Unilever demonstrate the value that three of the world’s leading marketing organisations place in WPP.
“We look forward to 2022 with confidence. We are guiding to strong top-line growth, improving profitability and continued investment in our people and services.”
A B-plus for Mark Read and his team then, so why the share price fall? The market may have been expecting a little more, certainly in terms of the 5% forecast for 2022. Founder Sir Martin Sorrell fuelled WPP’s growth by big acquisitions and Read may be looking at some substantial tech-based businesses..
But Read said when he succeeded Sorrell that his first priority was to get WPP back on track with its peers and he’s succeeded in doing that ahead of schedule.
Now he needs to convince investors that all these businesses are best housed in the same place. Competing with the consultants in technology and commerce and go-go outfits like Sir Martin Sorrell’s S4Capital and David Jones’ BandTech Group in digital is a tall order.
Some bits of the empire may find themselves up for sale (creative agencies for example) if they’re a lag on growth. WPP is valued at £12.5bn, roughly in line with its revenue.
WPP shares recovered ground lost in late trading, suggesting the initial reaction from investors was overdone.