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WPP raises dividend and full-year revenue outlook

WPP raises dividend and full-year revenue outlook as advertising giant sees healthy growth in new tie-ups

  • WPP revealed that its headline pre-tax profits expanded by £60m to £562m
  • Epic Games, Audible and Audi were among the groups to strike deals with WPP
  • Despite the results, WPP shares were the top faller on the FTSE 100 this morning

WPP has hiked its annual guidance and dividend payments following continued growth in deals with major corporate clients.

The world’s largest advertising agency, founded by marketing guru Sir Martin Sorrell, said it would hand investors a 15p per share interim dividend, an increase of 20 per cent on last year.

It comes after the firm revealed that headline pre-tax profits expanded by £60million to £562million in the first six months of 2022 on the back of solid demand from the healthcare, technology and consumer packaging goods industries.

Returns: WPP, the world’s largest advertising agency, said it would hand investors a 15p per share interim dividend, an increase of 20 per cent on last year

Among those to strike deals with WPP were video game developer Epic Games, the makers of Fortnite, which hired the company to produce ‘digital experiences’ for brands in the metaverse.

Others included Audi, online audiobook store Audible, and food manufacturers Danone and Mars, the latter of which retained its contract with WPP subsidiary MediaCom to be its global media partner.

This helped the company’s overall net new business billings surge to $3.4billion, from $2.9billion in the prior year, though it earned far more in the latter half of 2021 when it secured a highly-lucrative contract with Coca-Cola.

Nonetheless, WPP’s recent strong performance has led it to upgrade its annual organic revenue outlook from a previous forecast of 5.5 to 6.5 per cent to between 6 and 7 per cent.

It also anticipates boosting its headline operating profit margin, although it took a financial hit from worsening inflationary pressures and severe lockdown restrictions in China.

Chief Executive Mark Read said: ‘Our services are business-critical – driving growth, building brands, innovating and helping clients navigate an increasingly complex marketing environment.

‘As major advertisers increasingly look to integrate their marketing investments, we are well positioned to serve the world’s largest companies, demonstrated by our success with Coca-Cola, which we are now onboarding at pace.’ 

Despite the optimistic outlook, WPP shares declined 7.2 per cent to 828.6p in early trading on Friday morning, making it the top faller on the FTSE 100 Index. 

WPP’s results have arrived the day after the Bank of England warned that it expects the UK economy to plunge into recession later this year and the biggest hit to real household incomes since records began.

And just a week ago, the International Monetary Fund reduced its global growth forecasts and enhanced its inflation projections amid the ongoing war in Ukraine, continued coronavirus outbreaks and the economic slowdown in China.   

AJ Bell investment director Russ Mould said many investors believe WPP acts as ‘a decent barometer for the wider economic climate’ as companies tend to spend more on advertising when confidence is strong.

He added: ‘WPP’s first-half numbers actually look fairly solid, but investors are so concerned about the economic backdrop, and what it says about WPP’s prospects, they have reacted negatively.

‘Clearly there is a belief that WPP’s recent momentum, which helped it lift its annual sales outlook, can’t last in the long-term.’