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WPP H1 Profit Climbs, Cuts FY17 Sales Growth View; Stock Down

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Shares of WPP Group Plc. (WPP.L,WPPGY) were losing around 11 percent in the early morning trading in London after the advertising giant reported Wednesday that it has revised down fiscal 2017 forecast, despite reporting significant growth in first-half profit and revenues.

The company attributed the revision to the pressure on client spending in the second quarter particularly in the fast moving consumer goods or packaged goods sector.

Regarding the current trading, the company said that like-for-like revenue declined 4.1 percent and net sales dropped 2.6 percent in the month of July. All regions, except the United Kingdom, Latin America and Central & Eastern Europe, showed lower revenue and all sectors were down, with advertising & media investment management and data investment management the most affected.

Cumulative like-for-like revenue growth for the first seven months of 2017 is down 0.9 percent and net sales down 0.8 percent. The company said the seven-month performance has been much tougher, as worldwide GDP growth seems to have slowed in the second half of last year and into the new year.

For the year 2017, the company now sees both like-for-like revenue and net sales to be between zero and 1.0 percent growth, lower than previous forecasts of 2 percent.

The company still targets operating margin to net sales improvement of 0.3 margin points on a constant currency basis.

Over the long term, WPP sees revenue and net sales growth greater than the industry average, improvement in net sales margin of 0.3 margin points or more, and annual headline earnings per share growth of 10 percent to 15 percent p.a.

For the first half, WPP's profit before tax climbed 83.3 percent to 779 million pounds from last year's 425 million pounds. The latest results were benefited by gains on the fair value of financial instruments, while last year was hurt by net exceptional costs.

Profit after tax of 634 million pounds climbed 124.7 percent, and earnings per share grew 146.6 percent to 46.6 pence.

Headline profit before tax was 793 million pounds, compared to 690 million pounds last year. Headline earnings per share were 45.4 pence, compared to 39.1 pence a year ago.

EBITDA grew 14.2 percent to 1.016 billion pounds. Headline net sales operating margins were up 0.2 margin points at 13.9 percent.

Revenue went up 13.3 percent to 7.404 billion pounds from last year's 6.54 billion pounds. In US dollar terms, revenues were down 0.4 percent to $9.328 billion, while in euros, it grew 2.7 percent to 8.609 billion euros.

Constant currency revenue was up 1.9 percent, while like-for-like revenue was down 0.3 percent.

Net sales increased 13.7 percent to 6.36 billion pounds.

Billings for the first half grew 6.3 percent to 26.906 billion pounds, but was down 4.7 percent in constant currency.

Further, the company said it Board declared an interim dividend of 22.7p per share, an increase of 16.1 percent. The record date is October 6, payable on November 6.

Separately, WPP said it acquired brand design agency, Design Bridge Limited. Design Bridge's revenues for the year 2016 were approximately 40 million pounds, with gross assets of approximately 28 million pounds.

In London, WPP shares were trading at 1,416 pence, down 10.94 percent.

by RTT Staff Writer

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