WPP interim headline profit and revenue beat expectations

Shares in WPP rallied on Wednesday after the advertising giant reported better-than-expected headline pre-tax profit, revenue and organic sales growth for the first half.

Headline pre-tax profit was up 15.8% to £690m, or 11.7% at constant currency, surpassing consensus expectations of £675m.

Meanwhile, reported revenue rose 11.9% to £6.5bn, which was above consensus of £6bn, boosted by a weaker pound.

The company said it saw like-for-like sales growth of 3.8%, which was a significant improvement over the first quarter growth rate of 3.2% and ahead of expectations of around 3.2% growth.

However, reported profits attributable to share owners fell by 56.6% to £246m, while reported pre-tax profit declined 40% to £425m, reflecting the impact of net exceptional writedowns of £122m. This was principally on the investment in comScore, in comparison to net exceptional gains of £203m the year before.

Return on equity for the 12-month period to the end of June was down slightly to 15.5% from 15.9%, reflecting the post-Brexit impact of a weaker pound on the group’s assets.

WPP said on Wednesday that it now expected revenue growth for the full year of “well over 3%”, which was an improvement on a previous estimate of “over 3%”.

The group said it plans to step up its drive to boost sales in its fast growth markets and new media markets, particularly following Brexit. It now hopes to see revenue from those markets making up 40% to 45% over the next four to five years, up from 35% to 40%.

Shore Capital, which rates the stock at ‘buy’, said: “We are encouraged by the positive trading performance and operational momentum revealed in this morning’s results.

“We remain bullish on WPP’s ability to capitalise on a solid medium-term outlook for global advertising spend - particularly in view of its concerted efforts to build an overweight exposure versus its peers to digital disciplines and faster growing regions (which should also help cushion regional variations and short term volatility in advertising spend).”

At 0915 BST, WPP shares were up 4.3% to 1,822p.