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WPP tumbles despite raising revenue targets as advertising demand remains strong

Shares in WPP tumbled by as much as 8 per cent on Friday as uncertainty over its outlook next year clouded a better than expected performance at the world’s biggest advertising group.

The London-based ad holding group followed its peers by raising its revenue growth targets for 2022, as it expressed confidence in its ability to weather the looming economic downturn.

But the upgraded forecast failed to allay investor nerves over WPP’s prospects, especially after the company held back from offering a concrete commitment to meet growth targets next year.

Mark Read, chief executive, told the Financial Times “strong demand” remained from clients for WPP’s services, which range from creative agencies and public relations to media buying.

“But we know there are more challenging economic conditions on the horizon and the outlook for 2023 is uncertain,” he added.

Read noted ad spending showed little signs of weakening in most of WPP’s markets. “In the US we have had two quarters, technically, of recession but our business grew in North America by 9.5 per cent in the first half year,” he said. “We have seen more resilience in advertising spending than people expected but that is largely because consumer spending has held up so far.” 

WPP has upgraded its forecast for 2022 following the second quarter in a row of unexpectedly strong performance.

Organic revenue grew 8.3 per cent in the first six months of 2022, comfortably beating market expectations of a 5.5 per cent increase. Performance was positive in all major regions aside from China, which was affected by Covid-related lockdowns.

In light of this, WPP increased its forecast on underlying growth for 2022 by 0.5 per cent to a range of 6 to 7 per cent, echoing similar moves by rival advertising holding groups such as Omnicom, Interpublic and Publicis.

Thomas Singlehurst, an analyst at Citi, said “it feels like WPP is being held to account” by the market against the “high benchmarks” for the quarter set by other agency holding groups.

In addition, Singlehurst argued that investors might have taken issue with WPP’s “lack of willingness” to firmly commit to achieving midterm targets in 2023. WPP said it remained “confident” of its ability to deliver organic growth of 3 to 4 per cent and an operating margin of 15.5 to 16 per cent, but the company would only provide formal guidance for 2023 in February.

Read said WPP had raised its forecasts for 2022 mainly because of strong performance in the first half of the year.

“We are mindful of the economic conditions in the second half of the year. Clearly we haven’t seen clients pull back yet. But we know we are entering more challenging economic circumstances, not least in the UK. But the UK is only 13 per cent of our business.”

Revenue for the first half of 2022 rose 10.2 per cent to £6.8bn, while pre-tax profit rose 12 per cent to £562mn.


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