'More than a cyclical recovery': WPP Q3 growth exceeds pre-Covid levels

WPP has claimed its bounceback from the pandemic “goes well beyond a cyclical recovery” as net sales accelerated in Q3 – growing nearly 7% compared with 2019 levels – and it upgraded its growth forecast for the full year for the third time.

Organic revenues rose 15.7% to £3.2bn in Q3 compared with 2020 when they plunged 8.4%. On a two-year “stack” basis, revenue was up 6.9% compared with 2019 – a key measure for investors who are looking beyond the short-term impact of the pandemic.

In the key global integrated agencies division, which includes creative and media, revenues were up 13.5% in Q3 against 2020. Group M, the media arm, was up 19% and the creative agencies, which have struggled in the recent past, were also up nearly 10%.

Mark Read, the WPP chief executive, credited the role of Choreograph, its data arm, for linking data and technology with creative and “proving its value for existing and new clients” in recent pitches for clients such as Unilever and Bayer.

Read described the Q3 results as “very strong”.

“Clients across all sectors and geographies are making significant investments in marketing, particularly in digital media and ecommerce services,” he said.

“We are now above 2019 levels in all of our business lines, and with the actions we have taken over the last three years [such as the Kantar sale and VMLY&R and Wunderman Thompson mergers], we are even better positioned for growth.”

WPP 'has performed more strongly than we expected'

WPP has now upgraded its organic revenue growth forecast to 11% to 12% for the whole of 2021.

“Consistently throughout the year, the business has performed more strongly than we expected,” Read told Campaign.

“We were up 0.5% versus 2019 in the first half [of 2021]. If you look at our guidance, that implies 4% to 5% in the second half. So we’re going beyond a cyclical recovery [in terms of making up for the declines seen in 2020 during the pandemic].”

WPP suffered three years of declining revenues before the pandemic and some investors have remained bearish but Read said recent growth showed the company’s restructuring has been working and it is not just recovering from the Covid slump.

“The bear case on WPP was all we’d see is a cyclical recovery in 2021 and 2022 and we’d see if the business can grow sustainably in 2023,” Read said. “I think our third-quarter results do indicate the longer-term opportunity for the company and for the industry overall [to grow].”

John Rogers, the chief financial officer, added in an investor presentation that the company has seen no signs of a “slowing down” in Q4 and supply chain disruption has had no significant impact on clients yet.

WPP’s share price rose more than 5% to £10.20, close to its highest level since before the pandemic.

The company’s 15.7% growth versus 2020 and 6.9% increase on 2019 suggest it is among the best performers of the established big agency groups after a long period of under-performance before Covid.

Interpublic was up 15% in Q3 versus 2020 and 10.7% versus 2019 and Publicis Groupe was up 11.2% on 2020 and 5% on 2019. Both also upgraded their full-year forecasts.

Omnicom was up 11.5% against 2020 but was down 1.6% on 2019, according to an estimate by analysts at Moffett Nathanson.