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WPP records maximum growth from India in H1’19

During the first half, WPP’s top 20 countries accounted for 87% of revenue and top 30 clients accounted for 27% of its revenue

India topped as the best performing market across the world for WPP where the advertising and communications giant grew by over 12% in the first half of 2019. Brazil was the second top performing market for WPP among faster growing economies recording a growth over 10%.

Mark Read, Chief Executive Officer of WPP, said, “Through the role of country managers and the introduction of our campus strategy, we are developing more closely integrated operations at the country level. During the first half, our top 20 countries accounted for 87% of revenue less pass-through costs. We performed strongly in faster growing economies, with Brazil up over 10% and India up over 12%. Our performance in China was -2.8% in H1 with a split of +6.6% in Q1 and -10.1% in Q2 reflecting timing differences and a +9.0% comparative in Q2 2018.”

“The UK returned to growth after a better second quarter. While we saw improving trends in Q2, the USA remained in decline. In the past 12 months, we have put new leadership into most of our major US companies, tackled structural challenges and invested in new creative talent and in marketing and new business,” Read added.

In the first half, WPP’s top 30 clients accounted for 27% of its revenue less pass-through costs. The holding company saw strong growth from clients in the technology sector, a varied performance in consumer packaged goods, with some improvements, and some weakness in healthcare. The majority of its revenue declines were concentrated in a small number of clients which underwent account reviews in 2018, or which significantly reduced their spending in 2019.

The Group won new assignments from Ferring, Merck, Pfizer, Walgreens and Walmart in the second quarter.

Business from new clients including Instagram, L’Oréal and eBay helped ease a sales decline at WPP and provide evidence that the restructuring of one of the world’s largest advertising groups is paying off. Shares in the FTSE 100 group rose 8 per cent on Friday — the biggest rally in a year — making it one of the top gainers on London’s main stock exchange.

WPP, which includes agencies such as GroupM and Ogilvy, revealed that like-for-like net sales fell 1.4% in the second quarter of this year, better than the 3% decline forecast by analysts. In the first three months, sales slipped 2.8%. WPP had previously warned that recent client losses would make the first half of the year tougher than the second.

Calling the results “slightly ahead of internal expectations”, Read said, “Clients are responding well to our new offer, as evidenced by recent wins and expanded assignments including from eBay, Instagram and L’Oréal. An encouraging number of our businesses and markets are achieving good growth.”

Over the past 15 months, the group has disposed of more than 44 associate companies, with a total value of £3.6bn, including the sale of 60% of market research group Kantar to Bain Capital in July. WPP said it had exceeded its target of 100 office mergers, with 102 completed or in progress. “68 offices have been closed or are in the process of closing against a target of 80; and approximately 3,100 of the 3,500 planned redundancies have been implemented. The anticipated gross savings remain in line with the £160 million estimate in December 2018,” said Read.

“That said, we are still in the early stages of our three-year turnround plan,” he added.

The top 10 companies within WPP accounted for 87% of revenue less pass-through costs in the first half. GroupM achieved good growth as a result of new account wins and continued spending by existing clients, but those WPP companies with the greatest exposure to US creative continued to decline.

WPP said that the mergers to form two new integrated networks in VMLY&R and Wunderman Thompson were making good progress, enabling the delivery of a true end-to-end offer to their clients and repositioning the combined companies to succeed in the long-term.

“The progress we have made and the positive new business momentum are reasons for optimism. As a creative transformation company with stronger, more tech-enabled agencies, we are well placed for the future as clients look for modern partners to help them navigate an increasingly complex and challenging marketing landscape,” Read concluded.

First half and Q2 financial highlights
1. Reported revenue up 1.6%, constant currency revenue flat, LFL revenue down 0.6% (Q2 up 0.1%)
2. H1 LFL revenue less pass-through costs -2.0%; Q2 -1.4% (Q1 -2.8%)
3. Q2 LFL revenue less pass-through costs improvements in key markets: USA -5.4%, UK +1.3%
4. H1 headline operating margin 11.9%, down 1.2 margin points LFL, reflecting revenue less pass-through costs trend; IFRS 16: Leases benefit on reported headline margin 0.5 margin points
5. Reported profit before tax down 44% driven primarily by a significant H1 2018 exceptional gain that has not been repeated (£117 million impact) and a charge on the revaluation of financial instruments versus a credit in 2018 (£138 million impact)
6. Average net debt £4.384 billion, down £709 million in constant currency compared with first half of 2018 supported by disposal programme
7. 2019 guidance reiterated: LFL revenue less pass-through costs down 1.5% to 2.0%; headline operating margin to revenue less pass-through costs down around 1.0 margin point on a constant currency basis (excluding the impact of IFRS 16)

Strategic highlights
1. New strategy delivering solid new business performance and strong client retention
Agreement in July to sell 60% of Kantar: c.$1.9 billion for de-leverage and c.$1.2 billion to be returned to shareholders
2. 44 disposals over the last 15 months, further simplifying WPP and positioning it for future growth
3. Ongoing programme of investment in new leadership and creative firepower, with focus on the US

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