Shares in advertising giant WPP (WPP) leapt 6.2% to £10.26, topping the FTSE 100 leader board after the company raised full-year guidance for revenues and profit as third quarter trading momentum accelerated.
Growth in full-year like-for-like revenues less pass-through costs is now expected to be in the range of 11.5%-to-12%, up from 9%-to-10% while operating margin is now expected to be ‘slightly above’ 14% rather than just below.
The company also announced a share buyback programme of up to £200 million, taking the full-year total to around £650 million, equivalent to approximately 5.7% of the market capitalisation.
STRONG GROWTH
WPP said growth in the global communications market continued to grow strongly in the third quarter which is reflected in its performance.
Third quarter revenues less pass-through costs grew 15.7% on a like-for-like basis and 9.9% on a reported basis to £2.6 billion, taking year to date like-for-like growth to 12.6%.
However, the firm believes that it is seeing structural growth with clients making ‘significant’ investments in marketing, particularly in ecommerce and digital media.
Chief executive Mark Read commented: ‘Our very strong performance goes well beyond a cyclical recovery, with like-for-like growth over 2019 at 6.9% in the quarter.
‘We are now above 2019 levels in all of our business lines, and with the actions we have taken over the last three years, we are even better positioned for growth.’
STRATEGIC PROGRESS
WPP said that the merger of Finsbury Glover Hering and SVC, and the acquisition of artificial intelligence specialist Satalia, has transformed the business and created the world’s ‘leading’ board-level communications company.
Shore Capital media analyst Roddy Davidson concurred with management that their actions over the last three years have placed the group in a better position to capitalise on the ‘favourable’ backdrop driving current growth.
Following today’s positive update Davidson expects to increase his earnings forecasts and has also upped his rating on the stock to buy, saying ‘we note that the group’s share price has largely tracked sideways since the Spring despite a sequence of positive news flow.’
