WPP hails faster recovery than expected in Q1 with 3.1% growth

WPP has said a return to growth has been “somewhat faster and somewhat stronger than we expected” as like-for-like revenue less pass through costs, its preferred measure of performance, rose 3.1% year on year in the first three months of 2021 to £2.3 billion (US$3.2 billion).

The fact that a return to growth happened in Q1, rather than Q2, “does stand out” and was a “quarter earlier than expected", Mark Read, the chief executive, told Campaign.

Growth of 3.1% is a significant improvement on the 6.5% year-on-year decline in Q4 2020, which itself followed falls of 7.6% in the third quarter and 15.1% between April and June during the worst of the pandemic.

It means WPP is showing the strongest growth of the five main holding companies to have reported so far, ahead of Publicis Groupe (up 2.8%), Interpublic (up 1.9%), Havas (down 0.8%) and Omnicom (down 1.8%). Dentsu is due to report in May.

In another positive sign, John Rogers, the chief financial officer of WPP, told the investor presentation that Q1 2021 was “almost flat” compared with two years ago in Q1 2019.

WPP's shares rose 3% to 980p when trading opened, reaching their highest level since February 2020.

Read said there was "a strong start to the year with a return to growth in all business lines and most major markets".

He cited a number of positive developments, including the “continued progress we’ve made in simplifying the business”, which saw Wunderman Thompson move into growth in Q1, and the “continued success of GroupM despite some industry commentators saying the media business is structurally challenged”. 

Read said: “It’s definitely the case that the pace of the recovery has been somewhat faster and somewhat stronger than we expected.

“Given that we’re still operating in Covid restrictions in nearly all parts of the world—for three months [in Q1 2021] and last year Covid impacted the business for only one month [in Q1 2020]—the recovery has definitely come a quarter earlier than expected and I think that bodes well for 2021.

“I also think it bodes well for the value of our industry and the relevance we have for clients and the demand for clients to communicate with their customers.”

China and UK performed well

The results were boosted by WPP's performance in Greater China, where LFL revenue less pass-through costs grew 18.4% year on year—reflecting the severe early impact of the coronavirus pandemic on China at the start of 2020.

The next strongest performance among WPP's top five markets was the UK (up 3.9%), followed by Germany (up 2.5%), the US (up 0.7%) and India (down 0.5%).

Globally, media division GroupM's like-for-like revenue less pass-through costs rose 5.8% year on year, ahead of the business as a whole, while the specialist agencies division was up 7.5%.

VMLY&R was WPP's best performer in the US, and made a major contribution to the UK performance along with Group M and AKQA Group.

Globally, Ogilvy and AKQA Group were still negative, Rogers said.

Read added: "Our strengths in ecommerce, digital media and technology, combined with our ongoing investment in creative talent, are resonating with clients as their markets recover and they seek to transform their offer for future growth.

"This week’s launch of our new global data company, Choreograph, adds a further dimension to the WPP proposition as clients look for trusted partners to help them navigate a fast-changing data landscape.

“Last week we made an industry-leading commitment to target net zero-carbon emissions across our entire supply chain by 2030, putting our $60bn of media billings behind this initiative. We will work with our clients, media owners and the industry on this collaborative effort.

“The roll-out of vaccines is improving visibility in many markets, although there is inevitably uncertainty over the pace of recovery. We are making good progress on our transformation programme, which will deliver significant efficiencies to reinvest in growth, and are confident of delivering our growth and profitability guidance for 2021.”

Looking ahead, he predicted: “It's going to be a busy year for new business.”

However, Read described the spread of the pandemic in India, a key market, as “tragic”.

Only about 2% of WPP staff have returned to offices in the UK and US so far.

WPP’s improved revenue performance follows four consecutive years of declining growth between 2017 and 2020 as it struggled to cope with digital transformation, and it was among the worst performers of the big six agency groups until the pandemic when it began to improve relative to peers.

Read has been chief executive since September 2018 and in de facto charge for three years, following the exit of Sir Martin Sorrell as CEO in April 2018.