The faster than expected recovery at WPP and across the wider agency sector to pre-pandemic levels has “surprised many people” and shows the “health of our industry”.
That’s according to Mark Read, the chief executive, who spoke to Campaign after WPP’s half-year results.
Net sales jumped 19.3% in Q2 against 2020 and were up 1.3% on 2019. Over the six months to June, sales were £4.9bn – up 11% on last year and 0.5% on two years earlier.
Now WPP expects growth of 9% to 10% for the full year – its second upgrade this year and roughly in line with US rival Interpublic.
Read also spoke about significantly increasing the bonus pool for WPP’s 104,000 staff, delaying the return to offices because of the Delta variant and the recent JWT discrimination case ruling.
You say you are “delighted” with these results and they are a little ahead of pre-pandemic levels in 2019, but that would seem to be expected given the wider market.
We did have a very strong first half. We’re leading the industry organically in the first half of the year and our performance accelerated into the second quarter. To do double-digit growth [11%] in the first half and close to 20% growth in Q2 is impressive.
It reflects clients reinvesting in marketing, in digital media, in e-commerce, in marketing technology as the economy recovers. But looking at it on a two-year basis, it reflects more than just a recovery given we’ve exceeded 2019 levels a year ahead of what we expected. It’s the second time we’ve raised our [revenue] guidance for the year. We raised it at the first quarter and we’re raising it again now.
I think it reflects the health of WPP and the health of our industry and the demand from clients to build brands, reconnect with customers, invest in marketing technology, innovate in e-commerce and new channels across the board. And the UK is particularly strong for us, up 32% in Q2, and Group M has really been the stand-out performer in the first half, growing 28% in Q2.
With Group M, you talk in the investor presentation about the growth of “commerce media”, up about 60% year on year. What are those platforms and where are your clients spending?
It is media related to clients driving their e-commerce business – it’s a mix of broad digital media as well as spending on Amazon, Instacart and other e-commerce platforms that drives e-commerce sales.
The staff bonus pool is up strongly in the first half and you said in the investor presentation that incentives are on course to be about 2.5 times the amount paid out in 2020 during the worst of the pandemic. What more can you tell us?
We do expect to have a strong incentive pool this year and that reflects the performance of the company and, frankly, the performance of our people and is well deserved.
WPP has a lot to defend in terms of account reviews this year and you withdrew from the Facebook media pitch. How demanding is the pitch environment? And do you want a reprieve from clients during the holiday season in August?
I don’t think we’ll get a reprieve in August. We’ve had a good first half in new business. We had an exceptional year last year when we led all of the new business league tables by some margin. We did say we had a little bit more to defend this year than last year.
Our performance this year has been solid but it has been stronger creatively than it has been from a media perspective. Wavemaker has had a really strong year in new business. MediaCom had an exceptional year in new business last year. It’s probably a bit more balance between creative and media [this year]. I think that’s good – we need to fire on all cylinders from a new business perspective and to have a solid creative performance is really important. There are a lot more [reviews] to go. It is very busy and it is challenging and demanding on our teams and we have to focus on our efforts where we think we are going to get the highest return.
How is the mental wellbeing of staff and how much are they in the office when the Delta variant continues?
The vast majority of our people continue to work from home. We are running about 10% in the office in the UK on any given day and about 5% in the US. It’s higher in some other continental markets – France, Italy, Spain are closer to 20%. But most people are working most of the time from home and that does have its challenges.
We’re keen to get people back into the office. The Delta variant may delay that by a month or two from September to October. But as we’ve said in the past, we’re never going back to the way we used to work historically. We will have a much more flexible way of working. We expect people to be in the office perhaps three or four days a week and have a bit more balance and flexibility.
There is also talk about a lot of people moving jobs and a war for talent after last year’s slump. John Rogers, the chief financial officer of WPP, did tell the investor presentation that employee churn levels are up but “not dissimilar” to 2019.
The strength of the recovery has surprised many people and I think that has placed demands on many of our people and you can see in our margin performance in the first half of the year that our revenue growth has, to some extent, outstripped the growth in our costs.
We are investing in talent in terms of recruiting people, in giving people [salary] increases and through incentives and I think it’s important that we do that. I noticed a couple of the analyst notes [from investment banks about WPP’s results] talked about the positive impact of increasing incentives in attracting better talent to the company and on growth in the future.
People understand that we do need to invest in people. It’s a competitive market – it always has been for the best people – but probably a little bit more difficult. It’s not easy recruiting people in this virtual environment either.
JWT, now part of Wunderman Thompson, lost a recent employment tribunal case which found that two male creative directors were unfairly made redundant “because of their sex”. What has WPP, the parent company, learnt from this case and do you really plan to appeal the ruling as Wunderman Thompson has said?
The events did take place three years ago at JWT since when we’ve merged the agency and changed the leadership. I am not going to comment on the specifics of that case but I would reiterate that we seek to run our business in a way that doesn’t discriminate against anyone in the company on any basis and that would be my commitment.
Jo Wallace, a creative director, who got caught up in the JWT case but was not directly involved, gave an interview to Channel 4 News after the tribunal in which she talked about how it might take 100 years to close the gender pay gap. And if we look at WPP’s published gender pay gap figures for the UK, some of them do seem to have moved very slowly (median gender pay gap was 17.5% in 2020 vs 17.6% in 2019). This is relevant because you talk in these results about how diversity, inclusion and sustainability metrics are now part of the compensation scheme for senior leaders at WPP. So how do you drive change faster?
It’s important to me and to our board that we’re clear on our expectations for our leaders that we expect them to build an inclusive culture in their company and the make-up of our workforce should reflect the societies in which we operate.
I think about it in two ways: Representation – do we represent the society in which we live in terms of gender, race and other metrics? – and belonging – do the people who work for us feel they belong in our company?
Both representation and belonging are things that we are increasingly measuring and we seek to put them in our people’s incentive plans to remind them it’s important and to reward and motivate them to make progress. I think we have to do that and can do that without discriminating on any basis.
If you look at the gender composition of our workforce, we’ve made very good progress on Hampton Alexander metrics [for senior female leaders] and we have some progress on the ethnic make-up of our workforce in the US and the UK – but we recognise we’ve got more to do on both.
In some ways, the 2021 numbers seem surprisingly good, even though some areas such as travel have not re-opened in a significant way. Could 2022 also be a boom year?
We’re not going to go into guidance for 2022. But what I would say is I think the better we do in 2021, to some extent the better it is for 2022. We have achieved these numbers against a background of a world that is still sadly impacted by Covid. We sadly lost a creative director at Ogilvy in South Africa this week. It brings it home that we are not in any way through this.
So there is further to go in terms of unlocking economies and sectors of the economy. These results, like the results of our peers, do reflect perhaps the commitment from our clients to invest in brand, in acquiring customers, in commerce, in innovation, in new product development – all of the things that WPP companies are good at.
We’ve really seen a lot of investment from clients. I think that does bode well for the future.
