Strong growth at media-buying arm Group M helped to drive WPP’s net sales up 19.3 per cent in the second quarter, more than making up for the 15.1 per cent Covid slump a year ago. As a result, the world’s biggest agency group has upgraded its 2021 revenue forecast for the second time in four months.
Over the first six months of 2021, net sales (known as revenues less-pass through costs) were up 11 per cent to £4.9bn, which WPP chief executive Mark Read said showed “we are leading the industry organically”.
Interpublic was up 10.6 per cent, Omnicom 10 per cent, Publicis Groupe 9.7 per cent and Vivendi’s Havas 7.3 per cent over the same period.
On a two-year basis, WPP was 0.5 per cent ahead of its pre-pandemic performance in 2019.
Read expects growth of 9 per cent to 10 per cent for the full year, which would mean it recovers all of 2020’s losses in a single year – rather than by 2022.
He said the bounceback in revenues showed there are “structural growth drivers”, including predictions of rising adspend for the next three years, that are supporting the agency sector.
“It reflects clients reinvesting in marketing, in digital media, in e-commerce, in marketing technology as the economy recovers,” Read added. “But looking at it on a two-year basis, I think it reflects more than a recovery, given that we’ve exceeded 2019 levels a year ahead of what we expected.”
Paying “strong bonuses” in 2021
Some of WPP’s 104,000 staff are in line for bigger bonuses as the company set aside £244m for “incentive pools” in the first half of the year, up fivefold from £48m in the same period last year.
“We have significantly increased our incentive pools in the first half, to reflect the tremendous contribution of our people in these challenging times,” Read said.
Bonuses are paid at the end of the year and it is understood the incentive pool is likely to increase by a smaller proportion in the second half of 2021 as the financial comparisons with a year earlier will be less dramatic.
John Rogers, chief financial officer, told an investor presentation that he expected the total 2021 incentive pool will be about £450m versus £185m in 2020 and £294m in 2019. That suggests incentives will be around 2.5 times higher than last year and 1.5 times two years ago.
“We believe it’s important to reward our colleagues with a strong bonus,” he said.
Rogers described a £450m bonus pool as “a little bit higher” than a typical year and said it would be “exceptional but not unprecedented”, adding it was likely to be in the region of £300m-£350m next year.
“Encouraging two-year growth” at Group M
“Group M has really been the stand-out performer,” Read said, pointing to 28.6 per cent growth in Q2 and 17 per cent in the first half.
Both VMLY&R, which also grew “double-digit” in H1, and Group M had “encouraging two-year growth” compared with 2019.
Wunderman Thompson, Ogilvy and AKQA Group “all showed a strong recovery in the second quarter”, WPP said.
Overall, the main integrated agencies division, encompassing creative and media, was up 10.9 per cent in H1. Public relations was up 7.4 per cent and specialist agencies 17.1 per cent.
Wins included AstraZeneca, Bumble, Hyatt, JP Morgan Chase, L’Oréal, Pernod Ricard and Sam’s Club.
By region, the UK was among the strongest performers – up 31.8 per cent in Q2 and 16.9 per cent in H1.
North America was up 13.7 per cent in Q2 and 7.5 per cent in H1; Western Continental Europe was up 27.1 per cent in Q2 and 15 per cent in H1; and the rest of the world, including Asia-Pacific, was up 16.1 per cent in Q2 and 10.5 per cent in H1.
WPP swung to a pre-tax profit of £394m for the half-year compared to a £3.2bn loss for the same period in 2020 when it took a big write-down on the historic acquisition of Y&R Group in light of the pandemic.
