The world’s largest advertising company has increased its final dividend due to strong demand despite the difficult economic environment, which investors feared would reduce marketing budgets.
WPP revenues increased almost 7 percent in the last year to PS11.8billion, up from PS10.4billion in 2021. Digital advertising remains the strongest sector, and television spend is returning to pre-pandemic levels.
Operating profit rose by 5% to PS1.36billion, compared to PS1.2billion a year ago. The final dividend has increased 30.5 percent to more than 24p.
The UK had the strongest growth, with a 12 percent increase, followed by India and Germany. Lockdown restrictions on consumer spending in China caused revenue from China to drop by more than 8 percent.
According to the company, generative artificial intelligence is being used more frequently in its business to create human-like content using prompts like images or text. This tech allows for faster work and greater efficiency, but also to generate ideas to “produce innovative creative work for our clients”.
Although it lost two major clients, L’Oreal & PepsiCo, it won new contracts with Audible, Danone, and Coca-Cola. This “partnership of unprecedented size” was still in place. The strongest areas of growth were technology, healthcare, and consumer goods.
Mark Read, chief executive said that WPP experienced strong growth in 2022 despite macro challenges. This reflects the priority of our clients in investing in communication, customer experience and commerce, as well as technology.
These results are similar to the bullish numbers that were reported by its French counterpart, Publicis , earlier in this month. It beat all expectations last year and posted similarly positive numbers. It reported that its revenues for the year had increased by 10.1% organically to EUR12.6 billion.
WPP’s market value has increased by almost 40% in the last six months, but is still 10% lower than last year. This is due to the grim economic forecasts and the experiences from technology giants like Meta and Snap who have reported a slowing of their revenue from advertising.
The company stated that it expects like-for-like revenue growth between 3 and 5 percent in the next year, as well as a headline margin of 15%.
WPP is listed on the FTSE 100 and employs approximately 109,000 people. It is also behind Ogilvy GroupM, Hill+Knowlton Strategies and Hill+Knowlton Strategies. It was founded by Sir Martin Sorrell who, in bitter circumstances, left the company almost five years ago. He was succeeded by Read.
It disposed of its Russian business after the invasion of Ukraine in March 2017. The company claimed that this move had cost them PS63 million. It accounted for 0.6% of WPP’s revenues in 2021.
WPP has been on an acquisition spree for fast-growing media tech companies with a niche within commerce. In 2022, WPP spent PS237 million.
recently purchased Fenom Digital in New York, which manages the technology infrastructure for ecommerce companies. It’s part of a strategy that aims to improve its online retail capabilities. The company has built apps for Nike, Sainsbury’s, and others.
Read the conclusion: “While there will be challenges, major companies must continue to build brands, sell product, transform and reinvent their businesses, understand their data and invest in technology. They also need modern partners who can help navigate this new world.”
The shares rose by 52 1/4 p or 5% to PS10.69