WPP 2015 first quarter trading update was released today. In Q1, there has been a revenue growth of 8.3 per cent, with constant currency growth of 7.4 per cent, like-for-like growth of 5.2 per cent, 2.2 per cent growth from acquisitions and 0.9 per cent from currency, reflecting the weakness of sterling against the US dollar, partly offset by the strength of sterling, primarily against the euro.
There has been a net sales growth of 6 per cent in sterling (down 3.2 per cent in dollars and up 18.3 per cent in euros), with constant currency growth of 5 per cent, like-for-like growth of 2.5 per cent, 2.5 per cent growth from acquisitions and 1.0 per cent from currency.
Q1 witnessed like-for-like revenue growth in all regions and business sectors, except data investment management, characterised by particularly strong growth geographically in the United Kingdom and Asia Pacific, Latin America, Africa and the Middle East and Central & Eastern Europe, and functionally in advertising and media investment management and sub-sectors direct, digital and interactive and healthcare.
Like-for-like net sales growth of 2.5 per cent, with all regions and sectors, including data investment management, showing growth has also been seen. The gap compared to revenue growth is similar to the first quarter of 2014, reflecting the scale of digital media purchases in the media investment management and data investment management direct costs.
The constant currency average net debt in the first quarter increased by £185m (7 per cent) to £2.734 billion compared to the same period in 2014, continuing to reflect the significant incremental net acquisition spend and share re-purchases of £331 million in the 12 months to 31 March 2015, compared with the previous 12 months, more than offsetting the improvements in working capital seen in the second half and final quarter of last year.
The net new business of almost exactly $1.0 billion in the first quarter, compared to $1.275 billion in the first quarter last year.
The company’s FY 2015 Q1 preliminary revised forecast is similar to its budget, with like-for-like revenue and net sales growth up over 3 per cent. Headline net sales margin target of 0.3 margin points improvement on a constant currency basis.
There will be dual focus in 2015. There will be stronger than competitor revenue and net sales growth due to leading position in faster growing geographic markets and digital, premier parent company creative and effectiveness position, new business, horizontality and strategically targeted acquisitions. Also, continued emphasis will be made on balancing revenue and net sales growth with headcount increases and improvement in staff costs/net sales ratio to enhance operating margins.
The long term targets will be to increase the industry revenue and net sales growth due to geographically superior position in new markets and functional strength in new media and data investment management, including data analytics and the application of new technology; improvement in staff costs/net sales ratio of 0.2 per annum or more depending on net sales growth.
There will be net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20 per cent; and headline diluted EPS growth of 10 per cent to 15 per cent per annum from revenue growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs.