WPP H1 Profit Down, July Sales Rise, Sees Growth In FY; Stock Up

(RTTNews) - Shares of WPP Group Plc. (WPP.L, WPPGY) were gaining around 6 percent in the morning trading on London after the advertising giant reported Wednesday positive current trading and expectations for increased results. This was after reporting higher headline profit and increased revenues in its first half, even as reported profit declined from last year. The company also announced a significant dividend growth.

Regarding the current trading, the company said July like-for-like revenue growth was 4.6 percent and net sales growth was 1.9 percent, ahead of budget and the second quarter revised forecast.

All regions and sectors, except data investment management, were positive. The United Kingdom was stronger than the previous quarter, perhaps reflecting a post-Brexit vote recovery, driven by a weaker pound sterling, the company said.

For fiscal 2016, the company projects stronger than competitor revenue and net sales growth.

For the long term, the company sees above industry revenue and net sales growth mainly due to geographically superior position in new markets.

The company projects net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20 percent, and headline earnings per share growth of 10 percent to 15 percent per annum.

For the first half, profit before tax fell 40.1 percent to 425 million pounds and earnings per share of 18.9 pence was down 56 percent.

The latest results included net exceptional write-downs of 122 million pounds, principally on the investment in comScore, in comparison to net exceptional gains of 203 million pounds last year.

Headline profit before tax was 690 million pounds, up 15.8 percent, and headline earnings per share of 39.1 pence was up 16.7 percent. Headline EBITDA, a key earnings metric, grew 13.7 percent from last year to 889 million pounds.

Revenues grew 11.9 percent to 6.536 billion pounds. In dollar terms, revenues grew 5.2 percent to $9.367 billion, while it declined 4.9 percent in euro terms to 8.384 billion euros.

Net sales grew 11 percent on a reported basis in sterling, up 4.3 percent in dollars, and were up 4.1 percent in euros.

At constant currency, revenue was up 8.9 percent and like-for-like revenue was up 4.3 percent. Constant currency net sales were up 8.1 percent, and like-for-like net sales were up 3.8 percent, with growth in all regions and business sectors.

Billings grew 9.3 percent on a reported basis and 6.3 percent in constant currency to 25.319 billion pounds.

Further, the company announced dividends per share of 19.55 pence, up 22.9 percent, a pay-out ratio of 50 percent, in line with the revised target pay-out ratio.

In London, WPP shares were trading at 1,843 pence, up 5.50 percent.