A 6.4% advance in the share price to 973.4p seems a somewhat strange response to a set of first half results from advertising giant WPP (WPP) showing a 44% slide in profit, owing to shrinking margins and a one-off gain in the previous year.
However, there were signs that the turnaround plan introduced by chief executive Mark Read since his appointment a little under a year ago is taking shape.
HALF YEAR NUMBERS
Pre-tax profit for the six months through June fell to £478m, down from £846m a year earlier. The bottom line was also dented by a revaluation of financial instruments. Revenue rose 1.6% to £7.62bn, but was flat on a constant currency basis and down 0.6% on a like-for-like basis.
Headline operating profit fell 6.8% to £730m, as operating margin contracted 0.8 percentage points to 11.9%.
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WPP held its interim dividend per share steady at 2.7p and reiterated full year guidance for a 1.5% to 2% fall in like-for-like revenue less pass through costs. In the first half, revenue on that measure fell 2%.
Trading is said to be slightly ahead of internal expectations and management also point to ‘reasons for optimism’.
ANALYST ‘ENCOURAGED’
Shore Capital analyst Roddy Davidson is pleased. He says: ‘We are encouraged by the progress summarised in today’s results release which adds support to our view that the group’s strategy is gaining traction.
‘Specifically, we like its focus on simplifying operations; engendering greater internal cooperation; pursuing efficiencies; reducing debt; realising value from non-core operations and; generally enacting a more disciplined capital allocation policy.
‘We believe that this approach is also better-suited to the challenges of a changing media landscape and plays to WPP’s strengths. We would also cite: the resources and impressive track record of its agency brands; its creative capabilities; the strength of its blue-chip client relationships, and; its integrated global offering as key underlying positives.’
