By Paul Sandle
LONDON (Reuters) -British ad group WPP said its global clients are investing in their brands in the face of economic uncertainties, supporting its third-quarter revenue even as wage inflation and lockdowns in China tempered its profit growth.
The owner of the Ogilvy, Grey and GroupM agencies reported a 3.8% rise to 2.99 billion pounds ($3.46 billion) in like-for-like revenue less pass-through costs and nudged up the bottom of its full-year forecast range to 7.0% from 6.5%.
But the group, which picked up contracts from Nestle and Samsung in the quarter, was less optimistic about growing its operating margin in light of inflationary pressures, including its wage bill and prolonged lockdowns in China
It said its operating margin would rise by 30 to 50 basis points this year, against its previous forecast of around 50 basis points.
Shares in WPP, which have fallen 20% in the last 12 months, were down 3.8% early on Wednesday.
Analysts at Citi said they reduced their earnings per share forecast by around 5% following the margin guidance change.
Google parent Alphabet Inc’s disappointing ad sales deepened worries across the digital media sector on Tuesday as advertisers cut back in the face of an economic slowdown.
Alphabet’s warning followed Snap Inc forecasting zero revenue growth on Friday.
But WPP Chief Executive Mark Read said the group continued to show “strong momentum”, and was doing more than ever for its clients, including e-commerce and digital transformation as well as advertising and public relations.
He said WPP was not comparable to platforms like Snap, which were competing against the likes of TikTok and were challenged by changes in privacy policies.
WPP’s client base was also different, comprising major companies with strong balance sheets and a long-term approach, he told analysts.
Read said Brazil and India were stand-outs in the quarter, although COVID-19 lockdowns weighed on China, which was down 9%.
Western Europe was “softer”, he said, with adjusted like-for-like revenue down 2.1%, dragged lower by a COVID-19 contract in Germany in the prior year.
($1 = 0.8651 pounds)
(Reporting by Paul Sandle; Editing by Sachin Ravikumar and Jan Harvey)
