WPP Net Sales Up 3.2% in Q1, Boosted by Strong U.S.

'Horizontality' Is Now Top of Agenda at World's Largest Communications Group

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Martin Sorrell
Martin Sorrell Credit: Dario Pignatelli/Bloomberg

WPP has posted like-for-like net sales up 3.2% for the first quarter of 2016, with revenues up 5.1% to $4.7 billion, boosted by a strong performance in the U.S. -- where sales were up 3.9%, revenues grew 6.9% to $1.8 billion, and new business wins included Wendy's, Target and Jet.com.

In Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, like-for-like net sales were up 3%, while in Western Europe they were up 2.3%, and in the U.K., up 3.2%. The group expects sales to remain above 3% for the full year. Like-for-like net sales is WPP's preferred measure for organic growth.

All parts of the group grew, apart from data investment management, where net sales were down 0.1% in the first quarter. WPP noted in its statement that overall growth was particularly strong in the U.S.

WPP – whose agencies include Ogilvy & Mather, JWT, Grey, Mindshare and Mediacom – claimed net new business of $1.779 billion in the first quarter, compared to $1 billion in the first quarter last year, and the group made 26 acquisitions in the same period.

Speaking on a call with analysts, WPP CEO Martin Sorrell said that he is still focused on small and medium sized acquisitions, but predicted that in time, "Six [will] become four," as the top communications groups – WPP, Omnicom, Dentsu Aegis Network, Publicis Groupe, Interpublic, and Havas – consolidate further.

Mr. Sorrell added that horizontality is now at the top of the group's agenda. He said, "Our clients want the best people on their business. They don't really care where they come from as long as they are getting the best possible thinking, implementation and distribution. That's key to developing the business. We care maybe about the verticals, but the clients really do want the best people."

Such horizontal teams already account for one-third of WPP revenue, with 38,000 employees working on 45 cross-agency account teams for clients including Ford, Procter & Gamble, Vodafone, HSBC, Unilever, and Chanel.

In the U.K., Mr. Sorrell has come under fire for his 2015 pay package of $107 million. This has become an annual rite, and he continues to defend his huge rewards by emphasizing his entrepreneurial role at the company, and WPP's leading industry position.

Shareholders will vote on Mr. Sorrell's pay package at the WPP annual general meeting in June. Robert Willott, director of financial research firm Fintellect, questioned in a statement whether Mr. Sorrell should enjoy such huge rewards "If there continues to be uncertainty about adequate succession planning and if there is a serious risk that the value of WPP will decline when he retires."

In its only reference to the lawsuit filed against JWT by former communications head Erin Johnson, WPP said in its earnings statement: "The investigations surrounding the recent events at J.Walter Thompson Company are being finalized. Immediate action has been taken. The former CEO, Gustavo Martinez, stepped down by mutual consent. Tamara Ingram was appointed as the new CEO. Specific policies are being tightened and training programs are being enhanced in the areas of gender, race, diversity and sensitivity, including unconscious bias, both for men and women."

The company also said "clients generally remain cautious," noting that "Procurement and finance remain the dominant functions for understandable reasons, with marketing taking a back seat."

"If you are running a legacy business, as many of our clients are, you face disrupters like Uber and Airbnb at one end of the spectrum, zero-based cost budgeters like 3G and Coty at the other end, with seemingly short-term focused activist investors in the middle, like Nelson Peltz, Bill Ackman and Dan Loeb. There is, therefore, considerable pressure in the system."

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