The British multinational communications company – and the world’s largest advertising company – WPP has announced its preliminary results for the final quarter of 2021, as well as the full year, which CEO Mark Read has described as: “An outstanding year for WPP.”
The reported revenue for WPP’s continuing operations for the full year of 2021 is £12.8bn, nearly a 7% increase from their 2020 financial results. Additionally, the communications company reports that over £1bn has been returned to the company’s shareholders, amongst other financial highlights published in the preliminary results today. WPP’s headline operating profit margin - meaning its profit margin derived from its ongoing operations’ income and excluding the effect of one-time charges, cost-cutting, and other extraordinary items like tax liabilities (a less volatile earnings measurement than net profit) – is reported to be 14.4% for the full year of 2021. This is a like-for-like increase of 1.7 margin points on the prior year’s ongoing operations’ profit margin.
In the 2021 Preliminary Results report, WPP says that this strong top-line growth and ‘sustained momentum into 2022’ has been the result of a year of “very strong growth driven by demand for digital services, ecommerce and technology,” as well as an impressive financial performance from not just its ongoing operations, but simultaneously from its new business. The report claims that 2021 saw a ‘stronger-than-expected’ economic environment for the advertising industry, citing a GroupM estimate of a 30.5% global increase in digital ad spend, brought about by ‘pent-up saving and structural growth’ in digital.
The results also report that WPP’s ‘breadth and depth of capabilities’ is resonating well with their clients, following this year’s $8.7bn of net new business won, which includes the newly-won global Coca-Cola account. In the report, Mark Read, CEO of WPP says: “Our extensive partnership with The Coca-Cola Company, the expansion of our work with Google and the continuation of our longstanding relationship with Unilever demonstrate the value that three of the world’s leading marketing organisations place in WPP.”
Alongside new business expansion and growing existing operations, aiding WPP’s profit margin increase in 2021 was around £245mn in gross savings - mainly through savings in property, simplification processes and shared services - not to mention a 12.1% increase in revenue less pass-through costs which further eliminated administrative and overhead costs for the organisation.
Mark says: “As clients seek to accelerate their growth and transform how they reach customers, the depth, breadth and global scale of our offer - which combines creativity with technology and data, through Choreograph, and the largest global media platform in GroupM - is proving its value for existing and new clients.” Stating that WPP is now two years ahead of schedule, hitting its 2023 revenue target in 2021, the CEO is confident in the company’s cash flow and the value it generates for clients and shareholders alike. “Cash generation continues to be very strong, underpinned by efficiencies achieved in our transformation programme, allowing us to make significant investments in our offer and reward our people for their huge contribution, while returning over £1bn in cash to shareholders through dividends and share buybacks.”
Where he explains WPP has made ‘substantial strategic progress’ is in its acquisition of AI capabilities and developing commerce and technology services that will ‘leverage across all of WPP for future growth’. Mark also acknowledges in the report the importance of WPP’s creation of the ‘world’s leading board-level communications firm’, which arose in 2021 from the merger of WPP-owned strategic communications companies Sard Verbinnen and Finsbury Glover Hering. Looking ahead to 2022 after a financially successful year for WPP, the CEO says in the report: “We look forward to 2022 with confidence. We are guiding to strong top-line growth, improving profitability and continued investment in our people and services.”