WPP led the FTSE 100 risers today as its shares climbed after it posted a surprise return to growth in the third quarter.
WPP’s share price rose above six per cent to 971.2p after revealing revenue climbed 5.2 per cent to £3.29bn.
Like-for-like sales rose 1.9 per cent in the three months to the end of September. That excludes market research unit Kantar, which shareholders voted to spin off yesterday to help simplify the business.
Organic growth rose 0.7 per cent to outstrip market expectations of minus 0.6 per cent.
CEO Mark Read’s warning that there will be plenty of “twists and turns along the way” failed to dampen investor enthusiasm. But the media giant’s boss stuck to full-year guidance that like-for-like sales will decline overall by up to two per cent.
“It’s the first time we have grown in a year, clearly that’s positive,” Read told City A.M.
“What’s reassuring is the improvement in performance has been across the company geographically and functionally. It’s a broad-based recovery and we got agencies back to growth in the third quarter.”
The US was WPP’s biggest source of revenue, where it rose 3.8 per cent year on year to £1.24bn.
The UK saw an increase of 1.4 per cent to £426m while Western Europe climbed 4.6 per cent to £613m. Asia-Pacific saw a huge nine per cent rise to top £1bn in sales.
“We saw substantially better results in the US and shows the action we have been taking have started to have an effect on the business,” Read said.
Read’s strategy, targeting growth that is in step with rivals like Interpublic and Omnicom by 2021, has borne fruit with client wins in Mondelez and Ebay.
And AJ Bell investment director Russ Mould praised Read for keeping a lid on expectations since founder Martin Sorrell’s tumultuous departure last year.
“The turnaround at the advertising giant WPP appears to be gaining some traction,” Mould said.
“Once a business with lots of moving parts, Read has simplified the structure, bringing more focus to a smaller number of more potent agency brands.”
But US like-for-like sales still showed a decline of 1.9 per cent. “Really our focus has got to be returning North America to growth,” Read told City A.M. “That is our number one focus.”
He warned that tough year-on-year comparatives would likely see a weaker fourth quarter, but added: “We are now in a position where our balance sheet will be much stronger.”
Read’s firm faces the challenge of sustaining growth in the face of big clients cutting fees and customers in-housing marketing, as well as tech giants stealing revenue from traditional media giants.
However, Read said he does not see in-housing as a money-saving measure. WPP has 150 people on site at Best Buy in the US and 70 marketers in News UK’s offices.
“Our industry has always been a dynamic industry and we are working with a number of clients on how we put out people inside their offices,” he said.
“We need to look into the in-housing trend and if we approach that cooperatively I think this can be a positive thing for WPP.”