Shares in WPP (LON:WPP) soared 25% after the global media firm reported improving momentum in Q2. The company also said it expected ‘an improving growth trajectory in H2’ and a higher operating margin.
Improving momentum
For the six months to June, WPP reported revenue of £6.37 billion, down 4.4% on a headline basis and 3.2% LFL. However, momentum improved from a 6.7% drop in LFL revenue in Q1 to just a 2.8% drop in Q2, beating expectations.
The improvement was mostly driven by WPP Media, where LFL revenue declined 2.8% in Q2 against 8.3% in Q1. Momentum also improved in WPP Creative and WPP Production, with a notable acceleration in the Asia Pacific and Latin American regions.
Operating profit in H1 was £398 million, down 3.4% on 1H25, representing a margin of 8.4%. Thanks to cost savings, the company now expects a FY operating margin of between 12% and 13%.
CEO Cindy Rose commented: ‘Q2 saw a further sequential improvement in LFL growth, highlighting the momentum we are building across the company. Organic growth remains our North Star.’
Ad agencies appear to be turning the corner, if this week’s updates from S4 Capital (LON:SFOR) and WPP are any gauge. Admittedly, there’s a big element of self help in both firms’ results, but there are also signs of improving demand.
As we’ve highlighted before, it’s often not the rate of decline which matters but how quickly that rate changes, the so-called second derivative. A slower quarterly decline can make a big difference to perceptions, especially when a company is as unloved as WPP.
Bear in mind the shares hit a 25-year low earlier this year after the company announced its FY25 results and its strategy update. If business is turning up, WPP will feature on the radar of professional ‘deep value’ and ‘special situations’ investors. Whether retail investors should take a punt is entirely down to personal preference and risk appetite.
