(Bloomberg) -- WPP Plc, the world’s largest advertising agency, topped estimates for sales growth and lifted its guidance as companies continued to spend on ads to reach consumers as lockdowns lift.

The London-based group said like-for-like revenue less pass-through costs increased 15.7% in the third quarter compared to a year earlier, at 2.64 billion pounds ($3.63 billion). Analysts had forecast a 9.4% increase.

Amid the surge in spending, WPP lifted its full-year guidance for like-for-like revenue less pass-through costs to 11.5% to 12%, with an operating margin “slightly above” 14%.

Key Insights 

  • “Our very strong performance goes well beyond a cyclical recovery,” Chief Executive Mark Read said in a statement. “Clients across all sectors and geographies are making significant investments in marketing, particularly in digital media and ecommerce services. We are now above 2019 levels in all of our business lines.”
  • WPP saw its key sales metric climb the most in China, Germany and the U.K. among its top markets, while the U.S. saw like-for-like sales less pass-through costs rise 12.4%.
  • Last quarter, the company raised its revenue forecast to a 9% to 10% increase this year, and boosted its interim dividend by 25% to 12.5 pence per share after seeing a robust rebound of advertising.
  • The firm has also seen some recent deal-making in recent months, with WPP-backed public relations company Finsbury Glover Hering merging with U.S. rival Sard Verbinnen & Co. earlier in October. WPP also purchased artificial intelligence firm Satalia in August and rolled out an augmented reality partnership with Snap Inc. in late September.
  • “Advertising agencies have enjoyed a strong tailwind in 2021 as brands have replenished campaign budgets in an effort to kickstart sales. That’s made it harder to distinguish the relative merits of rivals’ strategies,” Bloomberg Intelligence analyst Matthew Bloxham wrote in a report ahead of the third-quarter earnings.

Market Reaction

  • Shares in WPP have gained 21% this year. They closed up 2% on Wednesday ahead of their quarterly results.

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