WPP results flat after STW merger as market outlook remains cautious

WPP AUNZ has reported a flat first half in its first result since the completion of the merger with STW Group earlier this year.

Mike Connaghan says no market guidance until August

On a like-for-like basis net sales barely moved, down 0.1%  from $407.5m last year to $407.3m.

At the same time earnings before interest and tax (EBIT) slipped slightly, down 0.4% to $47.2m.

While the result was flat, WPP AUNZ CEO, Michael Connaghan, said it was a promising first performance for the company.

“While we are very much in the initial stages of the merger integration, it has been a very positive beginning,” Connaghan said.

“There has been strong engagement and collaboration from the local business units and support from WPP global operations. The substantial benefits of the merger are tangible providing the group with access to new tools, technologies and client relationships.”

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Connaghan again highlighted the $15m in savings WPP hoped to realise in the merger of STW and WPP’s Australian and New Zealand operations but said that the shift would take time before it had a direct impact on results.

“Post transaction completion, we have made investment to validate, challenge and refine the cost synergy assumptions,” he said.

“The simple conclusion was an enhanced confidence in reaching and exceeding projected Synergy targets.”

Offering his first market guidance since the merger, Connaghan said that WPP was on track to deliver a full year headline profit of between $140m and $147m – up from $137m in 2015.

“This represents mid-to-high single-digit organic growth,” he said.

“We are cautious in our outlook for the group given a flat media market, retrained client spend and a subdued macro-economic environment in key markets. The group will achieve this organic growth through winning market share and driving cost efficiencies.”

WPP AUNZ reported a rise in net debt in the six months to June 30 from $220m to $318.2m, driven by the increased debt acquired to help finance the merger. Net cash balance was $71,5m, up from $26.9m in December.

Connaghan highlighted that the new debt facilities were on “materially better terms than the previous debt facilities”.

The company declared a fully-franked interim dividend of 2.1 cents per share.

Shares in WPP AUNZ closed at $1.26 on Thursday evening.


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