Financials show big improvements in 2021 since 2020, but there are still improvements to be made. Can WPP continue this into 2022?

Overview

WPP plc is a UK-based public relations, communications, technology, advertising and commerce holding company. It was the world’s largest advertising company, as of 2019. WPP specialises in creative transformation, it uses the power of creativity to build better futures for its people, clients and communities. It is headquartered in London, England.

Financials

Looking at the financial end year of 2021 against 2020, its revenue grew to £12,801bn in 2021 from £12,002bn in 2020, with a gross profit at +£2,203bn, up from +£2,014bn in the prior year. General and administrative costs have seen a huge reduction in 2021, down to (-£974m) from (-£4,293bn) in 2020. Operating profit was reported as positive for the year 2021 coming in at +£1,229bn compared to a loss of (-£2,278bn) for the year 2020. Profit for the year after tax and finance costs totalled +£720m versus (-£2,901bn) in 2020. Non-current assets also rose by £350m over the year but the value of the current assets fell to +£15,335bn versus +£23.981bn in 2020, which is a big decline. However, current liabilities fell to (-£16,485bn) from (-£23,227bn).   

Technicals

From a technical overview, at present, WPP shares are trading at £7.80 a share. Applying the Fibonacci retracement to the chart, towards the upside resistance sits at £7.88 then at £7.90 then at £7.92, which are all based just above the 38.2% Fib. A break above the £7.92 price level could see the share price climb towards the 50% Fib where major resistance sits at £8.05. On the other hand, towards the downside, support sits at £7.70 then at £7.65 then a major support level at £7.55, which rests just below the 23.6% Fibonacci retracement. A break below the 23.6% Fib may see the share price fall towards the lows of the year (£7.13). Looking at the technical indicators, MACD is positive and so is RSI as it reads 57.  

Summary

The company has made some progress since 2020, continuing to see growth in revenue and profit. A huge reduction in general and administrative costs was vital as it was used to offset debt and liabilities. Operating profit was important in 2021 as it finished on a positive compared to a big loss in 2020, still down (-£1,049bn). Current assets fell sharply by £8,646bn but as stated above, current liabilities also fell by £6,742bn, nevertheless, it is not enough to offset the difference. To finalise, if the 2022 annual report has similar performance levels as the 2021 report, and it shows that it can continue this pace in the years to come, then in the next 3-5 years the stock’s share price could make some recoveries from the losses in recent years. However, if WPP incurs similar losses in the next 2 financial years as it did in 2020, the stock could head the other way.