WPP falls short on margins but wins big clients
NEW ADVERTISING clients have helped WPP deliver an industry-beating 18.7 per cent rise in profits for last year, though investors were disappointed yesterday by the FTSE 100 firm’s margin forecast.
Sir Martin Sorrell’s media outfit said it expects margins to increase 0.3 percentage points this year, trimmed from an earlier prediction of 0.5 points.
Operating margins in 2013 rose 0.3 points, less than the 0.5 points analysts had expected, to a record 15.1 per cent.
Sorrell said the downgrade for 2014 reflected “competitive pricing activity” from rivals that is unlikely to be sustained over the longer term.
The company’s advertising businesses have picked up a number of new clients from competitors Publicis and Omnicom, whose merger means the new world’s biggest ad agency is losing accounts that have conflicts of interest with one another.
WPP has won deals worth hundreds of millions of dollars a year with brands including Nestle, Gillette, Sony, Dyson in 2013.
Other corporate giants, including Vodafone, Telefonica and Microsoft, have put their advertising contracts out for bids.
Overall billings for WPP rose 4.1 per cent to £46.2bn last year, with £6.1bn of this new business. Revenues were up 6.2 per cent at £11bn, or 3.5 per cent from existing business, 2.2 per cent from WPP’s acquisitions drive and 0.5 per cent from currency movements.
Pre-tax profits totalled almost £1.3bn. All the firm’s business areas grew apart from public relations and affairs, the smallest unit, whose revenues excluding currency movements shrank 0.7 per cent to £921m.
The company completed 62 acquisitions in the year, from US big data specialists to Kenyan marketers, and has up to £400m in firepower to buy more companies this year.
Despite the disappointing margin forecast, analysts at S&P Capital said “WPP is likely to fare better than rivals over the next 12 months thanks to its digital and higher growth markets footprint, and client opportunities arising from the [Publicis] merger”.