WPP's founder and chief executive Sir Martin Sorrell, who must know a thing or two about rebranding, likes to talk of "new markets" rather than emerging ones. Whatever the euphemism, areas like East Asia and South America remained the advertising giant's growth engines last year. But second-half currency issues and cautious guidance prompted analysts to cut their forecasts, pushing the shares down more than 5 per cent.
Overall, like-for-like sales climbed 4 per cent, up from 3 per cent in 2012. Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe - which WPP defines as one region - led the pack with a 6 per cent gain. The UK and North America, which together account for 47 per cent of WPP's revenues, weren't far behind, with sales rising 5 and 3 per cent, respectively. The only soft spot was Western Europe, where sales limped 1 per cent higher to £2.6bn.
The group also made strides in new media - a key plank of its growth strategy - with 7 per cent like-for-like sales growth in the direct, digital and interactive division. Viewed on a sector-by-sector basis, however, WPP's performance was a bit more muted. Sales in public relations and affairs were particularly weak, slumping 1.7 per cent to £0.9bn.
But arguably the biggest issue for WPP was a strengthening sterling. The headline operating margin was up 0.3 points to a record 15.1 per cent, but the company had previously guided the market to expect a gain of half a percentage point, and the miss - which was blamed on second-half forex movements - sparked a sell-off in the shares. The company also pointed to increased pricing pressure as its rivals consolidate and cut their prices. Publicis and Omnicom, after WPP the world's two largest advertising groups, are due to complete their merger this year, pushing Sir Martin's empire into second place.
Following downgrades, broker Numis Securities expects pre-tax profits of £1.49bn this year and EPS of 82p, rising to £1.63bn and 92p in 2015.
| WPP (WPP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,261p | MARKET VALUE: | £17bn | |
| TOUCH: | 1,260-1,262p | 12-MONTH HIGH: | 1,391p | LOW: 1,020p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 563p* | NET DEBT: | 29% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 8.7 | 0.7 | 35.9 | 15.5 |
| 2010 | 9.3 | 0.9 | 47.5 | 17.8 |
| 2011 | 10.0 | 1.0 | 67.6 | 24.6 |
| 2012 | 10.4 | 1.1 | 66.2 | 28.5 |
| 2013 | 11.0 | 1.3 | 72.4 | 34.2 |
| % change | +6 | +19 | +9 | +20 |
Ex-div: 4 Jun Payment: 7 Jul *Includes intangible assets of £11.1bn, or 827p a share | ||||
