March 1, 2012 / 7:36 AM / 6 years ago

UPDATE 2-WPP beats expectations ahead of summer Olympics year

* 2011 organic revenue up 5.3 pct

* Operating margin rises to 14.3 pct

* Shares up 3.7 percent (Adds CEO comment, analyst reaction, shares)

By Paul Sandle

LONDON, March 1 (Reuters) - WPP, the world’s largest advertising group, posted better-than-expected growth and margin for 2011 and said organic sales rose 4 percent in January, in line with its target for this year when the industry enjoys a quadrennial boost.

Whatever the state of the world economy, the ad industry gets a lift every fourth year from a combination of the summer Olympics, U.S. presidential election and European soccer championships.

WPP, whose portfolio includes Ogilvy & Mather and Young & Rubicam, said on Thursday those events were worth 1 percent growth to the industry.

Its 2011 organic revenue grew 5.3 percent and headline operating margins rose 1.1 points to 14.3 percent, beating market expectations of 5 percent and 14 percent respectively.

Shares in WPP, which also said on Thursday it expected its operating margin to rise 0.5 point this year, were up 3.7 percent at 1100 GMT.

WPP said its strength in fast-growing economies and in digital media would help it grow faster than the industry.

Last month, U.S. rival Interpublic forecast 3 percent organic revenue growth in 2012.

WPP chief Executive Martin Sorrell said Western-based major companies were sitting on big cash piles, and they were using the money to invest in their brands.

Top clients, which include Ford, Nestle, P&G and Unilever, account for around a third of WPP’s revenue.

“In fast-growing economies, they are investing in capacity and brands. In slow-growing economies they are investing in brands, so there is a double whammy,” Sorrell said.

Advertising spending in 2012 would continue along the same tracks as last year, he said, with Asia-Pacific, Latin America, Africa and the Middle East leading the way.

“The U.S. is improving in front of the election. There is a question whether that continues after the election,” he said. “In the euro zone, it looks as though we will muddle through.”

Britain was a bright spot, with organic revenue up 6.7 percent, which Sorrell put down to the country being the home of many multinationals.

Analysts at Bank of America-Merrill Lynch said WPP’s organic growth was ahead of guidance. “We favour WPP given its leading emerging market exposure and see scope for an improving trend for (market research arm) Consumer Insight in the second half to drive a re-rating,” they said.

THE SOCIAL NETWORK

WPP will double the amount spent with Facebook to about $400 million in 2012, Sorrell said. It spent $1.6 billion with Google last year.

Sorrell said while Facebook was a powerful branding tool, it remained more of a PR medium than an advertising one.

“It is a social network, so people engage with it on a social basis rather than a commercial basis,” he said.

Sorrell also gave a vote of confidence in older media by welcoming the arrival of British newspaper the Sun on Sunday, which launched last weekend. “It has brought a little more excitement to the Sunday market,” he said.

The tabloid is Rupert Murdoch’s replacement for the News of the World, which was closed in July when many advertisers and readers said they would shun the title in the wake of the phone hacking scandal.

WPP posted headline 2011 pretax profit of 1.23 billion pounds ($1.96 billion) on revenue of 10.0 billion, up 7.4 percent. It raised its dividend 38 percent to 24.6 pence. ($1 = 0.6260 pound) (Editing by Neil Maidment and Dan Lalor)

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