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WPP 2012 Preliminary Results

WPP (NASDAQ:WPPGY) today reported its 2012 Preliminary Results.

Key figures
£ million     2012    

∆ reported 1

∆ constant 2
    % revenues     2011     % revenues
Revenue     10,373     3.5%     5.8%     -     10,022     -
Gross Margin     9,515     3.0%     5.2%     91.7%     9,239     92.2%

Headline EBITDA 3
    1,756     7.0%     10.7%     16.9%     1,640     16.4%

Headline PBIT 4
    1,531     7.1%     11.1%     14.8%     1,429     14.3%

EPS headline diluted 5
    73.4p     8.4%     13.1%     -     67.7p     -

Diluted EPS 6
    62.8p     -2.6%     1.9%     -     64.5p     -
Dividends per share     28.51p     15.9%     15.9%     -     24.60p     -

1 Percentage change in reported sterling

2 Percentage change at constant currency exchange rates

3 Headline earnings before interest, tax, depreciation and amortisation

4 Headline profit before interest and tax

5 Diluted earnings per share based on headline earnings

6 Diluted earnings per share based on reported earnings

Full Year highlights
  • Reported billings decreased slightly to £44.4bn, primarily reflecting the strength of the £ sterling, although up 1.6% in constant currency driven by leadership position in net new business league tables
  • Revenue growth of 3.5%, with like-for-like growth of 2.9%, 2.9% growth from acquisitions and minus 2.3% from currency
  • Like-for-like revenue growth in all but one region, characterised by particularly strong growth in Asia Pacific, Latin America, Africa and the Middle East and all but one sector (public relations and public affairs), with strong growth in advertising, media investment management and specialist communications
  • Like-for-like gross margin growth at 2.4%, with slower growth in the Group’s consumer insight businesses in the mature markets of North America, the United Kingdom and Western Continental Europe
  • Headline EBITDA growth of 7.0% giving 0.5 margin point improvement, with operating costs (+2.8%) rising less than revenues
  • Headline PBIT increase of 7.1% with PBIT margin rising by 0.5 points to 14.8%, surpassing the previous historical pro forma high of 14.3% 7 achieved in 2011
  • Exceptional gains of £102 million on sales of stake in Buddy Media and New York property
  • Exceptional restructuring charges of £93 million taken chiefly in respect of Western Continental European businesses and IT infrastructure
  • Gross margin margins, a more accurate competitive comparator, up 0.6 margin points to an industry leading 16.1%
  • Headline diluted EPS up 8.4% and reported diluted EPS down 2.6% (reflecting last year’s exceptional release of corporate tax provisions), with 15% higher final ordinary dividend of 19.71p and full year dividends of 28.51p per share up 15.9%
  • Average net debt increased £373m (13%) to £3.203bn reflecting increased spending on acquisitions (chiefly AKQA) and higher dividends, partly offset by relative improvement in working capital
  • Creative excellence recognised by the award, for the second consecutive year since its inception, of the Cannes Lion for the most creative Holding Company
  • Over last two years alone headline diluted earnings per share up almost 30%, dividends per share up 60% and the dividend pay-out ratio increased from 31% to 39%
7 Headline PBIT margin of 15.0% in 2008 adjusted to 14.3% for the full year impact of the acquisition of TNS

Current trading and outlook
  • January 2013 | Like-for-like revenues up over 2% for the month, ahead of budget and similar to the final quarter of 2012; like-for-like gross margin up the same
  • FY 2013 budget | Like-for-like revenue and gross margin growth of around 3% and headline operating margin target of 15.3% up 0.5 margin points
  • Dual focus in 2013 | 1. Revenue growth from leading position in faster growing geographic markets and digital, premier parent company creative position, new business, “horizontality” and strategically targeted acquisitions; 2. Continued emphasis on balancing revenue growth with headcount increases and improvement in staff costs/revenue ratio to enhance operating margins
  • Long-term targets reaffirmed | Above industry revenue growth due to geographically superior position in new markets and functional strength in new media and consumer insight, including data analytics and application of new technology; improvement in staff costs/revenue ratio of 0.3 to 0.6 margin points p.a. depending on revenue and gross margin growth; operating margin expansion of 0.5 margin points or more; and PBIT growth of 10% to 15% p.a. from margin expansion and from strategically targeted small and medium-sized acquisitions

In this press release not all of the figures and ratios used are readily available from the unaudited preliminary results included in Appendix 1. Where required, details of how these have been arrived at are shown in the Appendices.

Review of group results


Revenue analysis
£ million     2012     ∆ reported    

∆ constant 8

∆ LFL 9
    Acquisitions     2011
First half     4,972     5.5%     6.8%     3.6%     3.2%     4,713
Second half     5,401     1.7%     4.9%     2.2%     2.7%     5,309
Full year     10,373     3.5%     5.8%     2.9%     2.9%     10,022

8 Percentage change at constant currency exchange rates

9 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals

Billings were down slightly at £44.4 billion, primarily reflecting the strength of the £ sterling. Billings were up 1.6% in constant currency. Estimated net new business billings of £3.894 billion ($6.231 billion) were won in the year, up almost 21% on last year, placing the Group first in all leading net new business tables. The Group continues to benefit from consolidation trends in the industry, winning assignments from existing and new clients. These wins continued into the second half of the year and the first two months of 2013 with several very large industry-leading advertising, digital and media assignments, the full benefit of which will be seen in Group revenues in 2013. There have been several recent significant gains, for example, in the pharmaceutical and healthcare industry.

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