WPP enjoys share price boost after revealing £514m annual profits

by Daniel Farey-Jones, Brand Republic 06-Mar-09, 09:55

LONDON - A steady start to 2009 and a strong profits performance in 2008 has helped WPP surprise the stockmarket, at one point pushing its share price up by as much as 9%.

As at 9.45am WPP's share price stood at 401p, up 7.1% from yesterday's close.

The marketing services group's 2008 results show the company's post-tax profits fell just 0.2% from 2007 to £513.9m. It bucked the recent trend for companies to cut dividends by increasing its annual payout by 15%.

Revenues rose 20.9% to £7.48bn, driven both by the weaker pound and the acquisition of global market research company TNS, which was counted only for the last two months of the year.

Organic revenue growth was 2.7% at a global level, but the group admitted the rate had slowed in the second half of the year to just over 1%. It did not say what the rate was in the fourth quarter.

North America was its weakest region with almost flat organic revenue growth in 2008.

The UK, which has recently been the group's slowest growing region, has improved and over 2008 performed more strongly than France and Germany, while Spain and Italy were the weakest of the big five Western European markets.

Both the UK and continental Europe notched up organic growth of more than 2%.

WPP, which is headed by chief executive Sir Martin Sorrell, said there was relatively strong like-for-like revenue growth at a global level for the first two months of 2009.

However, the company's budgets for 2009 have been set to reflect a 2% fall in organic revenues and its individual units have been cutting costs and jobs accordingly.

The results did not reveal how many people have been made redundant, but did show that staff numbers -- excluding staff at associate companies and TNS -- had increased at the end of 2008 to 112,262 compared with 100,869 at the end of 2007.

WPP is expecting the first half of 2009 to be worse than the second half, while it still believes "there will be a recovery of sorts in 2010" driven by the massive fiscal injections currently underway around the world.

As a result of the inflation government action is likely to provoke, WPP expects capital rich countries, such as Brazil, China, India and Japan, to benefit. It believes WPP's strategic focus on these countries, on new media and consumer insight will benefit equally.

WPP also contradicted speculation that it would write down the value of TNS, for which it paid £1.03bn, and opted to recognise the acquisition as adding £1.13bn of goodwill.

For Bob Willott's analysis of WPP's result visit his blog Bob Willott on the Bottom Line.

Comments

Larry Kay - 06/03/2009

So WPP, marketing superpower whether you like it or not, seems to be brazenly ignoring the economic climate! Typical, really. It'll be interesting to see how they circle ailing companies & agencies, waiting to snap 'em up cheap. Will the recession just favour the big networks? Will the richest few get richer \(and fewer)? Fair enough, if it works for them... Not that we'll be on the Sorrell-scope yet, of course, but we're network-proof at Creative Orchestra, set up as we are on an innovative Social Enterprise model, legally bound to put our profits back into incubating young creative talent. Leaves us free to concentrate on ideas, not churn. No advertising pounds wasted on admin - just 100% creativity for your money. We believe it'll actually be equally profitable, in our own little way. What do you think, adland? Is there opportunity for a young, truly bespoke creative agency? Who's going to find a way to profit from the recession - the big guys or the little guys?

Levitates - 06/03/2009

Check out related news items - "WPP to axe thousands of jobs in Europe and North America."

Larry Kay - 06/03/2009

Indeed, but I guess that's more to insulate themselves than a sign of difficulty. Won't compromise their buying power, of course.

Darian Watts - 09/03/2009

Well it's nice to know that all those staff at WPP agencies who have been made redundant \(or about to be) and paid a bare minimum can at least say they used to work for a company that makes a lot of dosh. But that's how you make money, work people hard, then dump them with little pay off. I don't think WPP \(Work & Profit before People) can hold it's head up proudly given the way it's treated some staff.