WPP exceeds global revenue growth of £10 billion for second year running

Sir Martin Sorrell’s WPP has released its preliminary results for 2012, showing an increase in revenue of 3.5%, exceeding global revenues of £10 billion for the second year running.

WPP, the largest marketing services group in the world, reported a like-for-like growth of 2.9%, 0.3% greater than market expectations.

There was particularly strong like-for-like growth in Asia Pacific, Latin America, Africa and the Middle East in advertising, media investment management and specialist communications, with overall profits reaching £894.7 million, down -2.4% on the 2011 results.

Public relations and public affairs revenues were down -1%, with WPP saying that it had been a “difficult year” for those sectors.

Commenting on the results, Brian Wieser, Senior Research Analyst at Pivotal Research Group, said: “We have been disabused of any expectation that WPP will generate positive working capital in the near-term.

“The company’s business emphasis, its country exposure and its client base are more likely to erode working capital than to generate it. By contrast, for each of Omnicom, IPG and Publicis we remain somewhat optimistic that these companies will continue to drive up working capital-based cashflows, which should be positive for the sector.

“Our preferred name among the agencies remains IPG. We expect cashflows from IPG of approximately $1 per share in 2014 and rising by a double digit pace in subsequent years as the company resumes more normalised revenue growth trends after a challenging 2012, and returns to expanding its margins.”

Based on a DCF valuation, Pivotal Research Group give Omnicom 4.5% long-term growth, IPG 4.0% and WPP 4.5%.

Speaking to the BBC, Sorrell said that despite these difficulties and the “stumbles” earlier on in the year, WPP had achieved its objectives for 2012.