Martin Sorrell, CEO of WPP, says 2013 is on track to be another “challenging year.” This prediction came after his holding company, which owns the Ogilvy, JWT and Y&R agency networks, reported organic revenue growth of 2.9% for 2012.
Factoring in 2.9% growth from acquisitions and a drop of 2.3% from currency fluctuations, revenue was up by 3.5%, to $15.6 billion. Billings fell slightly to about $66 billion, due to the weakness of the pound.
Pre-tax profits for the world’s biggest communications group were up 8.3% to $1.6 billion, although – because taxation on profits was higher and sterling weaker than in 2011 – profits after tax fell by 2.4% to $1.34 billion.
All regions except North America were up, with the best growth seen in Asia, Latin America, Africa and the Middle East. In North America, like-for-like organic revenue fell by 0.1%, but revenue overall was up 4.7% to $5.3 billion.
Sorrell said at a results presentation this morning in London, “I would like to see a better performance from our media and creative agencies in the U.S. and we expect to see that in 2013.”
He blamed part of the group’s poor performance in the U.S. on the problems brought about by the country’s $16 trillion deficit, although he did single out Grey New York – and its appearance in this year’s Ad Age A- List – for credit.
Advertising and media grew in North America, but that was more than offset by a disappointing performance in consumer insight, public relations and public affairs, healthcare and specialist communications businesses. The group said in a statement that this was “indicative of continued pressure on discretionary client spending.”
Sorrell was speaking at WPP’s first results presentation since moving the parent company’s headquarters back this year to London from Ireland, where WPP relocated in 2008 for tax reasons. He said, “I don’t think we were firing on all cylinders in 2012 but we got to where we needed to get to, even if we got there ugly.”
WPP Group, whose agencies include Ogilvy & Mather, Grey, JWT, Ogilvy & Mather and MediaVest, acquired digital giant AKQA for $540 million last year, boosting the percentage of its revenues from digital by 1% to 30%. The aim is to increase digital to 35% to 40% of total revenues.
Sorrell also talked about “horizontality” and said that staffers work in 30 different teams, dedicated not just to larger clients like HSBC, J&J, Colgate, Vodafone, and BP but also on smaller ones that “We are trying to develop into larger ones in due course.” He said that “horizontality” accounted for almost a third of revenues.
Saying 2013 will be another “challenging year,” Sorrell forecast revenues will be up 3%. He was more optimistic about 2014, which he expects to be boosted by the World Cup in Brazil, the Sochi Winter Olympics in Russia and the U.S. mid-term elections.
In a statement, WPP said, “The first two events will continue to reposition Brazil and Latin America, and Russia and Central and Eastern Europe, in the world’s mind, just like the Beijing Olympics did for China and Asia and the World Cup did for Africa – and, possibly, London 2012 [Olympics] did for the U.K.” The U.K. posted 5.1% organic growth in the fourth quarter and 4% to $2.6 billion for the full year.
In Western Continental Europe, revenue grew by 0.1% to $3.7 billion. Across across the fast-growing markets of Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe, revenues were up 8.3% to $15.6 billion.
The group’s key objectives for 2014 are to improve operating margins, increase flexibility of cost base, develop the role of the parent company and improve WPP Group’s creative capabilities and reputation.
This story originally appeared in Advertising Age
