WPP Registers 13% Rise, Pins Future On Digital

Arrow-over-moneyWPP posted a 13% gain in third-quarter revenue to $3.951 billion, the UK advertising and marketing services holding company reported today. But organic revenue growth (ORG), which excludes acquisitions, divestitures and currency fluctuations, was up just 4.7% -- down from the first two quarters and lower than the third-quarter results reported recently by competitors.

Havas said earlier this week its third-quarter ORG was up 7.3%, a three-year high, and an improvement over the 5.6% growth achieved for the first half of the year. Publicis recently reported Q3 ORG of 6.4%, while Omnicom said it posted a 7.2% gain in the metric, viewed as a key performance indicator by the industry.  

For the first nine months of 2011, WPP reported revenues of $11.573 billion, up an unadjusted 13% with ORG of 5.6%. By comparison, nine-month ORG growth for Havas, Publicis and Omnicom was 6.1%, 6.9% and 6.5%, respectively.



WPP said it had tougher comparisons for ORG, given its strong performance over the last two years. It also said its performance was impacted by the “relative weakness” of the British pound against other currencies.

At this point, WPP estimates that its full-year organic revenue growth will be 5%, subject to further review in the coming weeks.

“Although this implies a reduction in the top line [revenue] growth rate in the fourth quarter ... revenue and gross margin growth remains strong in line with the rest of the first three quarters,” the company stated. Gross margin improvement, it said, was a reflection of the company’s competent cost-containment efforts.

WPP stated that by the end of the year, forecasters will probably reduce ad-spending estimates for 2012 to around 3% globally from the current 3.5%. But factoring in special events like the 2012 Olympics in London, the U.S. presidential campaign spending and European Football Championships, the total will likely be lifted to 4%.

“Advertising as a proportion of GDP remains at depressed levels in mature markets post-Lehman, and the faster-growth markets remain under-branded and under-advertised.” WPP stated.

That said, the company added that “nervous, risk-averse clients not only continue to invest in brand in slow growth, predominantly Western markets, but also invest in brand behind new capacity in faster-growth markets -- a positive double whammy for our industry.”

Bottom line -- WPP predicts that 2012 “will not be the really challenging year,” although the following year will be. “The rubber is really likely to meet the road after the U.S. presidential election in late 2012 and into 2013, when a newly elected American president will finally have to deal with the U.S. deficit.”

By communications services sector, the company said that revenue growth “strengthened” in most areas on a constant currency basis during Q3 except for consumer insight, “within which custom research remains the drag, particularly in mature markets.” Media investment management was the biggest gainer by percentage -- up 21% -- while the consumer insights business was up the least, less than 1%.

Per geographic region, revenues in the Asia-Pacific markets, Latin America, Africa and the Middle East continued to grow at faster rates, while growth in the U.S. fell in the third quarter to 4.6%, compared to 6.1% in Q2. Western Europe continued as the slowest-growth region in the third quarter, the company said.

Digital and interactive revenues accounted for almost 29% of total revenues, up 0.7 percentage points versus the third quarter of 2010. The company said its goal is for digital to account for between 35% and 40% of revenues in the next three to four years.  

Net new business billings won in the first nine months of 2011 were $4.211 billion, in line with the same period last year. Wins so far this year include S.C. Johnson and Comcast’s NBC Universal. 

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