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WPP results: Four 'grey swans' fail to trouble Sir Martin Sorrell


By Tony Walford, Founder

March 1, 2013 | 3 min read

The Drum's resident marketing finance expert, Green Square partner Tony Walford, gets to grips with today's financial results from WPP, which posted a record pre-tax profit of £1.3bn for 2012.

WPP's Sir Martin Sorrell

This time last year WPP was predicting "around 4 per cent" Revenue growth for 2012, having just announced that Revenues and Profit Before Tax were over £10bn and £1bn for the first time. The marketing services group’s share price stood at 828p.

But at the beginning of the third quarter of 2012 four "grey swans" flew into town.

With a nod to Nassim Nicholas Taleb's “black swan” theory, which refers to unexpected events of large magnitude and consequence, WPP CEO Sir Martin Sorrell commented that "There seem to be four grey swans.... Grey because we know about them. By definition, we do not know the black ones."

The most troubling of Sir Martin’s grey foursome was the wobbly US economy, closely followed by the eurozone crisis, unrest in the Middle East and a slowdown in the BRIC economies, particularly China. Revenue growth predictions were pulled down, for the second time in two months, to 2.5 per cent to 3 per cent.

This morning we got to hear just how grey 2012 was for WPP. The answer was, with the exception of PR and public affairs, actually not grey at all. The brightest spots – perhaps helped by big sporting events and the US elections – were “traditional” advertising and media planning and buying, which were not only up 13 per cent year-on-year, but also offered a tasty 17.7 per cent profit margin.

Results, as reported elsewhere in The Drum, turned out to be relatively bright and above analysts’ expectations, with revenues at £10.4 billion and PBT up 8 per cent at £1.1 billion. At the time of writing the share price stood at 1,055p - a 27 per cent increase on this day last year; at one point early this morning it was trading above 1,060p.

And the outlook was upbeat with January's revenue being ahead of budget, although 2013 is expected to be another tough year with no Olympics, elections or jubilees, and large flocks of dull-coloured birds still circling Europe and North America.

Sir Martin even came up with a new grey swan this morning – the decision to launch a referendum on Britain’s EU membership, which he said may adversely affect clients’ confidence going forward. But for now, the investors will be happier than they were last year – especially as their dividends were up to 28.5p per share.


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