WPP cashes in on BRICs as profits rise 19%

2011 was a good year for the world's largest advertising firm, and chairman Sir Martin Sorrell reckons 2012 is already looking better.

by Emma Haslett
Last Updated: 27 Apr 2012
They say that during a downturn, the advertising provides an indicator of how the economy as a whole will far. So going by results posted by WPP, the world’s largest advertising company, 2011 was a marvellous year. Pre-tax profits at the firm, which owns the likes of JWT, Ogilvy and Burson-Marsteller, rose by 19% to £1.2bn in the 12 months to the end of December. And Sir Martin Sorrell, WPP’s ever-optimistic founder and CEO, reckons with all the major sporting events about this year, it’s going to be even better.

Admittedly, while like-for-like revenues came in above expectations – at 5.3%, rather than 5%, that’s because the company revised its 2011 sales forecast down from 5.9% in October. So not an entirely rosy picture. But other headline figures more than made up for that: for the first time since the beginning of the downturn, the firm’s operating margin hit 14.3%, while billings rose by 5% to almost £45bn. No wonder, then, that shares rose by 3% to 829p this morning.

As with most British success stories at the moment, WPP’s accomplishments were driven by emerging markets, where growth hit 12%. Latin America was particularly strong, with constant currency revenues rising by more than 14%, while the BRIC countries (Brazil, Russia, India, China) accounted for almost $2bn of revenue. Not bad.

The sheer size of the company is pretty staggering: not only did it recruit 5,000 new employees last year, pushing its total up to 113,000, but it hoovered up 30 companies. And this year looks like it won’t be any different: it’s already made plans to acquire 10 firms.

And the good news is that Sorrell reckons 2012 is gearing up to be a vintage year as WPP’s businesses take advantage of the Olympics, the UEFA Football Championship and the advertising cash cow that is the US presidential elections. But he added that he’ll be keeping one eye on what’s going on in the eurozone. ‘I think we will muddle through, but there is no room for error in western Europe at the moment,’ he said this morning.

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