Strong advertising growth fuels WPP results

Arvind Hickman
By Arvind Hickman | 7 March 2016
WPP CEO Sir Martin Sorrell.

Strong growth in media buying and advertising has helped the world's largest communications group post solid financial results for the year end 2015.

WPP Group, which has GroupM and creative shops such as J. Walter Thompson, Ogilvy & Mather, Y&R and Grey under its umbrella, increased revenue by 6.1% to £12.2 billion ($23 billion). 

This includes net profit growth of 8.1% to £1.2 billion and a 3.1% increase in global billings to £47.6 billion.

In 2015, WPP increased billings by £5.5 billion - the highest in the market - and GroupM topped the RECMA 'media tsunamis' net new business and retention tables.

WPP's media buying and advertising arm, which contributes 45% of total revenue, grew by 8.2% to £5.5 billion. Data investment management reported flat growth to £2.4 billion and branding, identity, healthcare and specialist communications had 7.7% growth to £3.3 billion.

“Despite this strong performance, the always on, Don Draperish general industry optimism seems misplaced,” WPP commentary on the results says.

“To survive in the advertising and marketing services sector, you have to remain positive, indeed optimistic, seeing the glass half-full and industry and company reports generally continue, understandably, to reflect that attitude.

“However, general client behaviour does not reflect that state of mind, as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth.”

The analysis warns of grey swans, including the US Federal Reserve pre-Christmas tightening, weakness of the Chinese economy and uncertainty over Britain's vote on exiting the EU.

Buoying the market are the Rio Olympic Games, Euro 2016 football tournament and the US presidential election.

Although WPP's results stack up favourably against many of its clients, other networks have seen bigger increases, albeit on the back of a consolidating media and advertising market.

As a comparison, Publicis Group increased its revenue by 32% to $15.3 billion and Dentsu Group grew revenue 12.8% to $10.2 billion for the year end 2015.

WPP has also been busy expanding in 2015 with 52 acquisitions - 18 of these are in new markets. The group now employs around 190,000 full-time equivalent staff in 112 countries and serves 352 of the Fortune Global 500 companies.

In Australia, WPP is planning to acquire STW Group, with a shareholder vote to seal the move only weeks. The results of this tie-up will feature in WPP's 2016 results.

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