WPPGY's FY11 Preliminary Results

Ireland-based advertising titan WPP Group plc. (WPPGY - Analyst Report) reported its preliminary financial results for the fiscal year 2011,on March 1, 2012. Diluted pro forma earnings per share in the reported period were £0.677 ($5.45 per ADR), up 19.4% (20.3% in constant currency) year over year. Results were above the Zacks Consensus Estimate of $5.10.

Revenue

The company’s reported revenue of £10,022 million ($16,135 million) was up 7.4% compared with the year-ago period and up 8.4% on a constant currency basis due to the strength in pound sterling versus the US dollar and Euro.

From a geographical perspective (on a constant currency basis), WPP Group experienced a noticeable recovery in North America with revenue of £3,388 million ($5,455 million), reflecting an increase of 6.3% year over year. Revenue in the United Kingdom grew 8.8% to £1,184 million ($1,906 million), while revenue from the Western Continental Europe increased 6.3% to £2,505 million ($4,033 million) and from the Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe soared 12.6% to £2,945 million ($4,741 million).

Revenue from Public Relations and Public Affairs grew 6.2% year over year on a constant currency basis to £886 million ($1,426 million). Branding & identity, healthcare and specialist communications witnessed a revenue increase of 10.1% to £2,521 million ($4,059 million), while revenue from advertising and media investment management increased 12.2% to £4,157 million ($6,693 million) and revenue of £2,458 million ($3,957 million) from consumer insight soared 1.7%.

Billings in the fiscal year 2011 amounted to £44,792 million ($72,115 million), up 4.9% year over year. Net new business billings were £3,225 million ($5,192 million) in 2011.

Margins

Gross margin was up 50 basis points in the year 2011 to 92.2%. EBITDA increased 14.0% to £1,640 million ($2,640 million) and margin was 16.4%. Operating profit increased 16.3% to £1,429 million ($2,300 million) with a margin of 14.3% versus 13.2% in the year-ago period.

Balance Sheet/Cash Flow

Exiting the fiscal year 2011, WPP Group’s cash and short-term deposits were roughly £2.5 billion ($3.9 billion), up 22.2% year over year. Net cash flow from operating activities in 2011 was £665 million ($1,071 million) while capital spending was roughly £216 million ($348 million).

The company’s board of directors declared a second interim dividend of £0.1714; payable on July 9, 2012, to shareholders of record as of June 8, 2012. The second dividend combined with the first amounted to total dividend of £0.2460 for 2011.

Dividends paid to equity shareholders came to £218 million ($351 million).

We currently maintain a Neutral recommendation on the company.