WPP plc (WPPGY - Analyst Report) reported solid full-year 2012 results with revenues of $16.43 billion (£10.37 billion) compared with $15.89 billion (£10.02 billion) in the previous year. The healthy year-over-year increase in revenue was attributable to strong performance in almost all the geographic segments except Western Continental Europe. Earnings for 2012 spiked 8.4% year over year to $1.16 per share (£0.734)
Revenues from North America climbed 4.7% year over year to $5.63 billion (£3.55 billion), buoyed by a relatively strong growth in the Advertising and Media Investment Management businesses, which more than offset declines in Consumer Insight, Public Relations and Public Affairs, and Branding & Identity, Healthcare and Specialist Communications businesses. Revenues in UK improved 7.7% to $2.03 billion (£1.28 billion), driven by a healthy rise in the advertising and media investment management business.
In Asia-Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe, revenues rose 5.7% year over year to $4.93 billion (£3.11 billion), driven largely by robust performance in the Middle East, Latin America, and the BRIC countries. However, revenues in Western Continental Europe declined 2.6% year over year to $3.87 billion (£2.44 billion), due to continued eurozone crisis.
By segments, Branding and Identity, Healthcare and Specialist Communications was the strongest performer in 2012 with an 8.0% year-over-year increase in revenues, followed by Public Relations & Public Affairs (3.6%), Advertising and Media Investment Management (2.8%), and Consumer Insight (0.1%). For full year 2012, EBITDA was up 7.0% to $2.79 billion (£1.76 billion), while operating profit increased 7.1% to $2.42 billion (£1.53 billion).
Free cash flow for full year 2012 aggregated to $1.73 billion (£1.094 billion), bulk of which was utilized for acquisitions and investments. WPP completed 65 acquisitions worldwide across all the business segments in the year. The company increased its half-yearly dividend payout by 15% to $0.31 per share (£0.1971), bringing its tally for the year to $0.45 (£0.2851). At year-end 2012, net debt was $4.47 billion (£2.82 billion) compared with $3.91 billion (£2.47 billion) in the year-ago period. Cash and short-term deposits at year-end 2012 were $3.09 billion (£1.95 billion).
Going forward, the company expects 2013 to be similar to 2012, albeit a little less challenging due to increased client confidence despite a turbulent macroeconomic environment and sovereign debt issues. WPP expects a like-for-like revenue and gross margin growth of around 3% and operating margin improvement of 0.5 margin points in 2013, with a primary focus of revenue and gross margin growth at a faster rate than the industry average. The company expects to achieve it by its market-leading position in the new markets, in new media, and in consumer insight.
At the same time, WPP expects to remain active on share buybacks and acquisition binge to extend its footprint as well as consolidate its leading position in existing markets. WPP should also remain wary of tough competition from other players in the market such as Clear Channel Outdoor Holdings Inc. (CCO - Snapshot Report), Publicis Groupe SA (PUBGY), and AirMedia Group Inc. (AMCN). WPP currently has a Zacks Rank #3 (Hold).
Note: 1 £ = $1.5847 (period average from Jan 1, 2012 to Dec 31, 2012)