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WPP’s Sorrell reports a mixed bag for 2014 as data investments curb sales growth

0186b7b83fffc902b7825222b216d7b8416d7c551WPP, the world’s biggest advertising group headed by Sir Martin Sorrell (left), has reported a mixed bag for 2014 in its annual results.

Profit exceeded £1.5bn for the first time (£1.51bn, up 3.7 per cent) but like-for-like sales growth (organic growth) was just 3.3 per cent, falling off in the second half of the year. WPP says this increased somewhat in January to 3.9 per cent.

This figure compares with organic growth of 5.7 per cent in 2014 from biggest rival Omnicom and just two per cent from Publicis Groupe, which admitted a ‘patchy’ performance which it blamed on the distractions of the aborted $35bn merger with Omnicom.

WPP blamed the rather disappointing 3.3 per cent growth rate on the “increasing scale of digital media purchases in media investment management and data investment management,” which suggests these big investments have yet to deliver.

Overall WPP reported billings of £46.19bn and revenue of £11.5bn.

How good these numbers are depends on how forgiving you are of currency fluctuations. WPP is claiming a record year if you allow for six to seven per cent “currency headwinds.” But these are a fact of life in any international business. WPP and its big US rivals Omnicom and Interpublic face at least another year of this as investors buy pounds and dollars in a dangerous world. Publicis, on the other hand, should benefit from the weak euro.

As for where the money’s coming from, it seems to be good old advertising and media buying; much of it in so-called mature markets like the US and UK.

The more you look at WPP the more you see two businesses running in parallel: its traditional (and vast) marcoms business and data, where it’s up against the tech giants plus the innumerable Silicon Valley start-ups claiming to offer clients a better data mousetrap.

It also needs to convince its big clients and others that they can trust WPP’s data and allow the company to trade media on their behalf. So far the jury is out on this one, to put it mildly.

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2 comments

  1. As I say on Adscam… And now the tasty bit… The company has outlined a “dual focus” for 2015: 1) Maintaining the parent company’s creative position, new business, and hunting for “horizontally and strategically targeted acquisitions.” 2) Placing a continued emphasis on balancing revenue growth with headcount increases and improving the staff costs to net sales ratio in order to enhance operating margins. Which obviously means even more Enfatico’s and even more layoffs. David continues to spin under the Chateau Touffou turf!
    Cheers/George

  2. Here’s Bob Willott of Marketing Services Financial Intelligence’s take on it:

    “Finance cost savings and disposal gains obscure WPP’s standstill. A 35% cut in finance costs and gains of £186 million on disposal of assets enabled WPP to report a 13.8% rise in post-tax profit in 2014. Without those benefits, the group would have reported a fall in post-tax profit of about 5.5%.”

    It’s amazing how most of the hacks write what they’re supposed to write.

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