WPP Posts $1.4 Billion Profit for 2010

Growth Driven by China, Rebound in U.S.

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WPP's profit in 2010 rose almost a third to $1.4 billion, driven by a strong rebound in North America, as well as continuing growth in China.

Revenue -- stripping out the effect of acquisitions -- grew 5.3%, and 8.5% in the last quarter of the year, marking WPP's best quarterly sales growth in a decade. Omnicom recently reported 10% revenue growth in the fourth quarter of 2010, while Publicis Groupe saw a 12.5% rise.

A statement from WPP, whose agencies include Ogilvy & Mather, JWT, Y&R and Mindshare, said, "The United States behaved more like a fast-growing, or as others insist on calling them, an emerging market, growing at 7.6% against GDP growth of around 3%."

North American revenue growth was up 7.6% for the year, and 9.8% in the final quarter. The region accounted for 35% of group revenue and 39.4% of profit. WPP attributed this partly to the "dead-cat bounce" created by advertising's biggest slump since the mid 70s, but also to the significant increase in activity in sectors -- like automobiles, financial services and retail -- that had been heavily cut.

Lower prices also helped to make traditional media more attractive to marketers, who chose to invest more in their brands in an attempt to maintain or increase market share, as a safer alternative to increasing capacity and fixed expenses. Billings for 2010 were up 12% to $69 billion.

Finally, changes to "headcount and staff costs" made at the end of 2009 have helped keep the balance sheet healthy, although the group stressed that it had begun to invest more in talent given the substantial increase in revenue.

"The most surprising feature of 2010 was the relatively strong performance of mature geographical markets, such as the United States and Germany, and traditional media, like free-to-air television," WPP said in a statement.

Around the world, the U.K. reported growth of 5.9%, compared to the rest of Western Europe, which was up 1.9%. Revenue in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe grew 5.6%.

WPP was optimistic for the year ahead. Revenue in January was up 8%, and growth is expected to continue at around 5% across the year. Meanwhile, net debt averaged $3.05 billion in 2010, down $347 million from $3.4 billion in 2009.

The prospects for 2012 also look healthy, buoyed by the prospect of the U.S. presidential election, the London Olympics and the UEFA European Football Championships, which WPP predicted should add 1% to 2% to global advertising growth.

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