$43.6B U.S. agency revenue
Revenue at WPP last year increased 3.5% to more than 11 billion pounds, or $18.4 billion, the world's largest agency holding company said Thursday. Profit for the year grew 13.1% to more than 1 billion pounds, or nearly $1.7 billion. Pre-tax profits grew 18.7% to nearly $2.2 billion.
In North America, revenue from continuing operations increased 2.9% to $6.2 billion, contributing 34.2% to total group revenue, boosted by 5.4% growth in the fourth quarter. Advertising and media -- as well as digital in general and digital agency AKQA in particular -- were the drivers of revenue in the region.
Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe together accounted for 30% of group revenue, which grew 6.1% to $5.4 billion. Latin America showed the strongest growth, up 9% over the year, with Australia and New Zealand, Central and Eastern Europe and Africa also performing well.
"The faster-growth markets continue to be important," WPP CEO Martin Sorrell said at a results presentation in London. "Despite the fact that it now seems to be a vice to have a penetration of the faster-growth markets, whereas six or twelve months ago it was a virtue, our view remains that the faster growth markets are the opportunity, and the personal regret I would have over the last ten years it's that we didn't go faster, both in fast-growth markets and digital."
WPP's plan is to accelerate activities in the faster growth markets, increasing their revenue from around a third of the tiotal -- or 35% in the case of digital -- to 40-45% over the next five years.
In the U.K., like-for-like revenue grew 4.8% to $2.3 billion, contributing 12.3% of total group revenue, although growth slowed in the final quarter to 2.3%. Western Continental Europe, which makes up 23.5% of group revenue, saw revenue edge upward 0.5% to $4.3 billion.
WPP stands to lose its position as the largest agency holding company by revenue if the proposed merger between Publicis and Omnicom goes ahead this year as planned, but Mr. Sorrell spoke of a " significant pipeline of reasonably priced small and medium sized potential acquisitions" for WPP. Exceptions include Brazil, India and digital in the US, where, Mr. Sorrell said, "Prices seem to have got ahead of themselves because of pressures to catch up."
WPP said it completed 62 acquisitions and investments in 2013, of which 38 were in new markets -- of which, 32 in turn were new media. The company also completed 22 acquisitions or invenstments in data investment management.
Mr. Sorrell took the opportunity of the apparently last full-year results presentation with WPP still at No. 1 to stir up trouble about the formation of Publicis Omnicom Group, claiming that he is getting a good flow of information from "POG" staff who are moving to WPP.
Stirring the pot
Mr. Sorrell claimed that, at senior levels, three POG people are moving to WPP for every one who moves to POG from WPP. He made a distinction between "French POG" and "U.S. POG," referring to the Paris headquarters of Publicis and the New York base of Omnicom. "There's a big debate, to put it at its politest, between the U.S. and France as to who's going to run the company, who's going to be in the key positions, where they are going to be run from," Mr. Sorrell said. "And we know -- if the attrition rate is three to one in our favor, it means we are getting 300% more information."
The Publicis-Omnicom merger was originally expected to be completed as early as late last year or the first quarter of this year, but the anticipated closing has now slipped into the second half of 2014 because of what Publicis Chairman-CEO Maurice Levy recently described as the "longer process" in China.
Mr. Sorrell spoke of "POG's inability to close the regulation approvals" and insisted, "China is not as simple as is being projected. There are some signs that the Chinese regulatory authorities are having a very close look, as recently as last week, at the implications for the content industry in China, and indeed for the domestic advertising industry. So it's not a clear cut thing as people have been indicating."
"Whatever happens, it will be twelve months from the announcement to completion date -- or even longer -- and then beyond that you have an integration period of two to three years," Mr. Sorrell added. "We know from our own deals that the first year you need to find your way to the bathroom, the second year you need to put the strategy in, and the third you need to fine-tune it. That gives us some opportunities both on the client and the people side."
In response to an analyst question about the importance of size, Mr. Sorrell responded, "We have the scale to deal with new media companies -- relationships with Google, Facebook or whoever -- we don't lack scale. If you look at the differences in scale we are probably two-thirds to three-quarters the size of POG."
"The scale issues are very much further down the line," Mr. Sorrell said. "The scale issues are for Havas, which increasingly looks likely to be inside of Vivendi, or for Dentsu with Aegis which is a very narrow media merger. They could acquire IPG, which would give them more scale, but whether it would give them the assets to do what we're talking about, I don't know. "
For 2014, Mr. Sorrell expects a "slight" increase in client confidence, but still predicts that it will be a "demanding" year.