WPPGY's 1H12 Interim Results - Analyst Blog

Ireland-based advertising titan WPP Group plc (WPPGY) reported its interim results for the first half of 2012, (ended June 30, 2012)  on August 30. Diluted pro forma earnings per share in the reported period were £0.258 ($2.03 per ADR), up 13.2% (18.6% in constant currency) from £0.228 ($1.84 per ADR) in the year-ago period.

Revenue

The company’s reported revenue of £4,972 million ($7,841 million) was up 5.5% compared with the year-ago period and up 6.8% on a constant currency basis due to the strength in pound sterling versus the US dollar and Euro.

The 5.5% year over year growth comprises a 3.6% organic growth, 3.2% growth from acquisitions and a negative 1.3% from currency translation.

From a geographical perspective (on a constant currency basis), WPP Group experienced a noticeable recovery in North America with revenue of £1,748 million ($2,756.7 million), reflecting an increase of 3.9% year over year. Revenue in the United Kingdom grew 5.6% to £591 million ($932.0 million), while revenue from the Western Continental Europe increased 6.6% to £1,187 million ($1,871.9 million) and from Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe revenue soared 11.1% to £1,446 million ($2,280.4 million).

Revenue from Public Relations and Public Affairs grew 6.3% year over year on a constant currency basis to £459 million ($723.9 million). Branding & identity, healthcare and specialist communications witnessed a revenue increase of 9.1% to £1,278 million ($2,015.5 million), while revenue from advertising and media investment management increased 7.6% to £2,044 million ($3,223.5 million) while revenue from consumer insight soared 3.2% to £1,191 million ($1,878.3 million).

Billings in the period amounted to £21,651 million ($34,144.5 million), up 1.2% compared with a year-ago period. Net new business billings of £2,475 million ($3,903.2 million) were won during the first half of 2012.

Margins

Gross profits increased 6.1% on a constant currency basis but margins plummeted 50 basis points to 91.9% in the reported period. EBITDA increased 13.0% to £682 million ($1,075.5 million) and margins were 13.7%. Operating profit increased 13.5% to £570 million ($898.9 million) with margins of 13.5% versus 11.0% in the year-ago period.

Balance Sheet/Cash Flow

Exiting the first half of 2012, WPP Group’s net debt was £2,861 million ($4,468.2 million), down 0.6% from the year-ago period. Capital spending in the period was £116 million ($182.9 million), up 8.4% from the year-ago period.        

The company’s Board of Directors declared its first interim dividend of £0.0880 to be payable on November 12, to shareholders of record as of October 12, 2012. The dividend rate represents an increase of 18% from the previous dividend rate. Dividend payout stands at 34%, indicating gradual progress towards the company’s aim of achieving a 40% payout ratio.
 
The current Zacks Consensus EPS Estimates for WPP plc are $5.56 and $6.27 for years 2012 and 2013, respectively. The estimates represent year-over-year growth of 3.4% for 2012 and 12.7% for 2013.

We currently maintain a Neutral recommendation on the company.

 
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