Advertising giant WPP topped market expectations with its results for 2012 but labelled its performance as 'ugly' due to the varying levels of growth throughout the year.
The company, led by media guru Sir Martin Sorrell, reported full-year revenues of £10.37bn, up 3.5% from 2011 and ahead of the £10.3bn consensus estimate.
However, changes in exchange rates - particularly the strength of the pound against the euro - reduced revenue growth by 2.3 percentage points. At constant exchange rates (CER), revenue rose 5.8%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Like-for-like (LFL) sales growth was 2.9%, ahead of the 2.6% increase expected by analysts.
Billings were down slightly at £44.4bn due to the strength of the pound. CER billings rose 1.6%.
Profit before interest and tax (PBIT) increased by 7.1% from £1.43bn to £1.53bn. Gross margins rose 0.6 margin points to 16.1%, the highest reported level in the industry, WPP said.
The company paid a full-year dividend of 28.51p per share for 2012, up 15.9% year-on-year.
Meanwhile, net debt stood at £2.82bn at the end of the year, up from £2.47bn at the end of 2011 due to increased spending on acquisitions and higher dividends.
Ugly yearThe company said: "2012, the group's twenty seventh year, was like the previous year, a record year, but it felt very different. We reached our targets, but we got there ugly."
It described how LFL revenue growth started strongly but tailed off during the year as clients lacked the "necessary confidence" given the "known unknowns". These included the Eurozone crisis, Middle-Eastern conflict, Chinese hard/soft landing, US deficit and Britain's EU membership.
It admitted that it did not make cost adjustments quickly enough to counter increased staff investment until quarters three and four with the LFL number of employees slightly down by the end of the year.
"So all in all, whilst clients may be more confident than they were in September 2008 pre-Lehman, with stronger balance sheets, these increased levels of uncertainty combinedwith strengthened corporate governance scrutiny make them unwilling to take further risks."
OutlookWPP said that revenues in January were ahead of budget, up 2.0% on a LFL basis with all regions except North America showing growth.
"The pattern for 2013 looks very similar to 2012, perhaps with increased client confidence balancing the lack of maxi- or mini-quadrennial events," the company said.
While forecasts for global economic growth have been reduced recently - "and may be reduced further in due course" - the firm expects advertising as a proportion of gross domestic product (GDP) should at least remain constant.
"Although it is still at relatively depressed historical levels, particularly in mature markets, post-Lehman and advertising should grow at least at a similar rate as GDP."
