WPP considers raising guidance after strong start to 2012

Highly acquisitive media giant WPP could be raising its full-year forecasts after an impressive start to 2012 with like-for-like revenue growth coming in ahead of expectations in the first quarter.

Group revenue in the three months to March 31st totalled £2,392m, up 7.6% on last year's £2,223m. The group said the pattern of revenue growth in 2012 has started similarly to the full year of 2011 with continuing improvement across all sectors and geographies.

Emerging markets were the best performers in the first quarter with revenues from Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe increasing by a combined 11.2%. These markets now account for 28.5% of group revenue, up from 27.6% the year before.

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While some areas of Western Europe continue to be affected by the Eurozone debt crisis (Greece, Portugal and Spain), the company still saw revenues rise 5.8%.

"We are in the process of reviewing our quarter one revised forecasts, but early indications are that revenues in the balance of the year will grow slightly better than budget, with full year like-for-like revenue growth of over 4% and a slightly stronger second half," the group said.

Meanwhile, the group gained a total of £1,159m in net new business wins (including all losses) in the first quarter, compared with £841m the year before.

The group, led by frontman Sir Martin Worrell, completed 14 transactions in the first quarter: 10 acquisitions/investments in new markets; two in consumer insight; and two driven by individual client or agency needs.

Net debt at the end of the period totalled £2,816m, up from £2,525m at the end of 2011 due to the increased spend on acquisitions and higher dividends.

Cautious outlook for 2013

The group says that the pattern of 2012 looks very similar to 2010 and 2011 (a record year for WPP), with forecasts of worldwide real economic growth around the 2.5-3.5% level, or including inflation of 2%, nominal growth of 4.5-5.5%.

"Advertising as a proportion of 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."

However, the group cautioned that "one of the clouds on the horizon" may be 2013 as there will be no 'maxi- or mini-quadrennial events that year' (in 2012, there is UEFA Football Championships, the Olympics and US Presidential Elections).

"It now seems more likely that President Obama will be re-elected and will have to confront the intimidating US budget deficit, whilst dealing with a Republican-controlled House of Representatives and/or Senate.Legislative gridlock may continue at a time when kicking the can down the road may no longer be viable and bond markets may strike."

BC