Record WPP financial results fuel confidence in sustainable recovery

Chief executive Sir Martin Sorrell was in feisty form as he reported the best set of financial performance figures in years at the world’s largest marketing services company by revenue.

The WPP growth engine is, apparently, firing on all six cylinders: billings, revenue, earnings per share, pre-tax profit, organic growth (or like-for-like as it is often known) and operating margins all showed evidence of substantial improvement. Perhaps the key highlights were pre-tax profit, up 19%, at over £1bn for the first time; and strong evidence of Quarter 4 growth, indicating the spurt is not some first-half fluke that will fade in the current year.

Doubtless WPP euphoria will subside once media focus moves on to the inevitable corollary of record financial performance – an equally record performance bonus handed to its chief executive. But, hey, that’s for then.

For now WPP’s results form a welcome bookend to a series of exceptionally good annual numbers from all the global marketing services giants – Interpublic’s particularly so – suggesting an ad recovery is on the way.

But is it sustainable? Sorrell  – revered as something of an economic sage these days – has indicated that WPP January figures are strong – even in the UK, on which he has been bearish for some time. And he has wheeled out his favourite prop on these occasions, the so-called Quadrennial Effect, to underline his contention that growth will be sustained throughout the year. Put into simple English, that means macro-events which occur every four years – such as the Olympics, the UEFA football championship and the US presidential elections – will stimulate global growth by at least 1%.

Nor was he pessimistic about what, to most of us, might seem a blot on the economic landscape. A number of the world’s biggest brand owners, among them Procter & Gamble, Coca-Cola and PepsiCo, have recently announced cuts to their workforce. Sorrell chooses to take comfort from the fact that all of these companies have guaranteed existing or even increased levels of marketing expenditure.

The Sage of Farm Street is less optimistic about 2013, though – foreseeing gridlock on Capitol Hill, with a re-elected Obama beleaguered by hostile Republicans in Congress. We’ll see.

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