WPPGY's FY11 Preliminary Results

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Ireland-based advertising titan WPP Group plc. (WPPGY) reported its preliminary financial results for the fiscal year 2011,on March 1, 2012. Diluted pro forma earnings per share in the reported period were £0.677 ($5.45 per ADR), up 19.4% (20.3% in constant currency) year over year. Results were above the Zacks Consensus Estimate of $5.10.

Revenue

The company’s reported revenue of £10,022 million ($16,135 million) was up 7.4% compared with the year-ago period and up 8.4% on a constant currency basis due to the strength in pound sterling versus the US dollar and Euro.

From a geographical perspective (on a constant currency basis), WPP Group experienced a noticeable recovery in North America with revenue of £3,388 million ($5,455 million), reflecting an increase of 6.3% year over year. Revenue in the United Kingdom grew 8.8% to £1,184 million ($1,906 million), while revenue from the Western Continental Europe increased 6.3% to £2,505 million ($4,033 million) and from the Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe soared 12.6% to £2,945 million ($4,741 million).

Revenue from Public Relations and Public Affairs grew 6.2% year over year on a constant currency basis to £886 million ($1,426 million). Branding & identity, healthcare and specialist communications witnessed a revenue increase of 10.1% to £2,521 million ($4,059 million), while revenue from advertising and media investment management increased 12.2% to £4,157 million ($6,693 million) and revenue of £2,458 million ($3,957 million) from consumer insight soared 1.7%.

Billings in the fiscal year 2011 amounted to £44,792 million ($72,115 million), up 4.9% year over year. Net new business billings were £3,225 million ($5,192 million) in 2011.

Margins

Gross margin was up 50 basis points in the year 2011 to 92.2%. EBITDA increased 14.0% to £1,640 million ($2,640 million) and margin was 16.4%. Operating profit increased 16.3% to £1,429 million ($2,300 million) with a margin of 14.3% versus 13.2% in the year-ago period.

Balance Sheet/Cash Flow

Exiting the fiscal year 2011, WPP Group’s cash and short-term deposits were roughly £2.5 billion ($3.9 billion), up 22.2% year over year. Net cash flow from operating activities in 2011 was £665 million ($1,071 million) while capital spending was roughly £216 million ($348 million).

The company’s board of directors declared a second interim dividend of £0.1714; payable on July 9, 2012, to shareholders of record as of June 8, 2012. The second dividend combined with the first amounted to total dividend of £0.2460 for 2011.

Dividends paid to equity shareholders came to £218 million ($351 million). 

We currently maintain a Neutral recommendation on the company.

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