Ireland-based advertising titan WPP Group plc. (WPPGY) reported its interim results for the first half of 2011 on August 24. Diluted pro forma earnings in the reported period were £0.228 ($1.84 per ADR), up 19.4% (22.8% in constant currency) from £0.191 ($1.46 per ADR) in the year-ago period.
Revenue
The company’s reported revenue of £4,713 million ($7,616.4 million) was up 6.1% compared with the year-ago period, and increased 8.1% on a constant currency basis due to the strength in pound sterling versus the US dollar and Euro.
Excluding the impact of acquisitions and currency fluctuations, revenue was up 6.1% in the reported period.
From a geographical perspective (on a constant currency basis), WPP Group experienced a noticeable recovery in North America with revenue of £1,677.8 million ($2,711.4 million), reflecting an increase of 8.3% year over year. Revenue in the United Kingdom grew 7.1% to £565.6 million ($914.0 million), while revenue from the Western Continental Europe increased 4.2% to £1,135.8 million ($1,835.5 million); while in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, the company’s revenue soared 12.0% to £1,333.8 million ($2,155.5 million).
Revenue from Public Relations and Public Affairs grew 5.8% year over year on a constant currency basis to £428.9 million ($693.1 million). Branding & Identity, Healthcare and Specialist Communications witnessed a revenue increase of 8.5% to £1,183.0 million ($1,911.8 million), while revenue from advertising and media investment management increased 12.1% to £1,927.6 million ($3,115.1 million) and revenue of £1,173.5 million ($1,896.4 million) from Consumer Insight soared 2.6%.
Billings in the period amounted to £21,392 million ($34,570.1 million), up 5.2% compared with a year-ago period. Net new business billings of £1,201 million ($1,922 million) was won during the first half 2011.
Margins
Gross margin was up 70 basis points in the quarter to 11.9%. EBITDA increased 10.5% to £619.5 million ($1,001.1 million) and margin was 13.1%. Operating profit increased 13.7% to £517.9 million ($836.9 million) with a margin of 11.0% versus 10.3% in the year-ago period.
Balance Sheet/Cash Flow
Exiting the first half of 2011, WPP Group’s net debt was £2,879 million ($4,612.3 million), down 5.0% from the year-ago period. Capital spending in the period was £107 million ($172.9 million), up 33.9% from the year-ago period.
The company’s board of directors declared its first interim dividend of £0.0746; payable on November 14, to shareholders of record as of October 14, 2010. The dividend rate represents an increase of 25% from the previous dividend rate of £0.0597.
We currently maintain an Outperform recommendation on the company.
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