WPP reports record margins and praises ‘strong’ performance from branding groups

WPP, which operates consultancies including Landor, Fitch and The Partners, made £1.3 billion profit in 2013 and has reported a record operating margin of 15.3 per cent.

WPP chief executive Sir Martin Sorrell
WPP chief executive Sir Martin Sorrell

The group’s 2013 preliminary results also show that billings are up by 4.1 per cent at over £46 billion, and revenues are up 6.2 per cent at over £11 billion.

WPP’s branding and identity, healthcare and specialist communications consultancies reported ‘strong’ revenue growth of 8.4 per cent.

Digital consultancy AKQA, which was acquired by WPP in 2012, was singled out for praise, with like-for-like revenue up over 20 per cent.

WPP chief executive Sir Martin Sorrell said that despite being a record year, 2013 was ‘still difficult’.

He says that this is due to them still lacking ‘necessary confidence’ and cited a number of ‘grey swans’ – potential financial risks which include the fragility of the Eurozone and the effect of possible Scottish independence on the UK economy.

Sorrell says, ‘[Clients] remain focused on a strategy of adding capacity and brand-building in both fast-growth geographic markets and functional markets, like digital, and containing or reducing capacity, perhaps with brand-building to maintain or increase market share, in the mature, slow-growth markets.’

He adds, ‘Efficient marketing companies always watch their costs closely. And when they encounter difficult times, they examine them with a rigour bordering on ruthlessness. Over the last five years or so, there cannot have been a single WPP client who failed to interrogate their advertising and promotional costs to within an inch of their lives in the hope of finding what they were hoping to find: savings that carried no financial penalty.

‘There have, of course, been some reductions in advertising spend, and in other forms of marketing communication. But for an area of expenditure whose return has been historically more difficult to evaluate than many others, marketing communications has shown itself to be remarkably resilient.

‘In part, this has been because more sophisticated methods of measurement have allowed companies to authorise marketing expenditure with a higher level of confidence; and in part because of the stark reality of competitive life.

‘There is a limit to how much you can cut before you begin to eat away at the very brand on whose future profit stream you depend. There is no such limit to the degree to which you can make a brand more desirable; or if there is, it is a limitation not of financial resources but of the human imagination.’

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