LONDON (Alliance News) - Media buying giant WPP PLC Monday raised its total dividend by 12% as it met market expectations for its 2014 results, and forecast similar growth for 2015, guiding net sales growth of over 3%.
The company proposed a final dividend of 26.58 pence, taking its total dividend to 38.20 pence, up 12% from 34.21 pence a year before. WPP said it had reached its targeted dividend pay-out ratio of 45% a year ahead of schedule. As a result, it will shortly be considering whether this pay-out ratio target should be raised further.
WPP posted a headline profit before interest and tax of GBP1.68 billion for 2014, up from GBP1.66 billion in 2013.
According to consensus forecasts provided by the company, analysts expected WPP to post a headline profit before tax and interest of GBP1.67 billion, and earnings per share of 82.2 pence.
WPP's headline profit before interest and tax figure excludes amortisation, impairment, gains on disposals or re-measurement of equity interests, write-downs, restructuring costs of shares of exceptional losses of associates.
It reported pretax profit of GBP1.45 billion, up from GBP1.30 billion a year before, on revenue of GBP11.53 billion, up 4.6% from GBP11.02 billion.
Revenue was held back by the strength of the pound against the dollar and euro in its first three quarters, which was partly offset by weakness in sterling against the dollar, yen, Australian dollar and Indian rupee in the final quarter.
On a constant currency basis, revenue rose 11.3%, WPP said.
The company said revenue growth sped up at constant currency in the fourth quarter in North America and the UK, up 10.5% in North America compared to the 9.8% growth it saw in its first nine months, and up 15.0% in the UK compared to 14.9% growth in the third quarter.
Western Continental Europe performed better than expected, "contrary to the macro-economic picture", it said, seeing improvement in the fourth quarter partly due to acquisitions. Within this region Germany, Italy, the Netherlands and Turkey all showed good growth, although Austria, Belgium, France, Spain and Switzerland were tougher markets, WPP said.
The fastest growth in the fourth quarter came from the Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe regions, up 16.0% at constant currency.
Latin America softened somewhat in the second half as parts of WPP's businesses in Brazil and Chile slowed, WPP said.
WPP made 65 acquisitions and investments during the year, of which 36 were in new markets, and 53 were in the quantitative and digital markets.
WPP said its revenue in January was up 6.7%, with net sales up 3.9%, as it saw a strong start to the year. It said all of its regions except Latin America were up, with Asia Pacific, Africa and the Middle East seeing above average net sales growth.
It said its budgets for 2015 have been prepared on a cautious basis, and show like-for-like revenue and net sales growth of over 3%, and a target net sales margin improvement of 0.3 point excluding the impact of currency.
In the longer term the company is targeting above-industry revenue growth, improvement in its staff costs to net sales margin ratio, expansion of its operating margin by 0.3 margin points or more on a constant currency basis, and headlined diluted earnings per share growth of 10-15% per year.
WPP cited a few 'known unknowns', or so-called 'grey swans' lingering over 2014, citing continuing fragility in the Eurozone, a "litany of woes" in the Middle East, a slowdown in emerging markets, the US's deficit and debt and the impact of Federal Reserve easing and tapering, and uncertainty surrounding the outcome of the UK's upcoming general election.
Grey swans are unlikely events, as opposed to black swans, which are wholly unpredictable events, and are a reference to the book by Nassim Nicholas Taleb.
WPP said that the "pattern" for 2015 looks similar to 2014, although without any events such as the World Cup to boost marketing investments.
"All in all, 2015 looks to be another demanding year, although a weaker UK pound against a stronger US dollar would provide a modest currency tailwind and positive impact on profits, unlike the fierce currency headwind in 2014," the company said in a statement.
Liberum reiterated its Hold rating for WPP, saying whilst it sees WPP as "best positioned" amongst the agency groups it remains cautious in the sector in general as advertising technology puts the traditionally high margins of the media space at risk.
"While we do not think the agencies will be disintermediated, we do think the competitive environment will be less favourable than in the past," Liberum said.
WPP's results come in ahead of Numis' estimates, and Numis reiterates its Add rating, viewing WPP as a "core holding in the sector". Numis raised its target price to 1,725 pence from 1,485.00 pence.
Shares in WPP are trading up 0.3% at 1,545.00 pence Monday morning.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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