WPP gives cautious outlook despite record year with 26 per cent surge in annual profits

 
Rebecca Smith
Martin Sorrell's firm made seven acquisitions and investments in the first two months of 2017
Martin Sorrell's firm made seven acquisitions and investments in the first two months of 2017 (Source: Getty)

The world's largest advertising group has said "tepid economic growth" is likely to cause a tricky 2017, despite reporting a record 2016 with profit before tax up 26.7 per cent.

It's planning conservatively for the year ahead, after noting a slower fourth quarter in 2016 and slower start to 2017. Shares fell 6.02 per cent in early trading to 1,796p.

The figures

WPP posted earnings for the year largely in line with analyst expectations. Revenue rose 17.6 per cent to £14.4bn, an increase of 12.5 per cent on the year before at constant currency rates.

Profit before tax shot up 26.7 per cent to £1.9bn. Like-for-like net sales growth was 3.1 per cent.

Headline diluted earnings per share were 113.2p - up 20.9 per cent.

It announced a final ordinary dividend of 37.05p, up 28.7 per cent and full-year dividends of 56.60p per share, up 26.7 per cent.

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Why it's interesting

Despite the record revenues, Sir Martin Sorrell's firm has struck a note of caution, after experiencing a "relatively slow" start to 2017. January like-for-like revenue was up 1.5 per cent and net sales up 1.2 per cent.

WPP said given "continued tepid growth" as well as recent weaker comparative net new business trends, the budgets for 2017 on a like-for-like basis, have been set "conservatively" at around two per cent for both revenue and net sales.

What the company said

The firm said:

2016, the group's thirty-first year, was another record year, following successive post-Lehman record years in 2011, 2012, 2013, 2014 and 2015, six record years in a row, despite a generally low global growth or tepid environment.

Whilst Trumponomics may well result in an increase in the United States GDP growth rate and the United States is the biggest ($18 trillion) GDP engine out of a total of $74 trillion worldwide, political uncertainties in Europe, West and East, the Chinese focus on qualitative growth and the longer-term recovery of Latin America, probably mean that stronger growth will be harder to find outside the United States.

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