Ireland based WPP PLC (NASDAQ:WPPGY) recently released its earning statement in which its revenues increased by 4% to $3.91 billion. The firm's growth includes organic revenue growth of 2.1% while 0.8% came from currency effects and 3% from acquisitions. On the other hand, its American rival Omnicom Group's (NYSE:OMC) earnings reported an increase in revenues of 2.8% to $3.39 billion year over year but its net income rose just 0.2% to $205 million. WPP has delivered strong performance in the emerging markets and in the United Kingdom. The business is continuing with inorganic growth. The current year looks challenging for the two companies due to the absence of any significant global event - both are now pinning their hopes for growth on 2014.
What growth WPP is seeing is being powered by the emerging markets in Asia Pacific, Latin America, Africa, Middle East and Central & Eastern Europe. Here, the company's revenues grew from $1.06 billion to $1.14 billion while the organic growth was 7.8%. Like the emerging markets, U.K. also reported strong numbers as revenues increased by 11.8% to $494 million while organic growth was 3.9%. North American region reported growth of 2.5% to $1.34 billion but organic revenue fell by 1%. Similarly, the company reported growth of 5.1% in Western Europe but here organic growth was negative 1%.
WPP PLC REVENUE BY REGIONS
Asia Pacific, Latin America, Africa, Middle East, Central & Eastern Europe
WPP gets 35% of its revenues from North America while the United Kingdom and Western Europe contributes 12.5% and 23% respectively while a little less than 30% comes from the emerging markets. Omnicom's largest share of revenue comes from the U.S., which accounts for 52.7% of revenue. The company doesn't have the same level of exposure to the international markets, particularly the emerging economies, as the WPP does. In its most recent quarterly results, Omnicom reported organic and inorganic growth in all of its geographic markets except in Europe where its reported revenues shrank by 3.4%.
OMNICOM REVENUE BY REGIONS
First QTR Revenue(In Million)
Rest of World
WPP gets 40.8% of its revenues from Advertising and Media Investment Management (AMIM) that reported a growth of 6% while organic growth was 3.9%. Revenue from the sector was £1.03 billion ($1.60 billion) in the first quarter of 2013, rising from £973 million ($1.51 billion) in 2012. Branding and Identity, Healthcare and Specialist Communications (BI, HC & SC) segment, which is 27.3% of the company, showed growth of 10.6% while organic growth was 2.4%
WPP PLC REVENUE BY SEGMENT
Advertising, Media Investment
Public Relations & Public Affairs
BI, HC & SC
WPP has continued with its string of acquisitions and in March, it made an investment in SFX Entertainment, a digital media company that focuses on electronic dance events. WPP also acquired John St., one of Canada's top creative agencies, which has a premiere clientele including well known names such as AstraZeneca, Kruger, ING Direct, Maple Leaf Foods and Tata.
WPP's chief, Martin Sorrell has often been the centre of shareholder's anger over his compensation package and 60% of the investors voted against his remuneration at 2012's annual shareholder's meeting. Back then, from his bonus scheme, Sorrell got $17.12 million in compensation. However, shareholders would be pleased to learn that this year he has offered an annual pay cut of $155,000.
So far, in the last six months, the stocks of both companies, WPP and Omnicom, have been up 14% and 26% respectively. In the corresponding period, SPDR S&P 500 ETF (AMEX:SPY) has been up by 13.5%, both of these companies have performed better than the market. But I don't see any significant revenue opportunities for WPP in 2013, which I also identified about six months ago. The previous year was extraordinary for advertisers in which the world witnessed three mega events, the EuroCup 2012 for the soccer-crazed continent of Europe, the London Olympics and the U.S presidential elections , all of which pushed the stock up 35%>. The business's investors are now desperately waiting for 2014 in which we have two relatively smaller events; the U.S midterm elections and Sochi Winter Olympics, and a mega event; Football world-cup in Brazil. So, with a jam packed 2014 on the horizon buying pullbacks would be prudent for a medium term - 12 to 15 month trade.