PR and public affairs revenue up six per cent in 2015, but WPP warns against 'Don Draperish optimism'

WPP's PR and public affairs operations saw revenue grow around six per cent to £945.8m ($1.34bn) in 2015, lifted by a strong Q4, although the firm used its annual results to warn against misplaced "Don Draperish" industry optimism.

WPP chief executive Sir Martin Sorrell: PR brands include H+K, Ogilvy and Burson-Marsteller
WPP chief executive Sir Martin Sorrell: PR brands include H+K, Ogilvy and Burson-Marsteller

WPP said Ogilvy Public Relations, Cohn & Wolfe and its specialist PR and public affairs businesses in the US, the UK and Germany "performed well" in the year. However, Burson-Marsteller and H+K Strategies were "less buoyant".

Across the year, profit before interest and tax in the division rose around 12 per cent to £155.4m ($219.6m).

Like-for-like revenues in the PR and public affairs arm grew 5.8 per cent in Q4, with total revenue in the division up 8.2 per cent in the quarter. WPP highlighted "strong growth in all regions, but particularly in the United Kingdom, Latin America and the Middle East & Africa".

Cohn & Wolfe global CEO Donna Imperato said: "Cohn & Wolfe had tremendous growth the past two years, growing nearly 25 percent organically and 43 percent with key acquisitions. Our transformation into an integrated communications agency has driven our success, as we meet increased client demand for digital and content work. We're seeing a strong start to 2016, paving the way for another spectacular year."

Stuart Smith, global CEO of Ogilvy Public Relations, said: "We grew eight per cent organically in the year and every region contributed to that. After three to four years of flat growth we're back with a bang. I'm feeling confident about the next two years. There is a lot more in terms of acquisitions on the agenda, with a focus on North America and Latin America."

Meanwhile, WPP said an "improving top-line and good control of costs" led to operating margin in PR and public affairs moving from 15.8 to 16.7 per cent in 2015 as a whole. The division accounted for 7.7 per cent of WPP’s overall revenue that year, a proportion unchanged from 2014.

The current year has started less positively for PR and public affairs. That division, along with its data investment management arm, was one of only two not to show revenue and net sales growth in January. Like-for-like revenue for WPP rose 4.2 per cent overall that month.

Across the group, profit before tax grew 7.3 per cent to £1.62bn ($2.29bn) on revenue up 6.1 per cent to £12.24bn ($17.31bn) in 2015. Like-for-like revenue grew 5.3 per cent.

In 2015, revenue growth on a like-for-like basis was strongest in North America (7.1 per cent), where WPP cited parts of its PR and public affairs businesses among the strongest growth areas.

In the UK, where like-for-like revenue rose 4.1 per cent to £1.78bn ($2.51bn), the PR and public affairs division was among those that performed "particularly well". Like-for-like revenue growth was 4.7 per cent in Western Continental Europe and 4.2 per cent in the Asia Pacific, Latin America, the Middle East & Africa  and Central & Eastern Europe segment.

Despite what the firm described as a "strong performance" in 2015, WPP made a reference to the central character of US TV drama series Mad Men when it cautioned that the "always-on, Don Draperish general industry optimism seems misplaced".

"General client behaviour does not reflect that state of mind, as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth," WPP warned.

The company listed a number of other concerns, including the continuing crisis in the Ukraine, continued tensions in the Middle East and North Africa and the "uncertainty-stimulating" referendum about the UK’s membership of the EU.

WPP said clients were "unwilling to take further risks" in the current climate, and therefore the focus was on cost rather than revenue growth. "We see little reason, if any, for this pattern of behaviour to change in 2016, with continued caution being the watchword."

However, the firm pointed to the "bonus" of "maxi-quadrennial events" in 2016 – the Rio Olympics and the Euro Football Championships – as well as the US presidential elections, saying these events should boost marketing investment "by up to one per cent or so, above advertising as a proportion of GDP".

WPP said it was targeting like-for-like revenue growth of "well over three per cent" in 2016, net sales growth of "over three per cent", and an operating margin to net sales improvement of 0.3 margin points.

This story was updated on Friday afternoon to include comments from Donna Imperato and Stuart Smith.

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