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Financial summary

2013, our twenty-eighth year, was another record one, with revenue, profitability, headline margins and earnings per share all reaching new highs.

2013 2012 Change %

The financial statements have been prepared under International Financial Reporting Standards (IFRS).

1 Billings and gross margin are defined in the Financial glossary.

2 The calculation of ‘headline’ measurements of performance (including headline EBITDA, headline operating profit, headline PBIT, headline gross margin margin, headline PBT and headline earnings) is set out in note 31 of the financial statements.

3 One American Depositary Receipt (ADR) represents five ordinary shares. These figures have been translated for convenience purposes only using the income statement exchange rates shown in the Financial statements. This conversion should not be construed as a representation that the pound sterling amounts actually represent, or could be converted into, US dollars at the rates indicated.

4 Earnings per share is calculated in note 9 of the financial statements.

5 Average net debt is defined in the Financial glossary.

Billings 1 £46,209m £44,405m +4.1
Revenue £11,019m £10,373m +6.2
Gross margin 1 £10,076m £9,515m +5.9
Headline EBITDA 2 £1,896m £1,756m +8.0
Headline operating profit 2 £1,583m £1,459m +8.5
Reported operating profit £1,410m £1,241m +13.6
Headline PBIT 2 £1,662m £1,531m +8.5
Headline PBIT margin 2 15.1% 14.8% +0.3
Headline gross margin margin 2 16.5% 16.1% +0.4
Headline PBT 2 £1,458m £1,317m +10.7
Reported PBT £1,296m £1,092m +18.7
Headline earnings 2 £1,088m £966m +12.6
Reported earnings £937m £823m +13.8
 
Headline diluted earnings per share 2,4 80.8p 73.4p +10.1
Reported diluted earnings per share 4 69.6p 62.8p +10.8
Ordinary dividend per share 34.21p 28.51p +20.0
Ordinary dividend per ADR 3 $2.68 $2.26 +18.6
 
Net debt at year-end £2,240m £2,821m -20.6
Average net debt 5 £2,989m £3,203m -6.7
Ordinary share price at year-end 1,380.0p 888.0p +55.4
ADR price at year-end $114.86 $72.90 +57.6
Market capitalisation at year-end £18,613m £11,237m +65.6

At 15 April 2014

     
Ordinary share price 1,218.0p
ADR price $101.86
Market capitalisation £16,430m

2013 results

Reported billings increased by over 4% to £46.2 billion and were up well over 3% in constant currencies, driven by a strong leadership position in all net new business league tables. Revenues were up over 6% to £11.0 billion and up well over 5% in constant currencies.

Headline PBIT margins increased by 0.3 margin points to a new high of 15.1% and, on a constant currency basis, were up 0.5 margin points, in line with target. On gross margin, or net sales, the headline PBIT margin was 16.5%, up 0.4 margin points on 2012 and up 0.5 margin points in constant currency.

Headline EBITDA increased by 8% to £1.896 billion. Headline profit before tax was up well over 10% to £1.458 billion and reported profit before tax was up well over 18% to £1.296 billion. Diluted headline earnings per share were up over 10% to 80.8p and diluted reported earnings per share rose by almost 11% to 69.6p.

Dividends were increased by 20% to 34.21p, a record level. This represents a dividend pay-out ratio of 42% on headline diluted earnings per share.


Free cash flow and net debt

Free cash flow strengthened to £1.220 billion in the year, over £1 billion for the third consecutive year. Net debt averaged £3.0 billion in 2013, a decrease of £0.2 billion at 2013 exchange rates, and net debt at 31 December 2013 was £2.2 billion, £0.6 billion less than 2012, reflecting improvements in working capital and the redemption of the £450 million Convertible Bond, reinforced by lower acquisition spending in 2013. Average net debt was around 1.6 times headline EBITDA in 2013 compared with 1.8 times in 2012, and well within the Group’s current target range of 1.5-2.0 times.


Revenue growth

Our reported revenue growth for the year was 6.2%, and on a constant currency basis, which excludes the impact of currency movements, revenues were up 5.7%.

On a like-for-like basis, which excludes the impact of currency and acquisitions, revenues were up 3.5%, with gross margin or net sales up 3.4%. In the fourth quarter, like-for-like revenues were up over 4%, following like-for-like growth in the third quarter of 5%, reflecting stronger growth in North America and Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, offset by lower growth in the UK. Like-for-like growth in the second half was therefore well over 4% compared with over 2% in the first.


Geographic performance

Our strongest regions in 2013 were again Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, with constant currency growth of almost 8% and like-for-like growth of over 6%.

In the UK, full year revenue growth was almost 11% in constant currencies and almost 5% like-for like. Western Continental Europe, like the UK, slowed slightly in the final quarter, with both constant currency and like-for-like growth of over 1%.

Like-for-like revenue growth in North America improved as the year progressed, from -1% in the first quarter to up over 5% in quarter four.

2013 revenue by geography %

Bar chart representing 2013 revenue by geography: North America - 34%, UK - 13%, Western Continental Europe - 23%, Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe - 30%
  • North America 34
  • UK 13
  • Western Continental Europe 23
  • Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 30

2013 headline PBIT1 by geography %

Bar chart representing 2013 headline PBIT by geography: North America - 38%, UK - 12%, Western Continental Europe - 16%, Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe - 34%
  • North America 38
  • UK 12
  • Western Continental Europe 16
  • Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 34

1 The calculation of headline PBIT is set out in note 31 of the financial statements.


Sector performance

Advertising and Media Investment Management revenues were up almost 7% for the year in constant currencies and well over 5% like-for-like, the strongest-performing sector on this basis. In the final quarter, constant currency revenues were up almost 8% and like-for-like revenues were up well over 6%.

Data Investment Management (formerly Consumer Insight) revenues grew 3% on a constant currency basis, with like-for-like revenues up well over 1%, and the second half much stronger than the first half. More significantly, gross margin (or net sales) was up over 2% like-for-like, a turnaround of the trend seen in 2012.

The Group’s Public Relations & Public Affairs businesses had a difficult year. However, although revenues for the year fell by almost 1% on a constant currency basis and by almost 2% like-for-like, top-line growth returned in the fourth quarter with constant currency revenues up over 2% and like-for-like growth of over 1%.

At the Group’s Branding & Identity, Healthcare and Specialist Communications businesses (including direct, digital and interactive), constant currency revenues grew strongly at over 8% with like-for-like growth of almost 4%.

Almost 35% of the Group’s 2013 revenues came from direct, digital and interactive, up over two percentage points from the previous year and growing well over 7% like-for-like.

2013 revenue by sector %

Bar chart representing 2013 revenue by sector: Advertising and Media Investment Management - 42%, Data Investment Management - 23%, Public Relations & Public Affairs - 8%, Branding & Identity, Healthcare and Specialist Communications - 27%
  • Advertising and Media Investment Management 42
  • Data Investment Management2 23
  • Public Relations & Public Affairs 8
  • Branding & Identity, Healthcare and Specialist Communications 27

2013 headline PBIT1 by sector %

Bar chart representing 2013 headline PBIT by sector: Advertising and Media Investment Management - 50%, Data Investment Management - 16%, Public Relations & Public Affairs - 8%, Branding & Identity, Healthcare and Specialist Communications - 26%
  • Advertising and Media Investment Management 50
  • Data Investment Management2 16
  • Public Relations & Public Affairs 8
  • Branding & Identity, Healthcare and Specialist Communications 26

1 The calculation of headline PBIT is set out in note 31 of the financial statements.

2 Data Investment Management was previously reported as Consumer Insight.

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