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Ad firm WPP sees business confidence improving

Chief Executive of WPP Group, Martin Sorrell, speaks at the Institute of Directors IOD annual convention at the Albert Hall in London April
Chief Executive of WPP Group, Martin Sorrell, speaks at the Institute of Directors IOD annual convention at the Albert Hall in London April

By Lorraine Turner

LONDON (Reuters) - WPP , the world's biggest advertising company, reported a stronger-than-expected rebound in revenue growth at the end of 2012 and nudged up its forecast for this year, citing signs of improving business confidence.

The British firm, a barometer of business sentiment whose clients include Microsoft, Procter & Gamble and Shell, said on Friday many of the economic worries raised by companies last year, including a debt crisis in the euro zone and a potential sharp slowdown in growth in China, appeared to be easing.

"The euro zone looks a little a bit better ... China seems to be motoring again, India (had a) good budget this morning," chief executive Martin Sorrell said.

"When you pull all that together, there's probably a little bit more confidence than last year and that may compensate ... for the lack of big events," he added, comparing a relatively quiet calendar in 2013 with last year's Olympic Games, U.S. presidential elections and European soccer championships.

WPP, home to agencies including Ogilvy & Mather and Young & Rubicam, said organic revenues, which exclude acquisitions, rose 2.5 percent at constant exchange rates in the fourth quarter of 2012, helped by an improvement in all regions except North America and up from 1.9 in the third quarter.

That lifted revenue growth for the full year to 2.9 percent, beating analysts' expectations of 2.6 percent.

A strong end to the year echoed the performances of rivals Omnicom and Publicis , which noted an improvement in emerging markets and the United States and were cautiously optimistic on the outlook for 2013.

DEMANDING YEAR

WPP, which operates in 110 countries across the world, said the encouraging end to 2012 had continued into January, with revenues up 2 percent, ahead of the group's budget.

"I probably feel a little bit better about the business, than I certainly did 3, 6, or 9 months ago," said Sorrell.

The group nudged up its organic revenue growth forecast for this year to 3 percent, after previously guiding towards 2-3 percent, though it predicted a "demanding" year due to the lack of major events and uncertainty over the U.S. budget deficit.

All eyes will turn to 2014 for better prospects with the soccer World Cup in Brazil and the Winter Olympics.

WPP posted headline 2012 pretax profit of 1.3 billion pounds ($1.97 billion) on revenue of 10.4 billion, up 3.5 percent. It raised its dividend 16 percent to 28.5 pence a share.

"Lots to like about WPP results this morning with 2013 guidance raised, January tracking ahead of budget, and the dividend payout ratio lifted," said analysts at Jefferies.

WPP's headline operating margin rose 0.5 points to 14.8 percent, in line with expectations, and the firm noted several big contract wins in the pharmaceutical and healthcare industry.

Shares in WPP were flat at 1050 GMT, just ahead of a 0.3 percent decline in Britain's benchmark FTSE 100 <.FTSE> index.

WPP said a decline in organic revenues in continental Europe eased in the final quarter of 2012, with a fall of 0.7 percent following a drop of 2.1 percent in the third quarter.

($1 = 0.6588 British pounds)

(Reporting by Lorraine Turner, Editing by Sarah Young and Mark Potter)

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