In the nearly five decades I have been reading annual reports, I cannot recall a year when any company came close to matching Warren Buffett’s shareholder letters and reports on Berkshire Hathaway. His wisdom, his honesty and his wit have made his letters must reading. This year’s report – Buffett’s 50th – was one of his best – a celebration of his firm’s extraordinary growth coupled with his traditional investment tutorial.
After reading all 148 pages soon after the Berkshire Hathaway report appeared in February, I assumed again I would read nothing better. I was wrong. My favorite annual report was published four months later by WPP, the advertising and communications services group. It celebrates 30 years of Sir Martin Sorrell’s leadership. It may be the best annual report I have ever read.
While Buffett has only printed two photos in 50 years – in each of the past two years he has run one photo of himself with his Omaha staff — WPP’s 250 page report is beautifully designed, photographed and illustrated. The report comes with a humorous four-page cover wrap charting WPP’s history. Each section begins with the work of one of eleven African artists.
The report is a model of clarity. It begins with a “quick, pre-digested, highly-compressed” seven-page summary, followed by detailed chapters that discuss what WPP’s 121,000 employees do and how its 155 operating units interact with each other. The glossy presentation doesn’t shy from controversy. Mindful of complaints from many shareholders, twelve pages are devoted to executive compensation, including a full discussion of Sorrell’s very rich compensation package — $66 million in 2014, up 44% from the year earlier.
Sorrell urges shareholders to invest for the long term, as does Buffett, who tells investors they shouldn’t buy Berkshire Hathaway stock unless they plan to hold it at least five years. While Buffett focuses almost entirely on his company’s operations and results, Sorrell takes a broader macro view, seeing risk in Europe’s economic fragility, instability in the Middle East, emerging nations coping with falling prices for their commodities, the U.S deficit and debt. He also remains bullish on China and in the medium to long term on Russia.
While WPP shares haven’t matched Berkshire Hathaway’s long-term performance, Sorrell can be proud of what he has accomplished. Since taking control of Wire & Plastic Products plc in 1985, renaming it WPP Group, the holding company has grown to annual revenues of 11.528 billion pounds and operating profit of 1.507 billion pounds. Between 2001 and 2014, revenues and profits have nearly tripled and market cap grew to 20.5 billion pounds from 8.7 billion pounds.
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