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International: WPP results show ad agencies weathering recession better than marketing services

21-August-2001
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International: WPP results show ad agencies weathering recession better than marketing services

WPP Group reported August 20 revenues up more than 3% in constant currency in the first half of the year. When the contribution of all acquisitions such as Young & Rubicam are included WPP reported pretax profit up 80% to #247.6 million ($356 million) in the six months to June 30, on 65% higher revenue of $2.87 billion compared to the same period a year ago. The group also reported net new business billings of almost $1.4 billion during the period.

Despite the state of the worldwide economy, WPP says its financial performance has continued to improve in the first half of 2001. Even though top-line growth has deteriorated against a budgeted like-for-like growth of 7%, the WPP says it continues to gain market share in all geographic regions including the U.S., the U.K., Continental Europe, Asia/Pacific and Latin America

WPP and other holding companies have spent the last few years positioning themselves against a downturn in spending on advertising in conventional media such as TV and print by increasing their offering in marketing services such as direct mail, branding and corporate identity. But now that the recession has hit, traditional ad agencies seem to be fairing better than marketing services.

On Monday WPP reported that function, information and consultancy and advertising and media investment management have been less affected and continued to improve their operating profits and margins. Public relations and public affairs, branding and identity, healthcare and specialist communications have been most affected.

By region, revenue growth in North America (which accounts for 46.6% of total group revenue) nudged up 0.4% and the U.K. grew 5.2% to become 15.7% of total revenue. Continental Europe was the strongest performer, growing 13.4% and becoming a source of 21.2% of group revenue. Combined, Asia/Pacific, Latin America, Africa & Middle grew 12.9% and now account for 16.5% of total revenue.

When the contribution from Y&R is included on a pro-forma combined basis, the proportion of revenue and revenue growth by communications services sector was as follows: advertising and media buying and planning, 45.7% (total revenue), 5.9% (revenue growth); information and consultancy 14.3%/14.5%; public relations and public affairs 13.1%/0.8%; branding and identity, healthcare and specialist communications 26.9%/3.4%

WPP noted that advertising and media investment management has been less affected than anticipated.

On a constant currency basis, combined revenue at Ogilvy & Mather Worldwide (including Cole & Weber and OgilvyOne), J. Walter Thompson Co., Y&R Advertising (including The Media Edge), Red Cell and MindShare rose by 10%, whilst operating margins continued to improve. These businesses generated net new business billings of $877 million.

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