Indiantelevision.com Team

(19 August 2006 4:00 pm)

MUMBAI: WPP's revenues were up over 16.1 per cent to $ 5.12 billion for the six months ended 30 June 2006. The results reflected significant improvement over last year and further evidence of growth across the whole business, both functionally and geographically.

The Group grew at almost 13 per cent and all regions showed double digit revenue growth, with the exception of the United Kingdom.

The United States continues to grow, despite the twin deficits and threat of inflation. Latin America remains one of the fastest growing regions, as it was in 2004 and 2005. Asia Pacific shows strong growth across the region, with China and India leading the way, with like-for-like growth rates of 22 per cent and 23 per cent respectively.

Western Europe, although relatively more difficult, has improved over last year and the UK has stabilised, at low levels of growth. Rates of growth in Europe continue, however, to be two-paced, with the UK, Germany, France, Spain, Italy, Netherlands, Sweden, Denmark and Portugal growing slower and Central and Eastern Europe, Russia and the CIS countries, in particular, more buoyant. Africa and the Middle East is currently the fastest growing region, along with Central and Eastern Europe.

The company's billings were up over 27 per cent at $25.8 billion, while revenues were up 12.7 per cent compared with last year.

WPP's headline earnings before interest, depreciation and amortisation (EBITDA) was up 22 per cent to $766.3 million and up over 18 per cent in constant currencies. The company's headline operating profit was up 20.5 per cent to $646.5 million from $536.5 million and up 16.8 per cent in constant currencies.

It's headline profit before tax was up 24.1 per cent to $566.1 million from $456.3 million or up 19.9 per cent in constant currencies.

Net finance costs (excluding the revaluation of financial instruments) were flat with last year at $80.4 million compared with $80.2 million in 2005, reflecting higher interest rates, offset by the impact of improved liquidity as a result of a reduction in working capital.

Media investment management continues to show the strongest growth of all WPP's communications services businesses, along with direct, internet and interactive and healthcare communications. Direct and digitally-related activities now account for approximately 20 per cent of the Group's revenues, which are running at the rate of approximately $11 billion per annum. These businesses generated an estimated net new business billings of $3.504 billion. Brand advertising, particularly in the new faster growing markets, along with information, insight and consultancy and branding and identity, healthcare and specialist communications, show consistent growth.

Public relations and public affairs also continues to show significant improvement over last year, following a strong year in 2005.

Going forward, among the key objectives the company has outlined include:
o Faster growing markets to be one third of total group
o Marketing services to be two thirds of total group
o Quantitative disciplines to be one half of total group

Asia Pacific, Latin America, Africa & Middle East together account for 20 per cent of the group's revenues compared to 41 per cent from Europe and 39 per cent that the US delvers. In the future this is expected to break down as 34, 33 and 33 per cent for the afore mentioned regions.

Marketing services (information, insight & consultancy; public relations & public affairs; branding & identity, healthcare and specialist communications) will in future account for two thirds of total group earnings. The scenario today is that advertising & media investment management takes care of 52 per cent of the group's business vs 48 per cent for marketing services.

Conclusion:
In the long term the group will be concentrating on positioning its top line in the highest growth functional and geographic sectors and improving the effectiveness of its cost structure.

In the first half of 2006, WPP continued to make small to medium-sized acquisitions or investments in high growth geographical or functional areas. In the first six months of this year, acquisitions and increased equity stakes have been concentrated in advertising and media investment management in the United States, the United Kingdom, Germany, South Africa, Israel, China, Singapore and Brazil; in information, insight and consultancy in China; in public relations and public affairs in India; in healthcare in the United States, the Netherlands and Switzerland and in direct, internet and interactive in the United States.

WPP's 2007 forecast is that it should be a good year too, buoyed by the build up to Beijing 2008 and heavy United States political spending, in advance of a presidential election, which may pit Hillary Clinton against John McCain. 2008 should be a bumper year, with the culmination of these two major events and the European Football Championships in Austria and Switzerland. 2009 may see slower growth, following the strength of 2008 and as the new United States administration wrestles with the country's economic issues.