MAM
WPP first quarter revenues up 16%
MUMBAI: WPP’s acquisition of Grey Global has resulted in a sliver lining if one goes by the revenues that former has garnered post the take over. WPP’s revenues have seen a 16 per cent rise on the first quarter of 2005, which primarily reflecting strong organic growth and a first-time contribution from Grey from 7 March.
The impact of currency in the first quarter of 2005 was minimal. On a like-for-like basis, excluding acquisitions and currency fluctuations, revenues were up almost six per cent. This maintains the improvement in the organic growth rate of the last two quarters of 2004 and reflects the growing focus by clients on improving profitability through innovation and branding and top line growth, rather than by relying solely on cost cutting.
In all the regions that WPP has a presence in, a double digit revenue growth has been seen. In North America, revenues were up over 16 per cent; in Europe, the UK was up 12 per cent and Continental Europe up over 15 per cent.. Asia Pacific, Latin America, Africa and the Middle East was up 22 per cent.
By communications services sector, advertising and media investment management was up over 17 per cent, information, insight and consultancy up 19 per cent, public relations and public affairs up over 12 per cent, and branding and identity, healthcare and specialist communications up almost 15 per cent.
The net new business billings of GBP 875 million ($1.62 billion) were won during the first quarter. The Group has continued to benefit from consolidation trends in the industry, winning several large assignments from existing and new clients.
In the first quarter both profitability and operating margin were ahead of budget. Full year margin forecasts are in line with the Group’s revised combined margin target for 2005, including Grey, of 14.3 per cent.
Also, WPP’s operating companies continued to improve productivity. On a pro-forma basis, the number of people in the Group (excluding associates) was up 3.8 per cent as of 31 March 2005 to 71,097, as compared to the previous year. In Q1 2005, average headcount on a like-for-like basis was up 5.2 per cent to 64,368, compared with Q1 2004.
Balance Sheet and Cash Flow
WPP has continues to implement its strategy of using free cash flow to enhance share owner value through a judicious combination of capital expenditure, acquisitions and share cancellations, whilst ensuring that these expenditures are covered by free cash flow.
Average net debt in Q1 2005 was down GBP 240 million to GBP 586 million, compared to GBP 826 million in 2004. The current net debt figure compares with a market capitalisation of approximately GBP 7.5 billion. Net debt at 31 March 2005 was GBP 938 million compared to GBP 825 million in 2004 — an increase of GBP 113 million, reflecting a GBP 384 million gross cash payment for Grey.
In the twelve months to 31 March 2005, the Group’s free cash flow was GBP 572 million. Over the same period, the Group’s capital expenditure, acquisitions and share cancellations were GBP 646 million (including a GBP 384 million gross cash payment for Grey).
In the first quarter of 2005, in addition to the completion of the acquisition of Grey, the Group made acquisitions or increased equity interests in advertising and media investment management in the United Kingdom, Denmark and Argentina; in information, insight and consultancy in Hong Kong; in public relations and public affairs in Denmark; in healthcare in the United States, Netherlands and Switzerland; and in direct, Internet and interactive in the United States.
In Q1 2005, 3,367,000 ordinary shares were purchased, at an average price of GBP 6.17 per share and total cost of GBP 20.8 million. 2,250,000 of these shares were cancelled. The company’s objective remains to repurchase up to two per cent annually of its share base in the open market at an approximate cost of GBP 150 million, when market conditions are appropriate.
WPP will also be looking at focusing on its key objectives of improving operating profits by 10 per cent to 15 per cent per annum; improving operating margins by half to one margin point per annum; improving staff cost to revenue ratios by 0.6 margin points per annum; growing revenue faster than industry averages; improving our creative reputation and stimulating co-operation among Group companies.
WPP head honcho Sir Martin Sorrell was quoted in a media report as saying, “The continually increasing cost in network television, the fragmentation of media, and the development of new technologies are all moving the market toward direct, interactive and Internet.”
Brands
Jubilant FoodWorks faces Rs 47.5 crore GST demand, plans appeal
Tax authorities flag alleged misclassification of restaurant services
MUMBAI:Â Jubilant FoodWorks Limited has landed in a tax tussle after receiving a GST demand of Rs 47.5 crore from the office of the additional commissioner of CGST and central excise in Thane, Maharashtra.
The order, issued under the provisions of the Central Goods and Services Tax Act, 2017, relates to an alleged incorrect classification of certain services under the category of restaurant services. According to the tax authorities, this classification resulted in a short payment of goods and services tax for the period between the financial years 2019-20 and 2021-22.
The demand includes Rs 47.5 crore in GST along with an equal amount as penalty, in addition to applicable interest. The order was received by the company on March 13, 2026.
In a regulatory filing to the BSE Limited and the National Stock Exchange of India Limited, the company said it disagrees with the order and believes its arguments were not adequately considered.
The company is preparing to challenge the decision and plans to file an appeal. It added that once the redressal process is complete, the demand is likely to be dropped.
Despite the sizeable figure attached to the notice, the company said it does not expect any material impact on its financials, operations or other activities.
The disclosure was signed by Suman Hegde, EVP and chief financial officer, who confirmed that the company received the order at 19:06 IST on March 13 and has already initiated steps to contest it.
The development places the quick service restaurant major in the middle of a tax debate that could hinge on how certain restaurant-linked services are classified under GST rules. For now, the company appears ready to take the matter from the tax office to the appeals desk.
