RNS Number:3632R
WPP Group PLC
28 October 2003
FOR IMMEDIATE RELEASE 28 October 2003
WPP
QUARTERLY TRADING UPDATE
THIRD QUARTER LIKE-FOR-LIKE REVENUES UP OVER 1%
TO OVER #1 BILLION
THIRD QUARTER REPORTED REVENUES UP ALMOST 11%
REPORTED REVENUES UP ALMOST 2% IN FIRST NINE MONTHS
LIKE-FOR-LIKE REVENUES UP 0.4% IN FIRST NINE MONTHS
SECOND HALF MARGIN IMPROVEMENT IN LINE WITH REVISED TARGET
Revenue Growth - Third Quarter
In the third quarter, our first #1 billion revenue third quarter, reported
revenues rose by almost 11%. Revenues, in constant currencies, were up 10%,
reflecting the acquisition of Cordiant Communications Group plc ("Cordiant")
with effect from 1 August, and the relative weakness of the dollar, more than
offset by the strength of the euro against sterling. On a like-for-like basis,
excluding the impact of acquisitions and currency fluctuations, revenues rose by
over 1% and over 2% ignoring the impact of the acquisition of Cordiant.
As shown in the appendix to this release, on a constant currency basis, the
geographical pattern of revenue growth varied in the third quarter. In North
America revenues were up over 8%. The United Kingdom was up over 6% and
Continental Europe up over 11%. Asia Pacific, Latin America, Africa and the
Middle East was our strongest region with revenues up 17%.
By communications services sector, advertising and media investment management
was strongest, with revenues up almost 14%. Public relations and public affairs
was almost flat, and branding and identity, healthcare and specialist
communications up over 9%. Information, insight and consultancy was up over 7%.
Revenue Growth - Nine Months
In the first nine months of 2003, reported revenues were up almost 2%. In
constant currencies, revenues were up over 4%. On a like-for-like basis,
excluding the impact of acquisitions and currency fluctuations, revenues were up
0.4%, up almost 1% ignoring Cordiant.
As shown in the appendix to this release, on a constant currency basis, the
geographical pattern of revenue growth varied in the first nine months. The
North American market has not only stabilised, but has started to show muted
growth. Like-for-like growth started in September 2002 and September 2003 marks
thirteen months of continuous growth, albeit low single digit. The United
Kingdom continues to be most affected by the recession, with our businesses in
Continental Europe less so. Asia Pacific, Africa and the Middle East, has shown
consistent growth in each quarter of 2003 and Latin America improved
significantly, although this was primarily due to last year's weak comparables,
particularly in Brazil and Argentina.
By communications services sector, advertising and media investment management
continues to improve with revenues up 7%. This was driven primarily by the
significant growth in media investment management, which started to improve in
September 2002, and then kicked up significantly from April 2003. Information,
insight and consultancy was up almost 5%, branding and identity, healthcare and
specialist communications up almost 3%. Public relations and public affairs
remained most affected by the recession with revenues down over 2%, although the
third quarter was "less worse".
New Business
Net new business billings of #402 million ($644 million) were won during the
third quarter, making a total of #1,737 million ($2,779 million) for the first
nine months. The Group continues to benefit from consolidation trends in the
industry, winning several large assignments from existing and new clients. The
Group was ranked equal first for net new business gains in the William Blair &
Company survey for the first nine months of 2003.
Current Trading
The Group's revenue growth in the third quarter continued to reflect trends seen
in the first two quarters of 2003 - stabilisation, muted growth in the United
States, continuing (but milder) weakness in the United Kingdom and in the
industry (not us) in parts of Continental Europe. Like-for-like revenue was
flat in the first half of 2003 and up over 1% in the third quarter, up over 2%
ignoring Cordiant.
By region, the United Kingdom continues to be affected by the recession, with
proportionately less impact (for us) in Continental Europe. North America has
shown accelerated rates of growth in each of the last four quarters and Asia
Pacific, Latin America, Africa and the Middle East has continued to deliver
consistent revenue growth.
By communications services sector, the recession continues to impact advertising
and media investment management and information, insight and consultancy the
least, with public relations and public affairs the most and branding and
identity, healthcare and specialist communications the next most.
Third quarter revised forecasts indicate that the Group's operating margin for
the second half of the year is likely to be stronger than that for the first
half, and in line with the revised margin target of a minimum of 13.0% following
the acquisition of Cordiant.
Prospects for 2004 remain better. The United States Presidential Election and
concurrent fiscal deficit spending in front of it to stimulate the economy, the
Athens Olympics, the European Football Championships and the impact of heavy
political advertising in the United States on media rates and supply, will
strengthen advertising and marketing services spending, particularly in the
United States. This will spill over into the United Kingdom, Continental
Europe, Asia Pacific, Latin America, Africa and the Middle East, although Asia
Pacific now has its own engine - China. In addition, there is evidence of
clients switching their attention from three years of cost management to
top-line revenue growth. We are climbing further out of the bath.
The worry remains, however, that 2005 might see inflation as a result of
government deficit spending on both sides of the Atlantic. Commodity prices,
the long-end of the bond market and gold prices may be signalling this already,
and a returned incumbent or new United States President might have to take
corrective action.
Balance Sheet and Cash Flow
The Group continues to develop its strategy of using free cash flow to enhance
share owner value through a combination of strategic acquisitions and share
purchases.
In the first nine months of 2003, the Group completed acquisitions in
advertising and media investment management in the United States, the United
Kingdom, Italy, Spain, Switzerland, China, South Korea and Ecuador; in
information, insight and consultancy in the United States, the United Kingdom,
the Netherlands, Portugal and Spain; in public relations and public affairs in
the United States and Sweden; in sports promotion in Spain, in direct in Germany
and in healthcare in the United States.
In the first nine months of 2003, 5.6 million shares were purchased at an
average price of #3.60 per share and total cost of #20.2 million. No shares
were purchased in the third quarter. The company's objective remains to
buy-back approximately #100 million - #150 million of shares each year,
currently equivalent to 11/2 - 2% of the ordinary share capital.
Average net debt for the first nine months of 2003 was #1,310 million compared
to #1,365 million in the comparable period last year, at actual exchange rates,
and #1,368 million in constant currencies. Net debt at 30 September 2003 was
#1,140 million against #1,303 million at the same time
last year, a decrease of #163 million. The current net debt figure compares
with a market capitalisation of approximately #6.4 billion. The decrease in net
debt reflects #529 million spent on capital expenditure, acquisitions (including
a net #90 million, after disposals, for Cordiant) and earnout payments, share
purchases and dividends in the previous 12 months, more than offset by cash flow
before capital expenditure, acquisitions and earnout payments, share purchases
and dividends over the same period of #552 million. The cash flow figure above
includes the #100 million raised by means of a share placing to part-finance the
acquisition of Cordiant.
Future Objectives
The Group continues to focus on its strategic objectives of improving operating
profits by 10 to 15%; 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 and encouraging
co-operation among Group companies.
For further information:
Sir Martin Sorrell )
Paul Richardson ) + 44 20 7408 2204
Feona McEwan )
This press release may contain forward-looking statements within the meaning of
the federal securities laws. These statements are subject to risks and
uncertainties that could cause actual results to differ materially including
adjustments arising from the annual audit by management and the company's
independent auditors. For further information on factors which could impact the
company and the statements contained herein, please refer to public filings by
the company with the Securities and Exchange Commission. The statements in this
press release should be considered in light of these risks and uncertainties.
Appendix: Revenue and revenue growth by region and communications services
sector
3 months ended 30 September 2003
Revenue Revenue Revenue Constant
2003 2002 growth currency
Region #m #m reported growth(1)
03/02 03/02
% %
North America 424.4 406.3 4.4 8.1
United Kingdom 166.4 156.2 6.5 6.5
Continental Europe 255.9 210.8 21.4 11.1
Asia Pacific, Latin
America, Africa &
Middle East 182.9 155.2 17.9 17.0
Total Group 1,029.6 928.5 10.9 10.0
Communications Revenue Revenue Revenue Constant
Services 2003 2002 growth Currency
Sector #m #m reported growth(1)
03/02 03/02
% %
Advertising & Media
Investment
Management 483.0 419.1 15.2 13.9
Information, Insight
& Consultancy(2) 176.4 161.9 8.9 7.2
Public Relations &
Public Affairs 106.5 107.9 -1.3 -0.4
Branding & Identity,
Healthcare and
Specialist
Communications(2) 263.7 239.6 10.1 9.6
Total Group 1,029.6 928.5 10.9 10.0
(1) Constant currency revenue growth excludes the effect of currency movements.
(2) In 2003 certain of the Group's specialist communications companies in
strategic marketing, consulting and consultancy were transferred into the
re-named information, insight and consultancy.
Appendix: Revenue and revenue growth by region and communications services
sector
9 months ended 30 September 2003
Revenue Revenue Revenue Constant
2003 2002 Growth Currency
Region #m #m reported Growth(1)
03/02 03/02
% %
North America 1,243.6 1,296.4 -4.1 4.1
United Kingdom 472.9 468.4 1.0 1.0
Continental Europe 752.7 655.0 14.9 5.4
Asia Pacific, Latin
America, Africa &
Middle East 471.2 468.5 0.6 8.0
Total Group 2,940.4 2,888.3 1.8 4.5
Communications Revenue Revenue Revenue Constant
Services 2003 2002 growth Currency
Sector #m #m reported Growth(1)
03/02 03/02
% %
Advertising & Media
Investment
Management 1,369.8 1,315.1 4.2 7.0
Information, Insight
& Consultancy(2) 510.4 493.0 3.5 4.8
Public Relations &
Public Affairs 319.4 340.8 -6.3 -2.1
Branding & Identity,
Healthcare and
Specialist
Communications(2) 740.8 739.4 0.2 2.8
Total Group 2,940.4 2,888.3 1.8 4.5
(1) Constant currency revenue growth excludes the effect of currency movements.
(2) In 2003 certain of the Group's specialist communications companies in
strategic marketing, consulting and consultancy were transferred into the
re-named information, insight and consultancy.
This information is provided by RNS
The company news service from the London Stock Exchange
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