WPP Group's 2005 Profits Exceed $1 Billion

08 March 2006

WPP Group on Monday announced record profits for 2005.

And although organic growth contributed strongly to the overall result, the prime driver for the profits bonanza was Grey Global Group whose results were incorporated from 7 March 2005, the date on which it was formally acquired by WPP.

Group profit before tax rose 36.3% to £592.0 million ($1.04 billion; €862.79m), surpassing the $1bn mark for the first time in WPP's history. According to the company, the results "reflect the continued steady strength of the world economy positively impacting almost all disciplines and geographies".

The key numbers include ...

  • Billings up by over 36% to £26.674bn.

  • Reportable revenue up 25% to £5.374bn.

  • On a constant currency basis, revenue rose almost 23% and gross profit by almost 24%.

  • Like-for-like revenues, excluding the impact of acquisitions and on a constant currency basis, were up 5.5%.

  • Operating costs including direct costs (but excluding intangibles), rose by over 23% and by over 21% in constant currency. Like-for-like total operating and direct costs rose over 4%.

  • Headline operating margin (including income from associates) increased a full margin point to a record 14.0% from 13.0%, ahead of the revised target set in August 2005 of 13.7%.

  • The number of people in the group averaged 70,936 against 57,788 in 2004, an increase of 22.8%.
Asked by CNBC/Dow Jones about the outlook for 2006, ceo Sir Martin Sorrell was uncharacteristically upbeat: "Well, I think we see 2006 as pretty similar to 2005, but probably a little bit better.

"I think television ratings have been in line with expectations. We have the World Cup in Germany and, having spent a little bit of time in Germany recently, I think the mood in Germany is a little bit stronger and more optimistic than it was certainly in 2005.

"Then we've got the mid-term Congressionals in the elections in America and that will add about $1.5billion in terms of advertising spending and will tighten up the media rates.

"From a geographical point of view; Asia, Latin America, Africa and the Middle East, and Eastern Europe all continued to be very strong. We grew last year in China by 23%, in India by 15% against markets going up by GNP growth of 10% in China and 8% in India.

"The one blip, or the one soft part of the world geographically, is Western Europe; the UK, France, Germany, Italy. I think the issue [faced by] the industry and probably the economies as a whole [is] whether we can compete with the rapidly growing East and an America that is showing surprising signs of stability and growth."

Data sourced from WPP Group and CNBC/Dow Jones; additional content by WARC staff