WPP Profits Down 11% As Ad Biz Starts ‘To Climb Out of Bath’

25 August 2003

WPP Group, the world’s third largest agency holding company, on Friday reported H1 pretax profits of £153.6 million ($242.10m; €221.91m) before goodwill, non-operating items and integration costs – down year-on-year by 11%.

A slippage which may disappoint investors (in view of the upbeat guesses published in last week’s Sunday Telegraph and The Times) , although according to these seers WPP itself “had budgeted for a dip in the six-month period followed by a slight upturn in the second half”.

Which is precisely what Sir Martin Sorrell’s troops have delivered. As WPP itself put it: “[The advertising business] is “starting to climb out of the bath”, a reference to Sorrell’s earlier description of the recession as “bath-shaped”. The result was also affected by the recent swings in currency exchange rates.

Exceptional costs and fixed asset gains excluded, WPP’s interim pre-tax profits narrowed by just 4.7% from £212.9m to £202.9m, while gross billings were down 1.6% to £8.64 billion. Sales fell 2% to £1.91bn – although on a constant currency basis this equated to a 2% increase.

Divisional performances varied. Advertising and media posted a 1% sales decline to £886.8m, whereas the less recession-susceptible information and consultancy unit hiked sales by the same percentage to £334m. The slide in public relations activity continued with sales plunging almost 9% to £212.9m; while the branding and healthcare division suffered a sales fall of 4.5% to £477.1m.

A “cyclical” advertising upturn in 2004 is forecast by WPP, although it warned that growth potential beyond that year is more difficult to predict. The ever-cautious Sir Martin will continue to plan ahead “on a conservative basis”.

Current growth is being driven by the North American market which despite being “muted” has lasted for ten consecutive months.

• Separately, WPP confirmed it plans to close its Burmese operation, Bates Myanmar, recently acquired along with other Cordiant assets. It may or may not have decided to do so in response to pressure from human rights groups who oppose doing business with that nation’s military dictatorship.

WPP has no other presence in Burma and it is understood that it was always the group’s intention to shutter the Burmese office.

The announcement was delayed until after staff were informed and WPP refused to be drawn as to the number of employees affected and whether they might be relocated when the office closes later this year.

Data sourced from: Multiple origins; additional content by WARC staff