WPP Q1 Results Hit by US Slowdown

27 April 2001

London-headquartered ad titan WPP yesterday revealed that the economic slowdown in North America has begun to erode its revenues.

Posting Q1 results, the group reported underlying revenue growth of only 6% – lower than an earlier forecast of 7% which in February it described as conservative.

Thanks to a string of acquisitions, overall revenues actually rose 73% from £558 million in Q1 2000 to £966.4m ($1.4 billion), largely due to the purchase of network Young & Rubicam last year [WAMN: 08-May-00]. However, if Y&R is included in last year’s first-quarter results and smaller acquisitions removed from the results, then growth stands at only 6% assuming constant exchange rates. Including smaller purchases, growth stands at 9%, keeping WPP on course to hit its yearly targets.

In addition, net new billings for the first quarter totalled £235m, some way below the £447m seen in Q1 2000.

Unsurprisingly, WPP’s North American operations have been hardest hit and although chief executive Sir Martin Sorrell would not disclose actual figures, he admitted that underlying growth in this market had been “below average”. On a brighter note, European revenues increased more rapidly than the group-wide average, while there was particularly strong growth in Asia Pacific and Latin America.

Interestingly, the areas in which WPP has been struggling most have been branding, corporate identity and public relations – the very same operations that Sorrell has expanded in the belief that they would be more resistant to a downturn. But advertising and media buying businesses were “more resilient”, particularly in areas outside North America, while market research (15% of WPP’s operations) performed particularly strongly.

The group said that revised forecasts for 2001 kept it in line with its target of raising operating margins from 14% to 15%.

News source: Financial Times