WPP profits fall, but revenues rise

06 March 2009

LONDON: WPP Group, the UK-based marketing services conglomerate, saw net profits fall by 5.8% to £439.1 million ($626m; €493m) in 2008, a result largely attributed to increased operating and staffing costs, while revenues rose 20.9% to £7.48 billion.

The company reported that organic revenues grew by more than 4% in the first half of this year, while the second half was "weaker", with the organic growth rate slowing to 1%.

Operating costs and direct costs also increased by 20.9%, and staff costs rose 22.5%, over last year as a whole.

WPP argued that the predicted "Beijing bounce" following the Olympics "failed to materialise", and worldwide adspend only rose by 2–3% last year despite the impact of the Olympics, US Presidential election and UEFA football championship.

Its North American revenues rose by 4.6% – although like-for-like growth fell 0.3% – and the region contributed 35.5% of total revenues, and just under 40% of operating profit.

Revenues in Asia Pacific, Latin America and the Middle East rose by 16.9% for the year, and these areas are now responsible for 23.9% of all revenues, and 22.6% of operating profits.

Mainland China saw sales grow by almost 9%, while Indian totals were up by 21%, but Japan and Australia were said to be "weaker".

UK revenues also increased by 7.2%, and continental Europe by 9.6%, despite the fact these areas are experiencing a "deterioration in economic conditions".

Among the company's main drivers of revenue, its "advertising and media investment management" operations saw revenues grow by 4.4%, and this area contributed 44.4% of all sales.

It information, insight and consultancy business grew by 27.8%, largely as a result of the acquisition of TNS, with like-for-like revenues rising 3.0%.

Branding and specialist operations revenues rose by 7.6%, with PR and public affairs expanding by 6.9%.

While WPP argues this year "was always likely to be a weaker year" than 2008, the "unprecedented current financial crisis" means it predicts revenues will fall 2%, below the predicted 4% decline in the ad market as a whole.

Among the other major holding companies, Omnicom Group posted a 2.5% increase in profits to just over $1bn in 2008, with revenues rising 5.2% to $13.4bn, despite a decline of 7% in the last quarter.

Publicis saw its profits fall 1.1% to €447m last year, with full-year revenues increasing by 0.7% to €4.7bn, but organic growth falling to 1.1% in the last quarter compared with an annual total of 3.8%.

Interpublic Group's net income doubled in 2008 to $295m based on a 6.2% uplift in revenue, but sales did decrease to $1.90bn in the final quarter from $1.98bn in the year-ago period.

Havas also saw its net income rise by 25% year-on-year to €104m, with revenues up 2.3% increase in revenues to €1.57 billion for the year, including growth of 2% in the last quarter.

Data sourced from WPP; additional content by WARC staff