Further to the leaked [and less than accurate] unveiling of WPP Group’s pre-tax results for the year to December 31 2002 [WAMN: 24-Feb-03], the world’s largest agency holding company on Monday announced the true numbers and confirmed a decline in headline profits of nearly twenty per cent.
Pre-tax profit before goodwill, impairment and investment write-downs was £400.6 million ($631.99m; €589.31m), a 19% decrease on 2001’s £489.8m. Although like-for-like revenues were down 5.9%, profits were at the upper end of expectations. Organic revenues, however, fell slightly more than a consensus figure of 5.5%.
Observed Sir Martin Sorrell: “Worldwide economic conditions are likely to remain difficult in 2003 particularly given the uncertainty created by the prospect of a war in Iraq ... The economy still seems to be paying the price for the over-expansion of the late nineties.”
But there is a silver lining. Despite the slide in profits, the rate of revenue decline across the board slowed throughout the year from 8% in Q1 to less than 3% in Q4. While in the US and the UK (WPP’s two hardest-hit markets) revenues grew by 2% in the fourth quarter. WPP had met its target for operating margins of 12.3%, bettering the 12.1% expected.
Citing the likely war and cyclical pressures, Sorrell predicted “broadly flat” like-for-like revenues in 2003 with a more robust second half relative to the first. Although like for like revenues in January were down 1%, estimated net business wins in 2003 to date were “very strong”, valued at an estimated $750 million.
Revised margin targets remain in place, with up to 13.1% for the current year and 13.8% in 2004. The full report can be downloaded from WPP 2002.
Data sourced from: Financial Times; additional content by WARC staff