WPP: Full-Year Profit Surges 18 Percent

NEW YORK WPP Group on Friday reported an 18 percent surge in pre-tax profit to $845 million in 2003 on a 5 percent rise in revenue to $7.6 billion. Diluted earnings per share rose 16 percent to about 54 cents a share.

The results, while better than expected, were partially offset by weakness in Europe, particularly, the U.K., The company said the advertising markets in the U.S. and Asia continue to recover.

WPP reported net new billings of more than $4 billion for the year.

In a statement, the London-based holding company said: “Spending amongst the packaged goods, pharmaceutical, oil and energy and government, which is the largest advertiser in the U.K. market, and price value retail sectors has remained ‘relatively resilient.'” WPP said those sectors represent about 27 percent of the group’s revenue. In addition, WPP said recession-affected sectors like technology, financial services, media and entertainment and telecommunications become “more perky.”

WPP also attributed its results to strong performances from its media company holdings: “The Group’s advertising and media investment management businesses continued the rebound which began in the second half of 2002, with media investment management the fastest-growing sector reflecting strong growth.”

In 2003, WPP’s MindShare and Mediaedge:cia generated new billings of nearly $2 billion. In a statement announcing its 2003 earnings, the company confirmed reports of creating a third global media network but provided few details [Adweek Online, Feb. 26]. Sources said the new network is expected to include freestanding WPP media agencies and secondary shops associated with MindShare and Mediaedge:cia around the world.

Public relations continued to lag recovery among the company’s other operating sectors, although WPP sees improvement. “As can be seen, public relations and public affairs continued to be most affected by recent economic weakness, although the first signs of recovery came in the fourth quarter of 2003, which showed positive revenue growth for the first time for 11 quarters,” the company said.

WPP’s operating margin rose to 13 percent versus 12.3 percent in 2002. WPP expects operating margins to rise to 13.8 percent this year.

Looking ahead, WPP CEO Martin Sorrell is optimistic about prospects for this quadrennial year: “President Bush wants to be reelected and will try to continue to stimulate the United States economy through increased government spending, which will be reenforced by the Athens Olympics, European Football Championships in Portugal and heavy political advertising in the United States. This year’s prospects therefore look good with worldwide advertising and marketing services spending set to rise by at least 3-4 percent.” Even Japan and Europe are showing signs of life, he said.

But he also injected a note of caution: “2005 remains difficult to predict, given heavy U.S. government deficit spending and its potential impact on the dollar and inflation.”

This story updates an item posted on Feb. 26 with expanded earnings information.