WPP Undeterred By Profit Fall

WPP is still confident about growth prospects for 2004 despite a fall in revenues and profits in the first half of this year. The performance of the global communications group tends to reflect the state of the advertising economy as a whole.

In its interim results issued today, WPP said that revenues in the six months to June 30 were down 2% to £1.91 billion, (+2% in constant currencies). Pre-tax profits before one-off exceptional items fell by 4.7% to £202.9 million, although this exceeded analysts expectations of £186 million.

The UK, which accounts for more than 16% of WPP turnover, remains a difficult market and revenues were down 1.8% in constant currencies. Continental Europe performed rather better with growth of 2.7% while North America was up 2.2% and other regions reported a 3.1% increase.

Revenues at WPP’s core advertising and media business grew by 3.7% while information, insight and consultancy rose 3.6%. On the downside, PR dropped 2.9% and branding and identity, healthcare and specialist communications saw a 0.6% decline.

WPP chief executive Sir Martin Sorrell today asserted that the advertising market is “starting to climb out of the bath” and the company will concentrate on its strategic objective of improving operating profits by 10-15% per annum. The second half of the year is already looking positive with revenues up 2% in July.

Better advertising conditions and the integration of Cordiant Communications should boost the group’s bottom line in 2004. It has been an eventful week for WPP, which announced on Wednesday that it would be selling its new found stake in ZenithOptimedia for $75 million. The company also decided to close the Bates Myanmar agency which was reported to have links with the country’s military dictatorship.

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