Acquisitions play a large part in the fortunes – or otherwise – of WPP this year. First half revenues were up over 56%, largely due to the contribution made by last year’s big name acquisition Young & Rubicam, along with several other smaller companies acquired along the way, whilst all the talk at the moment is of the deal WPP is trying to wriggle out of.
In real terms, revenues at WPP have fallen by 6% and the company has slashed over 3,000 jobs from its total workforce. In the trading statement issued this morning it said that achieving its operating margin target of 15% for 2001 would be ‘very difficult’.
In the trading statement issued this morning WPP said that “Combined WPP and Y&R constant currency revenues declined over 3% mainly reflecting the impact of the tragic events on 11 September 2001 and subsequent developments in the United States. On a like-for-like basis, excluding acquisitions and currency fluctuations, revenues fell by over 6%.”
WPP has cut over 3,000 jobs from its total workforce already this year in an attempt to minimise losses and estimates that, if present trends continue into Q4, like-for-like revenues for the full year could fall by 2%. The effect of the US attacks on the advertising market has been widely reported, with News Corp claiming losses of £69 million and Viacom estimating total losses at £350 million. WPP said that losses sustained within the group as a result of the events would be at least £20 million, largely within its public relations and public affairs divisions.
Operating margins after ‘exceptional revenue losses and costs’ (as the 11 September losses may be considered) for 2001 are expected to be similar to those for 2000.
WPP makes no mention of the Tempus offer in the statement and states that key objectives for the future are “improving operating profits and margins, increasing cost flexibility (particularly in the areas of staff and property costs), using free cash flow to enhance share owner value, continuing to develop the role of the parent company in adding value to our clients and people, developing our portfolio in high revenue growth, geographical and functional areas and improving our creative quality and capabilities.”
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