Q1 2004 Trading Update
WPP Group PLC
30 April 2004
FOR IMMEDIATE RELEASE 30 April 2004
WPP
QUARTERLY TRADING UPDATE
REPORTED REVENUES UP ALMOST 6%
CONSTANT CURRENCY REVENUES UP OVER 12%
LIKE-FOR-LIKE REVENUES UP ALMOST 2%
FIRST QUARTER OPERATING MARGIN ABOVE BUDGET
FULL YEAR OPERATING MARGIN FORECAST TO INCREASE IN
LINE WITH TARGET
SIGNIFICANT IMPROVEMENT IN LIQUIDITY
Current Trading
Reported revenues rose by almost 6%. In constant currencies, first quarter
revenues were up by over 12%, the difference being primarily due to the weakness
of the dollar. On a like-for-like basis, excluding acquisitions and currency
fluctuations, revenues were up almost 2%. Excluding the acquisition of Cordiant,
like-for-like revenues were up almost 4%. This reflects continued sequential
improvement in the last three quarters, with revenue growth, excluding Cordiant,
of over 2% in the third quarter of 2003 and of over 3% in the last quarter of
2003.
As shown in the appendix to this release, on a constant currency basis, all
regions, except Continental Europe, showed double digit revenue growth. In
North America, revenues were up by almost 11%. In Europe, the UK was up almost
12% and Continental Europe up over 7%. Asia Pacific, Latin America, Africa and
the Middle East was up over 28%.
By communications services sector, advertising and media investment management
was up over 14%, information, insight and consultancy up over 3%, public
relations and public affairs up almost 6% (which includes, on a pro-forma basis,
certain of the Group's public relations businesses in Asia which were previously
included in advertising), and branding and identity, healthcare and specialist
communications up over 19%. Public relations and public affairs, the sector
most affected by the recession, has finally started to pick up.
Net new business billings of £514 million ($926 million) were won during the
first quarter. The Group continues to benefit from consolidation trends in the
industry, winning several large assignments from existing and new clients. There
are an increasing number of new business opportunities, as clients turn their
attention to managing for growth and the top line, rather than focussing totally
on costs. In addition, there are signs that corporate capital expenditures
(particularly in technology) are picking up, possibly filling any potential
vacuum in consumer spending.
In the first quarter both profitability and operating margin were above budget
due to strong revenue conversion, and full year margin forecasts are in line
with the Group's margin target for 2004 of an increase of 0.8 margin points to
13.8%. Operating margin targets for 2005 and 2006 will be set at the end of
August, when the Group's half year results are announced. Targets will be in
the range of 14% - 15% for 2005 and at least 15% for 2006.
As noted in the Group's preliminary announcement for 2003, excluding Cordiant,
like-for-like revenue growth improved in each quarter. This sequential
improvement was maintained in the first quarter of 2004, with like-for-like
revenues, excluding Cordiant, up almost 4%.
The Group's operating companies continued to improve productivity. On a
pro-forma basis, the number of people in the Group (excluding associates) was
virtually flat at 55,938 on 31 March 2004 as compared to 55,780 on 1 January
2004. In the first quarter of 2004, average headcount on a like-for-like basis
was down almost 3% compared with the first quarter of 2003.
Balance Sheet and Cash Flow
The Group continues to implement its strategy of using free cash flow to enhance
share owner value through a judicious combination of capital expenditure,
acquisitions and share cancellations, whilst ensuring that these expenditures
are covered by free cash flow.
Net debt at 31 March 2004 fell sharply by £538 million (or by £426 million at
2004 exchange rates) to £797 million, compared to £1,335 million at the same
date in 2003. Average net debt in the first quarter of 2004 was down £376
million to £730 million compared to £1,106 million in 2003, at 2004 exchange
rates. At this level, the Group's gearing is comfortable. In the twelve
months to 31 March 2004, the Group's free cash flow was £465 million. Over the
same period, the Group's capital expenditure, acquisitions and share
cancellations were £458 million.
In the first quarter of 2004, the Group completed acquisitions or increased
equity interests in advertising and media investment management in Germany,
Sweden, Indonesia and South Korea and in public relations and public affairs in
the United States and the United Kingdom.
6,600,000 ordinary shares were purchased in the first quarter of 2004, at an
average price of £5.57 per share and total cost of £36.8 million. All of these
shares were cancelled. As the return on capital criteria for investing in cash
acquisitions have been raised, particularly in the United States, the Company
will continue to commit to repurchasing up to 2% annually of its share base in
the open market at an approximate cost of £150 million, when market conditions
are appropriate.
Future Objectives
The Group continues to focus on its key objectives of 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 and
improve return on capital employed; 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.
For further information:
Sir Martin Sorrell ) 44 207 408 2204
Paul Richardson ) 1 212 632 2301
Feona McEwan )
This press release may contain forward-looking statements within the meaning of
the federal securities laws. These statements are subject to risks and
uncertainties that could cause actual results to differ materially including
adjustments arising from the annual audit by management and the company's
independent auditors. For further information on factors which could impact the
company and the statements contained herein, please refer to public filings by
the company with the Securities and Exchange Commission. The statements in this
press release should be considered in light of these risks and uncertainties.
Appendix: Revenue and revenue growth by region and communications services
sector
3 months ended March 31, 2004
Revenue Constant
Currency
Growth
Region Reported Growth (1)
2004 % 2003 % 2004/2003 2004/2003
£m Total £m Total % %
North America 390.3 41 401.2 44 -2.7 10.8
United Kingdom 164.7 17 147.5 16 11.7 11.7
Continental Europe 246.0 26 228.8 25 7.5 7.2
Asia Pacific, Latin
America, Africa
& Middle East 159.3 16 131.0 15 21.6 28.2
TOTAL GROUP 960.3 100 908.5 100 5.7 12.5
Revenue Constant
Communications Services Growth Currency
Sector
Reported Growth (1)
2004 % 2003 % 2004/2003 2004/2003
£m Total £m Total % %
Advertising, Media
Investment
Management (2) 439.5 46 409.6 45 7.3 14.3
Information, Insight &
Consultancy 158.3 16 161.0 18 -1.6 3.1
Public Relations
& Public Affairs (2) 105.3 11 108.3 12 -2.8 5.6
Branding & Identity,
Healthcare and 257.2 27 229.6 25 12.0 19.2
Specialist Communications
TOTAL GROUP 960.3 100 908.5 100 5.7 12.5
(1) Constant currency growth excludes the effects of currency movements.
(2) In 2004, certain public relations revenue which historically was included in
Advertising, Media Investment Management
has been moved to Public Relations and Public Affairs. As a result, the
comparative figures for both Advertising, Media
Investment Management and Public Relations and Public Affairs have been
re-stated to reflect this change.
This information is provided by RNS
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