Q3 Revenues Up Almost 12% in Constant Currencies
WPP GROUP PLC
25 October 1999
WPP GROUP PLC
QUARTERLY TRADING UPDATE
THIRD QUARTER REVENUES UP ALMOST 12% IN CONSTANT
CURRENCIES
OPERATING MARGINS ON PLAN TO IMPROVE BY 0.6% IN 1999
Revenue Growth - Third Quarter
In constant currencies, third quarter revenues rose by
almost 12%. Sterlings weakness against the United
States dollar and the Japanese Yen was only partially
offset by strength against major European currencies and
as a result reported revenues rose by over 14%.
As shown in the Appendix to this release, on a constant
currency basis, the geographical pattern of revenue
growth varied in the third quarter. In North America,
revenues were up almost 14%. In Europe, the United
Kingdom and Continental Europe were both up over 12%.
Asia Pacific, Latin America, Africa, and the Middle East
was up over 7%, better than the first half, reflecting an
improvement in economic conditions in Asia Pacific and an
easier year-to-year comparison for Latin America.
By function, advertising, media planning, buying and
research was up almost 5% reflecting the Groups improved
new business performance in the first half of the year.
Information and consultancy was up almost 9%, public
relations and public affairs up almost 32% and branding &
identity, healthcare and specialist communications up
almost 23%.
Net new business billings of £730 million ($1.2 billion)
were won during the third quarter. This compares to £330
million ($545 million) for the comparable quarter last
year. The Group continues to benefit from consolidation
trends in the industry winning several large assignments
from existing and new clients such as FiNet, Ford,
Mattel, Mazda, Miller, SAP, Tele 2, Thepavement.com,
Unilever, WebMD and Wings Alliance.
Revenue Growth - Nine Months
In the first nine months of 1999, revenues rose by almost
12% and gross profit by 11% in constant currencies. On
average, sterling weakened by just under 2% against all
other currencies and the same period last year. As a
result reported revenues rose by over 13%.
As shown in the appendix, in the first nine months
constant currency revenue growth was almost 15% in North
America. United Kingdom revenues were up almost 13% and
Continental Europe over 12%. Asia Pacific, Latin
America, Africa and the Middle East revenues were up over
1%, chiefly reflecting the economic difficulties facing
Latin America.
By function, advertising, media planning, buying and
research revenue growth was up over 4%, information and
consultancy up almost 14%, public relations and public
affairs up over 28% and branding & identity, healthcare
and specialist communications up by almost 20%.
Current trading
For the first nine months of 1999, the Groups
profitability was well ahead of last year. The first
nine months performance indicates that the Group will
achieve its objective of a further 0.6% improvement in
1999 in reported operating margins from 12.8% to 13.4%.
Balance sheet and cashflow
The Group continues to implement its strategy of using free
cashflow to enhance shareowner value through a combination
of strategic acquisitions and share purchases.
In the third quarter of 1999 the Group completed
acquisitions in advertising, media planning, buying and
research in Continental Europe and Latin America; in public
relations and public affairs in the United Kingdom and
Latin America; in information and consultancy in the United
States and Europe; in branding & identity, healthcare and
specialist communications in Continental Europe and Latin
America.
2.5 million WPP shares were purchased during the third
quarter at an average price of £5.43 and total cost of
almost £14 million. In the first nine months of 1999 the
Group has purchased 3.3 million WPP shares at a total
cost of £17.9 million. The rolling share re-purchase and
buy-back programme continues at a target level of £50
million per annum, equivalent to approximately 1% of the
current market capitalisation.
Average net debt rose during the third quarter to £226
million from £206 million in the same period last year in
constant currencies and compares to a market
capitalisation of approximately £5 billion. This
reflects the £220 million spent on capital expenditure,
acquisitions and share purchases in the previous twelve
months. Free cashflow over the same period was £208
million.
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 cashflow to enhance
shareowner value, continuing to develop the role of the
parent company in adding value to our clients and people,
improving our creative quality and capabilities and
developing our portfolio in high revenue growth
geographic and functional areas.
For further information:
Martin Sorrell )
Paul Richardson ) (44) 020 7 408 2204
Feona McEwan )
Andrew Hall (1) 212 632 2314
Appendix: Revenue and revenue growth by region and sector
3 months ended September 30, 1999
Revenue Revenue Revenue Constant
1999 1998 growth currency
Region £m £m report growth1
99/98 99/98
% %
North America 238.4 203.4 17.2 13.7
United Kingdom 110.3 98.3 12.2 12.2
Continental
Europe 6.4 88.2 9.3 12.5
Asia Pacific,
Latin
America,
Africa,
Middle East 92.7 81.1 14.3 7.1
Total Group 537.8 471.0 14.2 11.9
Marketing Revenue Revenue Revenue Constant
Services 1999 1998 growth currency
Sector £m £m reported growth1
99/98 99/98
% %
Advertising,
Media
Planning,
Buying &
Research 242.0 225.2 7.5 4.9
Information &
Consultancy 107.1 97.5 9.8 8.6
Public
Relations &
Public Affairs 46.3 34.2 35.4 31.8
Branding &
Identity,
Healthcare
and
Specialist
Communications 142.4 114.1 24.8 22.9
Total Group 537.8 471.0 14.2 11.9
1 Constant currency revenue growth excludes the effect of
currency movements.
Appendix: Revenue and revenue growth by region and sector
9 months ended September 30, 1999
Revenue Revenue Revenue Constant
1999 1998 growth currency
Region £m £m reported growth1
99/98 99/98
% %
North America 690.4 587.9 17.4 14.8
United
Kingdom 322.3 285.6 12.9 12.9
Continental
Europe 295.5 262.9 12.4 12.3
Asia Pacific,
Latin
America,
Africa,
Middle East 246.9 234.5 5.3 1.5
Total Group 1,555.1 1,370.9 13.4 11.6
Marketing Revenue Revenue Revenue Constant
Services 1999 1998 growth currency
Sector £m £m reported growth1
99/98 99/98
% %
Advertising,
Media
Planning,
Buying &
Research 719.2 675.6 6.5 4.3
Information &
Consultancy 299.0 260.8 14.6 13.7
Public
Relations &
Public
Affairs 129.1 98.9 30.5 28.1
Branding &
Identity,
Healthcare
and
Specialist
Communications 407.8 335.6 21.5 19.8
Total Group 1,555.1 1,370.9 13.4 11.6
1 Constant currency revenue growth excludes the effect of
currency movements.