20th Apr 2007 07:01
WPP Group PLC20 April 2007 FOR IMMEDIATE RELEASE 20 April 2007 WPP QUARTERLY TRADING UPDATE CONSTANT CURRENCY REVENUES UP OVER 6% LIKE-FOR-LIKE REVENUES UP OVER 4% FIRST QUARTER OPERATING MARGIN IN LINE WITH BUDGET FULL YEAR OPERATING MARGIN FORECAST TO INCREASE IN LINE WITH TARGET OF 15% Current Trading Reportable revenues were £1.366 billion, down 0.7%, principally reflecting the11% decline in the US dollar against sterling. In constant currencies, firstquarter revenues were up 6.3%. On a like-for-like basis, excluding acquisitionsand currency, revenues were up 4.3%. On the same basis, gross margin(1) was up4.6%. This continues the mid-single digit organic growth rate of the last twoand a half years, which began with the second-half of 2004 and continued through2005 and 2006. This also reflects the continued strong economic environmentacross the world. Some softness in the United States in the last few months,relative to the strong last half of 2006, has been largely counter-balanced byimprovements in Western Europe. As shown in the appendix, on a constant currency basis, Asia Pacific, LatinAmerica, Africa and the Middle East, continue to be the fastest growing region,with revenues up almost 12%. North America remains strong with revenues up over6%. Continental Europe was up over 4% with Western Continental Europe continuingthe improvement seen in the second half of 2006. Although the United Kingdomremained the slowest growing region, revenues were up over 2% and gross marginup over 3%, reflecting the significance of market research revenues in theUnited Kingdom. As more market research is executed on the web, both revenue anddirect costs are reduced. As a result, gross margin is probably the bettermeasure of performance. The United States continues to grow, with like-for-like revenues up almost 4%.The Middle East continues to be the fastest growing area, up almost 22%like-for-like and Latin America continues the strong growth of 2006, with almost10% like-for-like growth. Asia Pacific remains strong, with revenues up almost9%. China and India continued the rapid growth seen in 2006, with first quarterlike-for-like revenues up 25% and over 16% respectively. Western ContinentalEurope, although still relatively more difficult, has seen some improvement,particularly in France, Germany and Italy. The United Kingdom, although better,remains the slowest growing region in the Group. By communications services sector, public relations & public affairs showed thestrongest growth with constant currency revenues up almost 13%, with branding &identity, healthcare and specialist communications (including direct, internetand interactive) up over 9% and advertising & media investment management upover 4%. Information, insight & consultancy was up over 1% and gross margin wasup over 5%. Again, as mentioned before, gross margin is a better measure ofperformance. Media investment management and direct, internet and interactive continue toshow strong growth at almost 11% on a like-for-like basis. Net new business billings of £516 million ($1.007 billion) were won during thefirst quarter and the Group continues to benefit from consolidation trends inthe industry, winning several assignments from existing and new clients. In the first quarter, both operating margins and profitability were in line withbudget. Full year margin forecasts are in line with the Group's margin targetfor 2007 of 15.0%. On a proforma basis, the number of people in the Group, excluding associates,was up 5.0% or 3,837 at 31 March 2007 to 81,165, as compared to the previousyear. On the same basis, in the first quarter of 2007, the number of people inthe Group averaged 80,867, up 5.1% or 3,937. In line with our strategy,approximately 70% of these increases were added in the faster growing geographicmarkets of Asia Pacific, Latin America, Africa and the Middle East and Centraland Eastern Europe which now account for around 22% of Group revenues. Balance Sheet and Cash Flow The Group continues to implement its strategy of using free cash flow to enhanceshare owner value through a judicious combination of capital expenditure,acquisitions and share repurchases, whilst ensuring that these expenditures arecovered by free cash flow. In the twelve months to 31 March 2007, the Group'sfree cash flow was £817 million. Over the same period, the Group's capitalexpenditure, acquisitions, share repurchases and dividends were £741 million. Average net debt in the first quarter of 2007 was up £39 million to £1,029million, compared to £990 million in 2006, at 2007 exchange rates. Net debt at31 March 2007 was £1,309 million compared to £1,133 million in 2006 (at constantexchange rates) an increase of £176 million. The current net debt figurecompares with a market capitalisation of approximately £9.7 billion. In the first quarter of 2007, the Group made acquisitions or increased equityinterests in advertising and media investment management in the United States,France, Germany, the Netherlands, Russia, Brazil, Colombia, Australia and China;in information, insight & consultancy in the United States and the UnitedKingdom; in direct, internet and interactive in the United States and Mexico. In the first quarter of 2007, 13.95 million ordinary shares, or over 1% of theGroup's share capital, were purchased at an average price of £7.54 per share andtotal cost of £105.2 million. All of these shares were purchased in the marketand subsequently cancelled. As mentioned in the Group's 2006 PreliminaryAnnouncement, your Board decided to further increase the target percentage forrolling share buy-backs on the open market, from 2-3% of its share capital eachyear, or approximately £200-300 million, to 4-5%, or approximately £400-500million in each of 2007 and 2008. We are currently running at an annual rate ofover 4%. Future Objectives The Group continues to focus on its key objectives of improving operatingprofits by 10% to 15% per annum; improving operating margins by a half to onemargin point per annum; improving staff cost to revenue ratios by up to 0.6margin points per annum; growing revenue faster than industry averages;continuing to improve our creative reputation and stimulating furtherco-operation among Group companies. For further information:Sir Martin Sorrell ) +44 (0)20 7408 2204Paul Richardson )Feona McEwan )Fran Butera (1) 212 632 2235 This press release may contain forward-looking statements within the meaning ofthe federal securities laws. These statements are subject to risks anduncertainties that could cause actual results to differ materially includingadjustments arising from the annual audit by management and the company'sindependent auditors. For further information on factors which could impact thecompany and the statements contained herein, please refer to public filings bythe company with the Securities and Exchange Commission. The statements in thispress release should be considered in light of these risks and uncertainties. Appendix: Revenue and revenue growth by region and communications servicessector 3 months ended 31 March 2007 Revenue Constant Growth CurrencyRegion Reported Growth(1) 2007 % 2006 % 2007/2006 2007/2006 £m Total £m Total % % North America 531.6 39 560.1 41 -5.1 6.5 United Kingdom 206.5 15 202.1 15 2.2 2.2* Continental Europe 352.5 26 346.3 25 1.8 4.4 Asia Pacific, LatinAmerica, Africa& Middle East 275.4 20 267.3 19 3.0 11.7 ------- ------ ------- ------ --------- --------- TOTAL GROUP 1,366.0 100 1,375.8 100 -0.7 6.3 ------- ------ ------- ------ --------- --------- *Gross margin up 3.1% Communications Revenue ConstantServices Sector Growth Currency Reported Growth1 2007 % 2006 % 2007/2006 2007/2006 £m Total £m Total % % Advertising, MediaInvestmentManagement 630.5 46 644.5 47 -2.2 4.5 Information, Insight& Consultancy 204.1 15 214.0 16 -4.6 1.4* Public Relations& Public Affairs 147.4 11 140.6 10 4.8 12.9 Branding & Identity,Healthcare andSpecialist 384.0 28 376.7 27 1.9 9.6Communications ------- ------ ------- ------ --------- --------- TOTAL GROUP 1,366.0 100 1,375.8 100 -0.7 6.3 ------- ------ ------- ------ --------- --------- *Gross margin up 5.5% -------------------------- (1) Gross margin is revenue less direct costs This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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