26th Jun 2007 12:00
WPP Group PLC26 June 2007 For Immediate Release 26 June 2007 WPP ANNUAL GENERAL MEETING TRADING UPDATE FOR FIRST FIVE MONTHS OF 2007 REPORTED REVENUES UP 1% CONSTANT CURRENCY REVENUES UP OVER 7% LIKE-FOR-LIKE REVENUES UP OVER 5% FIRST FIVE MONTHS' OPERATING MARGIN AHEAD OF BUDGET AND FORECASTS IN LINE WITH FULL YEAR MARGIN TARGET The following statement was made by the Chairman at the Company's 35th AnnualGeneral Meeting held in London at noon today: "First, a few comments on current trading over the first five months of thisyear. 2007 has seen further continued growth in revenue, profit and margins,following the record performance in 2006. On a reportable basis, worldwide revenues were up 1%, low reported growthprincipally reflecting the 9.5% depreciation in the US dollar against sterling.In constant currencies, however revenues were up over 7%. On a like-for-likebasis, excluding acquisitions and currency, revenues were up a healthy 5.2%,with growth in the first two months of the second quarter accelerating to over6%. This maintains the improvement in the organic growth rate of 5.5% seen in2005 and 5.4% seen in 2006 and an improvement on the 4.3% growth in the firstquarter of 2007. Geographically, on a constant currency basis, all regions, with the exception ofthe United Kingdom, showed strong revenue growth. In the United States, revenueswere up almost 8%. In Europe, the United Kingdom was up almost 3% andContinental Europe up almost 6%. Central and Eastern Europe was up over 12%.Asia Pacific, Latin America, Africa and the Middle East were up over 11%. By communications services sector, advertising and media investment managementrevenue was up almost 6%, information, insight & consultancy up almost 3% (withgross margin up over 5%), public relations and public affairs up over 14% andbranding and identity, healthcare and specialist communications up over 9%. The United States continues to grow well with like-for-like revenues up almost5%, and stronger than the first quarter. Asia Pacific, one of our strongestgrowing regions, showed continued strength, with like-for-like revenues up over9%. The Middle East continued the strong growth seen in the first quarter andremains our fastest growing area. Western Continental Europe, continued theimprovement seen in the second half of 2006 and the first quarter of 2007. TheUnited Kingdom, although improving over first quarter growth, remains theslowest growing region in the Group. Media investment management, as in 2006 and the first quarter of 2007 continuesto show the strongest growth of all our communications services functions, alongwith direct, internet and interactive. Direct, internet and interactive relatedactivities now account for over 23% of the Group's revenues, up from 21% lastyear. Public relations and public affairs also continue to show improvement overlast year and the first quarter, following a strong year in 2006, reflecting thepositive impact of the web, particularly social networking. The Group's operating companies continued to improve productivity in 2007,despite the increased investment in people in the first quarter of 2007, withaverage headcount, on a like-for-like basis, up 4.7% compared with revenuegrowth of 5.2% and a consequent increase in revenue per head in the first fivemonths. Operating margins in the first five months were ahead of budget, withfull year forecasts in line with the Group's full year margin objective of15.0%, compared with 14.5% in 2006. The Company continues to make significantprogress in winning major new business assignments. The Group's professional and financial strategy continues to be focused on fiveobjectives: increasing operating profit by 10% to 15% per annum; increasingoperating margins by half to one margin point per annum; reducing staff cost torevenue ratios by up to 0.6 margin points per annum; growing revenue faster thanindustry averages; and improving our creative reputation and stimulatingco-operation among Group companies. Average net debt for the first five months of this year increased £80 million to£1,186 million, compared to £1,106 million in 2006, at 2007 average exchangerates. Currently free cash flow amounts to approximately £800 million, or $1.5billion per annum. Alternatives for the use of this cash flow are capitalexpenditure, acquisitions, dividends and share buy-backs. Capital expenditure,mainly on information technology and property, is expected to remain equal to orless than the depreciation charge in the long-term. In the first five months of this year, the Group made acquisitions or increasedequity stakes in advertising & media investment management in the United States,the United Kingdom, France, Germany, the Netherlands, Spain, Russia, Brazil,Colombia, Australia, China, India, Japan and Pakistan; in information, insight &consultancy in the United States and the United Kingdom; in direct, internet andinteractive in the United States, Belgium, Germany, South Africa, Chile, Mexico,China and Korea; in healthcare in the United Kingdom and Spain. Today we announced that the necessary clearances from regulatory authorities inthe United States and Germany, relating to the offer for 24/7 Real Media Inc("24/7 Real Media"), have been received. Our wholly-owned subsidiary, TSTransaction, Inc., intends to purchase all shares of common stock in 24/7 RealMedia, that are validly tendered and not withdrawn at the close of the tenderoffer period, which is scheduled to expire at midnight New York City time onWednesday, 27 June 2007. Your Board also continues to focus on examining the alternative betweenincreasing dividends and accelerating share buy-backs, and as mentioned in theGroup's 2006 Preliminary Announcement, your Board decided to further increasethe target percentage for rolling share buy-backs on the open market, from 2-3%of its share capital each year, or approximately £200-300 million, to 4-5%, orapproximately £400-500 million in each of 2007 and 2008. In the first fivemonths of 2007, 23.256 million ordinary shares, or over 2% of the Group's sharecapital, were purchased at an average price of £7.54 per share and total cost of£175.4 million, an annual rate of over 4%. All of these shares were purchased inthe market and subsequently cancelled. The parent company's objectives continue to be to encourage greaterco-ordination and co-operation among Group companies, where this will benefitour clients and our people, and to improve our creative product. As bothmulti-national and national clients seek to expand geographically, while at thesame time seeking greater efficiencies, the Group is uniquely placed to deliveradded value to clients with its coherent spread of functional and geographicactivities. To these ends we continue to develop our parent company talents in five areas:in human resources, with innovative recruitment programmes, training and careerdevelopment, and incentive planning; in property, which includes radicalre-design of the space we use to improve communication as well as theutilisation of surplus property; in procurement, to ensure we are using theGroup's considerable buying power to the benefit of our companies and ourclients; in information technology, to ensure that the rapid improvements intechnology and capacity are deployed as quickly and effectively as possible; andfinally in practice development where cross-brand or cross-tribe approaches arebeing developed in a number of product or service areas: media investmentmanagement, healthcare, privatisation, new technologies, new faster growingmarkets, internal communications, retail, entertainment and media, financialservices, and hi-tech and telecommunications. In addition, we continue to seek to improve our creative product as broadly aspossible, by recruiting, developing and retaining excellent talent, acquiringoutstanding creative businesses, recognising and celebrating creative success.Significant progress was evident at the Advertising Festival in Cannes lastweek, for example. We are today publishing our fifth Corporate Responsibility Report ("CRR").During the last year, public and political attention to the issue of climatechange has greatly intensified, confirming our conviction of the importance ofthe CRR. In this year's CRR, we have calculated our global carbon footprint from energyuse and business travel to be approximately 260,000 tonnes of CO2. This is not,relatively, a huge amount but we believe that all corporations now need to takesteps to help address this global issue. It's a startling fact that, of theworld's 100 most powerful economies, 52 are corporations. Climate change is increasingly important to WPP's clients and our work isalready helping them develop and communicate their climate strategies. As theiradvisors, we should meet the standards of behaviour we recommend to our clients. Our new CR strategy has two key elements : The first and most significant is to target a reduction in our carbon footprintof 20% by the end of 2010. We have already established regional Energy ActionTeams to devise and implement the changes necessary to our office portfolio, IT,energy sourcing and travel requirements. You can find more detail on ourwebsite. The second is we have decided to purchase carbon offsets through the CarbonNeutral Company equal to our total CO2 emissions. This is often described as'carbon neutrality'. We have taken great care to source all offsets only fromrenewable energy generation schemes which will be independently verified. In thelonger term, however, we recognise that simply buying offsets is no substitutefor a well thought through and executed plan to reduce corporate carbonemissions in the first place. And finally, a reminder: 2006 was a very good year, our best yet. 2007 promisesto be even better. My report to you today has contained a lot of good news. It was an excellentyear - and our management deserves great credit. But they would wish me toremind you that - probably more than any other company of its size in the world- WPP's performance is reliant on the performance of its 100,000 people. Little we do is automated; there are few economies of scale. The tens ofthousands of projects we undertake every year on behalf of our clients are bydefinition all different, all made-to-measure, all the product of individualhuman brains. And these brains, these talents, can be found in over 100 countries around theworld ... in over 100 different companies ... working in every one of the many,many different and highly competitive disciplines that make up the marketingcommunications market. So when we look back on another extremely satisfactory year, it's important tous that our share owners should recognise as fully as our management the debt weowe to our people. It's my great pleasure to close this statement by honouring them for the qualityof their contribution and thanking them for their continued commitment. For further information, please contact: Sir Martin Sorrell )Paul Richardson ) +44 (0)20 7408 2204Feona McEwan )Fran Butera (1) 212 632 2235 www.wpp.com Important Information This statement is for informational purposes only and is not an offer to buy orthe solicitation of an offer to sell any of 24/7 Real Media's common shares. The tender offer for 24/7 Real Media is being made pursuant to a Tender OfferStatement on Schedule TO (including the Offer to Purchase, the related Letter ofTransmittal and other tender offer materials) filed by WPP and TS Transactionwith the SEC on May 31, 2007, as amended. These documents contain importantinformation about the tender offer and stockholders of 24/7 Real Media are urgedto read them carefully before making any decision regarding tendering theirshares. The Offer to Purchase, the related Letter of Transmittal and certain other offerdocuments as well as the Solicitation/Recommendation Statement, are availablefree of charge on the SEC's website (www.sec.gov) or from D.F. King & Co., Inc.,the information agent for the tender offer at (888) 605-1958 (toll free).Citibank N.A. is acting as depositary for the tender offer. Forward-looking Statement This statement includes statements that are, or may be deemed to be,"forward-looking" statements. These forward-looking statements can be identifiedby the use of forward-looking terminology, including inter alia the terms"believes", "plans", "expects", "may", "will" or "should" or, in each case,their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical factsand include statements regarding WPP's intentions, beliefs or currentexpectations concerning, among other things, WPP's results of operations,financial condition, liquidity, prospects, growth, strategies, the outlook forrelevant markets and the proposed acquisition of 24/7 Real Media. By theirnature, forward-looking statements involve risk and uncertainty because theyrelate to future events and circumstances. A number of factors could causeactual results and developments to differ materially from those expressed orimplied by the forward-looking statements. Forward-looking statements may andoften do differ materially from actual results. Any forward-looking statementsin this statement reflect WPP's view with respect to future events as of thedate of this release and are subject to risks relating to future events andother risks, uncertainties and assumptions relating to WPP's operations, resultsof operations, growth strategy and liquidity. Save as required by relevant law or regulation, WPP undertakes no obligationpublicly to release the results of any revisions to any forward-lookingstatements in this statement that may occur due to any change in itsexpectations or to reflect events or circumstances after the date of thisrelease. Information in this statement should not be relied upon as a guide tofuture performance. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WPP