27th Jun 2005 12:00
WPP Group PLC27 June 2005 FOR IMMEDIATE RELEASE 27 June 2005 WPP ANNUAL GENERAL MEETING TRADING UPDATE FOR FIRST FIVE MONTHS OF 2005 REPORTED REVENUES UP OVER 20% CONSTANT CURRENCY REVENUES UP OVER 21% LIKE-FOR-LIKE REVENUES UP OVER 6% FIRST FIVE MONTHS' OPERATING MARGIN AHEAD OF BUDGET CONTINUING IMPROVEMENT IN LIQUIDITY The following statement was made by the Chairman at the Company's 33rd AnnualGeneral Meeting held in London at noon today: "First, a few comments on current trading over the first five months of 2005.2005 has seen further significant growth in revenue, profit and margins,following the strong performance in 2004. The United States continues to grow, continuing the recovery first seen inAugust 2002. Latin America remains the fastest growing region, as it was in2004. Asia Pacific remains strong across the region, with China and Indialeading the way. Western Europe, although relatively more difficult, hasstabilised and the United Kingdom has improved. Rates of growth in Europecontinue, however, to be two-paced, with parts of Germany, France, Sweden,Denmark, Benelux and Portugal remaining difficult and Eastern Europe, Russia andthe CIS countries in particular, more buoyant. Media investment management continues to show the strongest growth of all ourcommunications services sectors, along with direct, internet and interactive andhealthcare communications. Direct, internet and interactive related activitiesnow account for almost 15% of the Group's revenues, which are running at therate of approximately $10 billion. Brand advertising continues to grow, alongwith information insight & consultancy and branding & identity. Publicrelations and public affairs also continues to show significant improvement overlast year, following a strong year in 2004. On a reportable basis, worldwide revenues were up over 20%, reflecting strongorganic growth and the contribution from Grey Global Group ("Grey") from 7 March2005. The impact of currency in the first five months was minimal - constantcurrency revenues were up over 21%. On a like-for-like basis, excludingacquisitions and currency fluctuations, revenues were up over 6%. This reflectsa further improvement in the last two months on the trend seen in the firstquarter of this year. Geographically, again on a constant currency basis, all regions showeddouble-digit revenue growth. In the USA, revenues were up over 22%. In Europe,the UK was up over 14% and Continental Europe up over 21%. Asia Pacific, LatinAmerica, Africa and the Middle East were up almost 25%. By communications services sector, advertising and media investment managementwas up over 25%, information, insight & consultancy up over 16%, publicrelations and public affairs up over 14% and branding and identity, healthcareand specialist communications up almost 20%. On a like-for-like basis thecombined revenue growth of media investment management and information, insight& consultancy was almost 11%, twice the rate of growth seen at some competitors. The Group's operating companies continued to improve productivity in 2005 withaverage headcount, on a like-for-like basis, up 5.1% compared with revenuegrowth of over 6% and a consequent increase in revenue per head in the firstfive months. Operating margins in the first five months were ahead of budget,which targeted a full year margin in line with the Group's objective of 14.3%,including Grey. The Company continues to make significant progress in winningmajor new business assignments. The Group's financial strategy continues to be focused on three objectives:increasing operating profit by 10% - 15% per annum; increasing operating marginsby up to 1.0 margin point per annum, or more depending on the level of revenuegrowth; and reducing staff cost to revenue ratios by up to 0.6 margin points perannum, again depending on the level of revenue growth. Currently surplus cash flow amounts to over £550 million per annum. Average netdebt for the first five months of this year was down £130 million, or 15%, to£740 million, compared to £870 million in 2004, at 2005 exchange rates, despitea gross cash payment of £384 million for Grey on 7 March, 2005. Alternativesfor the use of this cash flow are capital expenditure, acquisitions, dividendsand share buy-backs. Capital expenditure, mainly on information technology andproperty, is expected to remain equal to or less than the depreciation charge inthe long term. In addition to the completion of the acquisition of Grey, theCompany continues to make small to medium-sized acquisitions or investments inhigh growth geographical or functional areas. In the first five months of thisyear, acquisitions and increased equity stakes have been concentratedgeographically in advertising & media investment management in the UnitedKingdom, Denmark, the Netherlands, Spain, Russia and Argentina; in information,insight & consultancy in the United States, Hong Kong, Korea and New Zealand; inpublic relations & public affairs in Denmark, Bahrain and Argentina; inhealthcare in the United States, the Netherlands and Switzerland and in direct,internet & interactive in the United States. Your Board also continues to focus on balancing the alternative betweenincreasing the dividend pay-out ratio and share buy-backs, and has continued arolling share repurchase programme aimed at buying in up to 2% of its shares inthe open market each year, when market conditions are appropriate. So far thisyear, this has resulted in the purchase of 11.944 million shares (of which 9.325million were cancelled), or approximately 1% of the outstanding equity. This,at a total cost of £71.2 million and at an average cost of £5.96 per share. Professionally, the parent company's objectives continue to be to encouragegreater co-ordination and co-operation between Group companies, where this willbenefit our clients and our people, and to improve our creative product. Asboth multi-national and national clients seek to expand geographically, while atthe same time seeking greater efficiencies, the Group is uniquely placed todeliver added value to clients with its coherent spread of functional andgeographic activities. To these ends we continue to develop our parent company talents in five areas: in human resources, with innovative recruitment programmes, training andcareer development, 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 clients; in informationtechnology, to ensure that the rapid improvements in technology and capacity aredeployed as quickly and effectively as possible; and finally in practicedevelopment where cross-brand or cross-tribe approaches are being developed in anumber of product or service areas: media investment management, healthcare,new technologies, new markets, privatisation, internal communications,retailing, financial services, entertainment and media, and hi-tech. In addition, we continue to seek to improve our creative product in as broadly adefined sense as possible, by recruiting, developing and retaining excellenttalent, acquiring outstanding creative businesses, recognising and celebratingcreative success. But we should never forget, when reporting large numbers and significantachievements, one of the essential truths of our business. More than in any other business I can think of, success in our sector - thecreative industries - is dependent on the ingenuity, intelligence, imagination,enterprise and talent of individual men and women. Advertising and marketingservices companies are not factories mechanically churning out images, ideas anddata as if they were cars or t-shirts. Everything we do is bespoke to meet aclient's precise needs. Every piece of work derives from thousands of hours ofexperience and training - and that essential human spark that brings to life thesimplest project, phrase or design. So may I finish by turning the focus on the 84,000 people who work for WPPcompanies around the world who in aggregate make your company the force it istoday. On your behalf and that of the Board, I would like to thank every one of them,and record our admiration and appreciation of their outstanding efforts. 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 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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