27th Jun 2006 12:00
WPP Group PLC27 June 2006 For Immediate Release 27 June 2006 WPP ANNUAL GENERAL MEETING TRADING UPDATE FOR FIRST FIVE MONTHS OF 2006 REPORTED REVENUES UP OVER 17% CONSTANT CURRENCY REVENUES UP OVER 13% LIKE-FOR-LIKE REVENUES UP OVER 4.5% FIRST FIVE MONTHS' OPERATING MARGIN AHEAD OF BUDGET AND IN LINE WITH FULL YEAR MARGIN TARGET The following statement was made by the Chairman at the Company's 34th AnnualGeneral Meeting held in London at noon today: "First, a few comments on current trading over the first five months of thisyear. 2006 has seen further continued growth in revenue, profit and margins,following the record performance in 2005. On a reportable basis, worldwide revenues were up over 17%. In constantcurrencies, revenues were up over 13%. Currency fluctuations in the first fivemonths of 2006 were principally due to the weakness of sterling against the USdollar. On a like-for-like basis, excluding acquisitions and currency, revenueswere up 4.5%. This maintains the improvement in the organic growth rate of thelast twenty months, which began towards the end of 2004 and continued through2005 and the first quarter of 2006. Geographically, on a constant currency basis, all regions, with the exception ofthe United Kingdom, showed double-digit revenue growth. In the US, revenues wereup almost 12%. In Europe, the UK was up over 6% and Continental Europe up over11%. Eastern Europe was up over 49%. Asia Pacific, Latin America, Africa and theMiddle East were up almost 23%. By communications services sector, advertising and media investment managementwas up over 11%, information, insight & consultancy up almost 8%, publicrelations and public affairs up over 12% and branding and identity, healthcareand specialist communications up over 20%. The United States continues to grow, like-for-like revenues up almost 4%,similar to the first quarter. Asia Pacific, one of our strongest growingregions, showed continued strength, with like-for-like revenues up over 8%. TheMiddle East continued its strong growth seen in the first quarter and remainsour fastest growing area. Western Continental Europe, although still relativelymore difficult, has, together with the UK, stabilised. The UK, however, remainsthe slowest growing region in the Group, as it was in the first quarter. Media investment management, as in 2005 and the first quarter of 2006, continuesto show the strongest growth of all our communications services functions, alongwith direct, internet and interactive and healthcare communications. Direct,internet and interactive related activities now account for almost 18% of theGroup's revenues, up from 15% last year. Public relations and public affairsalso continue to show improvement over last year and the first quarter,following a strong year in 2005. The Group's operating companies continued to improve productivity in 2006 withaverage headcount, on a like-for-like basis, up 3.4% compared with revenuegrowth of 4.5% and a consequent increase in revenue per head in the first fivemonths. Operating margins in the first five months were ahead of budget and inline with the Group's full year margin objective of 14.5%, compared with 14.0%in 2005. The Company continues to make significant progress in winning major newbusiness assignments, ranking number one in all the new business tables for thefirst five months of the year. 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 was £1,163 million,compared to £999 million in 2005, an increase of £164 million. Currently surpluscash flow amounts to approximately £750 million per annum. Alternatives for theuse of this cash flow are capital expenditure, acquisitions, dividends and sharebuy-backs. Capital expenditure, mainly on information technology and property,is expected to remain equal to or less than the depreciation charge in the longterm. In the first five months of this year, the Group made acquisitions orincreased equity stakes in advertising & media investment management in the US,the UK, Germany, South Africa, Israel, China, Hong Kong, Singapore and Brazil;in public relations & public affairs in India; in direct, internet & interactivein the US. Your Board also continues to focus on examining the alternative betweenincreasing dividends and accelerating share buy-backs, and recently completed areview of its share buy-back policy. The Group will accelerate its sharerepurchase programme and will now aim to buy-back up to 2-3% of its sharecapital, as compared to 1-2% historically. In the first five months of 2006,20.979 million ordinary shares, equivalent to almost 2% of the share capital,were purchased, including 5.5 million ordinary shares acquired by the WPP ESOPin connection with restricted stock awards. These shares were acquired at anaverage price of £6.78 per share and total cost of £142.2 million. Of theseshares, 15.5 million were purchased in the market and subsequently cancelled. 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. 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 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,privatisation, new technologies, new faster growing markets, internalcommunications, retail, entertainment and media, financial services, and hi-techand telecommunications. 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. Significant progress was made at the Advertising Festival inCannes last week, for example. And finally, a reminder: 2005 was a very good year. But of course, what those aggregate numbers fail to reveal are the extraordinarynumber, range and diversity of quite separate achievements that go to make upthose impressive company totals. By applying their brains and their talent and their experience to the service oftheir clients, every company in every discipline on every continent hascontributed to that parent company total. The contribution of some 92,000individual people, representing a vast variety of skills, has gone to make upthat parent company total. And, as always, it is those individual skills that our clients value, and payfor. Project by project, some tens of thousands of them in all, as WPP companieshelped make their clients more successful, so, project by project, they addedinexorably to the figures presented here. So it is entirely right that we should end this statement by acknowledging thetrue source of our success - and offering our wholehearted gratitude to allthose many people who made it happen." 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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