21st Apr 2006 07:00
WPP Group PLC21 April 2006 For Immediate Release 21 April 2006 WPP QUARTERLY TRADING UPDATE REPORTED REVENUES UP OVER 23% CONSTANT CURRENCY REVENUES UP 18% LIKE-FOR-LIKE REVENUES UP ALMOST 5% FIRST QUARTER OPERATING MARGIN ABOVE BUDGET FULL YEAR OPERATING MARGIN FORECAST TO INCREASE IN LINE WITH TARGET OF 14.5% RECORD NET NEW BUSINESS FOR FIRST QUARTER Current Trading Reported revenues rose by over 23%. In constant currencies, first quarterrevenues were up 18%. The impact of currency fluctuations in the first quarterof 2006 accounted for just over 5% of the Group's revenue growth, principallydue to the strength of the US dollar against sterling. On a like-for-like basis,excluding acquisitions and currency, revenues were up almost 5%. This maintainsthe improvement in the organic growth rate of the last eighteen months, whichbegan with the last two quarters of 2004 and continued through 2005. This alsoreflects the continued relatively benign economic environment across the worldand the continued strength of the US economy. As shown in the appendix, on a constant currency basis, all regions, with theexception of the United Kingdom, showed double digit revenue growth. AsiaPacific, Latin America, Africa and the Middle East, is still the fastest growingregion, up over 26%. Continental Europe up over 19%, North America up almost 17%and the UK was the slowest growing region, up over 9%. The United States continues to grow, like-for-like revenues up almost 4%. TheMiddle East is now the fastest growing area, with Latin America continuing itsdouble-digit revenue growth. Asia Pacific remains strong, with India and Chinacontinuing the rapid growth seen in 2005, with first quarter like-for-likerevenues up sharply again. Western Continental Europe, although still relativelymore difficult, has seen some improvement, particularly in Germany. The UnitedKingdom, however, remains the slowest growing region in the Group. By communications services sector, branding & identity, healthcare andspecialist communications (including direct, internet and interactive) were fastgrowing, up almost 23%, advertising & media investment management was up over19%, with public relations & public affairs up over 14% and information, insight& consultancy up almost 10%. Media investment management, as in 2005, continues to show the strongest growthof all our communications services functions, with direct, internet andinteractive and healthcare communications growing at almost double-digits, on alike-for-like basis. Net new business billings of £1.30 billion ($2.34 billion) were won during thefirst quarter and marks the highest net new business won by the Group for afirst quarter. The Group continues to benefit from consolidation trends in theindustry, winning several large assignments from existing and new clients andwas ranked number one in all published net new business surveys for the firstquarter. In the first quarter, both operating margins and profitability were ahead ofbudget. Full year margin forecasts are in line with the Group's revised margintarget for 2006 of 14.5%. The Group's operating companies continued to improve productivity whilecontinuing to invest in talent. On a pro-forma basis, the number of people inthe Group (excluding associates) was up 4.3% or 3,168 at 31 March 2006 to75,993, as compared to the previous year. In the first quarter of 2006, averageheadcount on a like-for-like basis was up 3.8% or 2,801 to 75,744, compared withthe first quarter of 2005. 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. Average net debt in the first quarter of 2006 was up £215 million to £1,043million, compared to £828 million in 2005, at 2006 exchange rates. The currentnet debt figure compares with a market capitalisation of approximately £8.7billion. Net debt at 31 March 2006 was £1,216 million compared to £1,261million in 2005 (at constant exchange rates) a decrease of £45 million. In thetwelve months to 31 March 2006, the Group's free cash flow was £745 million.Over the same period, the Group's capital expenditure, acquisitions, sharerepurchases and dividends were £783 million. In the first quarter of 2006 the Group made acquisitions or increased equityinterests in advertising and media investment management in the United States,the United Kingdom, Germany, South Africa, Israel, China, Singapore and Brazil;in public relations and public affairs in India; in direct, internet andinteractive in the United States. In the first quarter of 2006, 13.2 million ordinary shares were purchased,including 5.5 million ordinary shares acquired by the WPP ESOP in connectionwith restricted stock awards. They were acquired at an average price of £6.81per share and total cost of £89.7 million. Of these, 7.7 million shares werepurchased in the market and subsequently cancelled. The company is reviewing itsobjective to repurchase up to 2% annually of its share base in the open marketat an approximate cost of £175 million, when market conditions are appropriate. Given the Group's cash flow of over $1 billion and under-geared balance sheet,it may be advantageous to repurchase more outstanding shares. In the firstquarter of 2006, shares were repurchased for cancellation at an annualised rateof 2.5%. Future Objectives The Group continues to focus on its key objectives of improving operatingprofits by 10% to 15% per annum; improving operating margins by 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;improving our creative reputation and stimulating co-operation among Groupcompanies. For further information: Sir Martin Sorrell )Paul Richardson ) (44) 20 7408 2204Feona 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 March 31, 2006 Revenue Constant Growth CurrencyRegion Reported Growth(1) 2006 % 2005 % 2006/2005 2006/2005 £m Total £m Total % % North America 560.1 41 443.9 40 26.2 16.7 United Kingdom 202.1 15 184.4 16 9.6 9.6 Continental Europe 346.3 25 291.5 26 18.8 19.6 Asia Pacific, LatinAmerica, Africa& Middle East 267.3 19 194.7 18 37.3 26.3 TOTAL GROUP 1,375.8 100 1,114.5 100 23.4 18.0 Revenue ConstantCommunications Services Growth CurrencySector Reported Growth1 2006 % 2005 % 2006/2005 2006/2005 £m Total £m Total % % Advertising, MediaInvestment Management 644.5 47 515.9 46 24.9 19.1 Information, Insight &Consultancy 214.0 16 188.7 17 13.4 9.7 Public Relations& Public Affairs 140.6 10 117.1 11 20.1 14.1 Branding & Identity,Healthcare andSpecialistCommunications 376.7 27 292.8 26 28.7 22.9 TOTAL GROUP 1,375.8 100 1,114.5 100 23.4 18.0 (1)Constant currency growth excludes the effects of currency movements. -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WPP