25th Apr 2008 07:01
WPP Group PLC25 April 2008 FOR IMMEDIATE RELEASE 25 April 2008 WPP QUARTERLY TRADING UPDATE REPORTABLE REVENUES UP OVER 14% FIRST QUARTER REPORTABLE REVENUES EXCEED $3 BILLION FOR THE FIRST TIME CONSTANT CURRENCY REVENUES UP 9% LIKE-FOR-LIKE REVENUES UP ALMOST 5% FIRST QUARTER OPERATING MARGIN AHEAD OF BUDGET THE GROUP REMAINS ON COURSE TO ACHIEVE ITS FULL YEAR MARGIN OBJECTIVE OF 15.5% Current Trading In the first quarter of 2008, reported revenues rose by 14.1% to £1.558 billion.Revenues in constant currency were up 9.0%, reflecting the strength of the Euroovercoming the weakness of the US dollar against the pound sterling. On alike-for-like basis, excluding the impact of acquisitions and currencyfluctuations, revenue growth was almost 5%, continuing the growth rates seenthroughout 2007 and before. First quarter growth reflected the continued steadyoverall economic environment, despite the continuing uncertainty stimulated bythe credit and liquidity crisis and the much heralded slowdown in the UnitedStates. Whilst January and February were strong across the board, both geographicallyand functionally, and indeed stronger than last year, March was slower, somewhatsurprisingly in Western Continental Europe. Throughout the quarter, NorthAmerica remained relatively strong and better than last year and global revenueswere in line with budget. Eastern Continental Europe, Latin America, AsiaPacific, Africa and the Middle East remained in good shape and the UnitedKingdom was stable. As shown in appendix 1, on a constant currency basis, Asia Pacific, LatinAmerica, Africa and the Middle East, continues to be the fastest growing region,with revenues up well over 15%. North America, despite the talk of recession andthe continuing crisis affecting the major financial institutions in the UnitedStates, remains strong with revenues up almost 10%. On a like-for-like basisrevenues were up over 5%, an improvement over the second half of 2007. On aconstant currency basis, Continental Europe was up over 5% but at two speeds,with Western Continental Europe up just over 3% and Eastern Continental Europeup almost 26%. The United Kingdom remained the slowest growing region, withrevenues up almost 5%, although showing an improvement over the final quarter of2007, and gross margin up almost 6%, reflecting the significance of marketresearch revenues. As mentioned above, North America continues to grow faster than commentatorsmight expect, with like-for-like revenues up over 5%, an improvement on the lasthalf of 2007. Eastern Continental Europe, is now the fastest growing area,marginally ahead of the Middle East, with both over 21%. Latin America continuesthe strong growth of 2007, with almost 15% like-for-like growth, reflectingdouble digit growth in the Group's media investment management, information,insight & consultancy and specialist communications businesses. Asia Pacificremains reasonably strong, with revenues up 6%, reflecting stronger growth inSouth East Asia and weaker growth in Japan, Australia and New Zealand. MainlandChina and India continued the rapid growth seen in 2007, with first quarterlike-for-like revenues up over 19% in both markets. As mentioned before, WesternContinental Europe, showed some softening in March, particularly in the majormarkets of Germany, France and Spain. The United Kingdom showed some improvementwith growth of almost 2%, a small increase over the last half of 2007. By communications services sector, branding & identity, healthcare andspecialist communications (including direct, internet and interactive), showedthe strongest growth, with constant currency revenues up 18%, with publicrelations & public affairs up almost 10%, information, insight and consultancyup over 6% and advertising & media investment management up over 4%. In the Group's 2007 interim and preliminary results announcements, additionalinformation was provided showing the first half and full year results inreportable US dollars, to allow for better comparison with a number of ourcompetitors, who report in US dollars and, particularly, because significantweakness in the US dollar sometimes makes comparisons difficult. Appendix 2shows revenue growth by geography and communications services sector inreportable US dollars, for the first quarter of 2008. US dollar reportablerevenues were up 15.6% in the first quarter, primarily reflecting the strengthof the Euro against the US dollar. Net new business billings of £564 million ($1.100 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 ahead ofbudget and last year. The Group remains on course to achieve its marginobjective of 15.5% for 2008. We are in the process of compiling our quarter one full year revised forecasts,but early indications continue to show like-for-like revenues growing fasterthan 2007. On a proforma basis, the number of people in the Group, excluding associates,was up 4.9% or 4,350 at 31 March 2008 to 93,352, as compared to the previousyear. On the same basis, in the first quarter of 2008, the number of people inthe Group averaged 91,870, up 4.5% or 3,914. In line with our strategy, 75% ofthese people were added in the faster growing geographic markets of AsiaPacific, Latin America, Africa and the Middle East and Central and EasternEurope, which now account for around 25% of Group revenues and are where asignificant part of the Group's investments are being focused. Balance Sheet and Cash Flow The Group continues to implement its strategy of using free cash flow to enhanceshare owner value through a combination of capital expenditure, acquisitions andshare repurchases. In the twelve months to 31 March 2008, the Group's free cashflow was £874 million. Over the same period, the Group's capital expenditure,acquisitions, share repurchases and dividends were £1,423 million. Average net debt in the first quarter of 2008 was £1,669 million, compared to£1,083 million in 2007, at 2008 exchange rates. This represents an increase of£586 million, reflecting the impact of the net acquisition cost of £709 millionfor 24/7 Real Media Inc. and other acquisitions and £404 million on sharerepurchases during the last twelve months. Net debt at 31 March 2008 was £2,152million compared to £1,410 million in 2007 (at constant exchange rates) anincrease of £742 million, again reflecting the acquisition spend and sharerepurchases. The current net debt figure compares with a market capitalisationof approximately £7.4 billion. In the first quarter of 2008, the Group made acquisitions or increased equityinterests in advertising and media investment management in the United States,the United Kingdom, the Netherlands, the Middle East, Chile, Guatemala andChina; in information, insight & consultancy in the United States and India; inpublic relations and public affairs in China; in direct, internet andinteractive in the United States and India. Consistent with the objective, announced in 2006, of increasing the sharebuy-back programme to 4-5% of the Group's share capital in 2007 and 2008, 15.6million ordinary shares, equivalent to 1.3% of the share capital, were purchasedat an average price of £5.96 per share and total cost of £93.1 million in thefirst quarter. All of these shares were purchased in the market and subsequentlycancelled. Such annual rolling share repurchases are believed to have a moresignificant impact in improving share owner value, than sporadic buy-backs. Weare currently running at an annual rate of share buybacks of slightly over 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 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 )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. This is WPP Group plc's first Interim Management Statement, made in accordancewith the UK Listing Authority's Disclosure and Transparency Rules, for the firstquarter of its financial year to 31 December 2008. Appendix 1: Revenue and revenue growth by region and communications servicessector 3 months ended 31 March 2008 Revenue Constant Growth CurrencyRegion Reported Growth(1) 2008 % 2007 % 2008/2007 2008/2007 £m Total £m Total % % North America 580.9 37 531.6 39 9.3 9.8 United Kingdom 216.4 14 206.5 15 4.8 4.8* Continental Europe 419.0 27 352.5 26 18.9 5.2 Asia Pacific, LatinAmerica, Africa& Middle East 341.7 22 275.4 20 24.1 15.6 ------- ------ ------- ------- -------- -------- TOTAL GROUP 1,558.0 100 1,366.0 100 14.1 9.0 ------- ------ ------- ------- -------- -------- *Gross margin up 5.7% Communications Revenue Constant Services Sector Growth Currency Reported Growth* 2008 % 2007 % 2008/2007 2008/2007 £m Total £m Total % % Advertising, MediaInvestmentManagement 695.1 44 630.5 46 10.2 4.2 Information, Insight& Consultancy 227.1 15 204.1 15 11.3 6.6 Public Relations& Public Affairs 167.2 11 147.4 11 13.4 9.9 Branding & Identity,Healthcare andSpecialist 468.6 30 384.0 28 22.0 18.0Communications ------- ------ ------- ------- -------- -------- TOTAL GROUP 1,558.0 100 1,366.0 100 14.1 9.0 ------- ------ ------- ------- -------- -------- *Constant currency growth excludes the effects of currency movements. Appendix 2: Revenue and revenue growth by region and communications servicessector in Reportable US Dollars 3 months ended 31 March 2008 Revenue Revenue Revenue 2008 2007 GrowthRegion $m $m Reported-------- 08/07 % North America 1,150.3 1,038.9 10.7 United Kingdom 428.4 404.0 6.0 Continental Europe 829.8 688.5 20.5 Asia Pacific, LatinAmerica, Africa &Middle East 676.7 538.2 25.7 --------- -------- --------- TOTAL GROUP 3,085.2 2,669.6 15.6 --------- -------- --------- Communications Revenue Revenue Revenue----------------Services Sector 2008 2007 Growth----------------- $m $m Reported 08/07 % Advertising & MediaInvestmentManagement 1,376.9 1,229.9 12.0 Information, Insight& Consultancy 449.6 399.4 12.6 Public Relations &Public Affairs 330.9 288.0 14.9 Branding & Identity,Healthcare andSpecialistCommunications 927.8 752.3 23.3 --------- -------- --------- TOTAL GROUP 3,085.2 2,669.6 15.6 --------- -------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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