WPP's Q1 revenue slips

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WPP Group's first-quarter results show it is still mired in the ad recession-with no indication of any real near-term upturn. While WPP registered a 2.1% decline in revenue to $1.35 billion, the agency giant said that translates to almost a 9% drop when acquisitions and currency changes are factored out.

Chief Executive Martin Sorrell said the agency company hasn't detected any improvement in ad spending. "We've not seen anything in the first quarter that leads us to be of the view that things have changed," he said.

North America is WPP's biggest market-and its weak spot for revenue growth: Revenue in the region fell 7.3%, factoring out currency changes. It rose in other regions.


WPP reported net new billings of $750 million. Revenue for its mainstay ad and media business edged up 0.1%, while public-relations and public-affairs units' revenue skidded 13.3%. WPP's ad holdings include Mediaedge:CIA, MindShare, Ogilvy & Mather Worldwide, J. Walter Thompson and Y&R Advertising; PR units include Hill & Knowlton.

WPP's net debt grew sharply from year end, jumping 70% to $2.1 billion as of March 31.

WPP, reporting under British rules, does not reveal quarterly profits.

Mr. Sorrell predicts some improvement in ad spending in the second half, mainly due to easier comparisons vs. 2001's depressed numbers. He forecast limited growth in 2003 but told analysts strong growth in ad spending probably won't occur until 2004.

Investors were not impressed: WPP shares, traded as American Depository Receipts on the Nasdaq, fell 3.3% to $55.46 the day of the announcement and slipped lower later in the week. The stock, though, has rebounded sharply from its post-Sept. 11 low of $32.55 as investors look toward a turnaround.

Struggling U.K. rival Cordiant Communications Group, meanwhile, announced its long-awaited 2001 results, showing a huge net loss of $399.7 million; that included a $323.7 million write-off of goodwill on acquisitions, notably marketing-services venture Lighthouse. Revenue increased 17.9% to $871.2 million; organic growth-growth factoring out acquisitions-dropped 8%.

"While previous rates of revenue decline have abated and we are seeing early signs of business activity emerge, we forecast no revenue growth this year," said Chief Executive Michael Bungey.

Cordiant, parent of Bates Worldwide, said it expects borrowing costs to increase $7.5 million to $9 million annually as a result of renegotiating its loans, which held up earnings disclosure until after new agreements were completed April 19. Analysts said the question of debt could come back to haunt Cordiant. Lorna Tibian, analyst at Numis Securities, London, noted a sale of its 25% stake in Zenith Optimedia Group to partner Publicis Groupe could bring in about $113 million, which would cut debt in half.

more to come

Cordiant ADRs fell 20 cents to $5.85 after its earnings announcement but rose later in the week. The stock is far off its 52-week high of $19.45 last spring.

More agency companies are set to report earnings: Omnicom Group (April 30); Interpublic Group of Cos. (May 2); and Grey Global Group (May 6).

contributing: bill britt

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