WPP Reports $7.6 Billion in First Half Revenue

Growth Slows in Second Quarter for World's Largest Holding Company

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WPP reported 13% growth to $7.6 billion in revenue for the first half of the year, in part due to increased client spending.

Excluding the effect of acquisitions and currency, like-for-like revenue was up 6.1% in the first half, and 5.6% in the second quarter, which was low compared to the 6.7% growth in the first quarter of 2011.

The U.K.-based ad company, which owns Ogilvy & Mather, JWT, Y&R and Group M media shops, among others, attributes discrepancies in currency, and revenue reported on a constant currency basis, to the comparative strength of the pound sterling against the U.S. dollar.

Gross profit for the first half of 2011 in pounds was 4.3 billion, a 6.7% increase over the first half of 2010. On a constant currency basis, the profit reflects an 8.8% year-over-year increase.

Though optimistic about the second half of the year, WPP expressed caution from recent economic turmoil and a slower growth rate in the U.S. The company also said that it is experiencing continued client demand for efficiencies.

North America's like-for-like revenue, once again excluding the impact of currency and acquisitions, showed 5.4% growth in the first half of the year, with reported general revenue growth of 2.3%. Latin America showed the strongest growth of all regions in the second quarter, with revenues up over 12%.

In the first half of 2011, Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe accounted for over 28% of the Group's revenues, an increase of one percentage point compared with the first half of last year, the company reported.

In the first six months of the year, WPP said it won estimated net new business billings of $1.92 billion. Advertising accounted for 40.9% of the company's revenue, with 8.1% like-for-like growth. Second to advertising was the "branding and identity, health care and specialist communications" category, which includes direct, digital and interactive. The category achieved like-for-like growth of almost 8% in the second quarter, compared to 7% in the first quarter. Public relations and public affairs were up 5.8%.

"The Group continues to benefit from consolidation trends in the industry, winning assignments from existing and new clients, which will have a significant positive impact on Group revenues late this year and in 2012," the company said in a statement. But "on a more negative note," it added, "there is some recent evidence of heavy competitive fee discounting or dumping and 'nicking' of people, which may have resulted in the operating margin erosion seen in the recent results of two of our competitors."

Despite the Standard & Poor's downgrade of the U.S. credit rating, the holding company has a positive outlook on 2012; it said elections and Olympics usually add at least 1%-2% to worldwide demand for advertising and marketing services.

This year, WPP also expects to continue to focus on acquisition deals with small- and medium-sized companies that provide new media and consumer insight. The company recently acquired Rockfish Interactive, and announced that it plans to roll up multiple digital agencies into a new agency, Possible Worldwide, with headquarters in New York and 17 other offices across the world.

The average number of people in WPP, excluding associates, was 107,239 in the first half of the year, compared to 102,651 in 2010, an increase of 4.5%. Earlier this month, Ad Age reported that the North American operations of several WPP network agencies are planning to outsource numerous finance-related jobs to India, which will result in over 100 cuts in the U.S.

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