WPP Revenue Up in '08, Expected to Drop in '09

Holding Company's Report Boosts Shares, Despite Net Income Down 14%

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LONDON (AdAge.com) -- WPP shares went up as much as 9% after the group reported 2008 revenue up 9.7% to $13.6 billion in London this morning. But the giant owner of marketing-services agencies said it's forecasting a like-for-like revenue decline this year, courtesy of the economic meltdown.

What's now the world's largest communications group said despite the Olympics, the U.S. presidential election and the European Football Championship, client spending rose only about 2% to 3% in 2008. WPP reported net income -- or what it calls profit attributable to equity holders -- down 14% to $803.5 million.

For 2009, originally predicted to be a flat year, WPP has revised forecasts down and is now expecting a 2% revenue fall, with the first half of the year the weakest. A group statement said 2009 "was always likely to be a weaker year, but the unprecedented current financial crisis has triggered a vicious recession across the globe."

WPP -- which owns Ogilvy & Mather, JWT, Mindshare and Hill & Knowlton, among other agencies -- defined 2008 as "a year of two contrasting halves," with organic growth of 4% in the first six months slowing to 1% in the second half of the year.

North America posted the worst results of the group's regions, with revenue down 0.3%. Revenue in the U.K. (2.2%) and continental Europe (2.3%) were slightly up, while Asia Pacific, Latin America, Africa and the Middle East grew revenue 8.4% and now account for 27% of total revenue.

New media and technology also grew, and now account for 25% of revenue, while consumer insight and information make up almost 27% of revenue.

Recovery in 2010?
WPP's statement said, "Although the economic gloom has heightened recently, we still believe there will be a recovery of sorts in 2010, partly driven by weak comparatives."

In a conference call, Mr. Sorrell predicted that consolidation was on the horizon for his rivals. "It is almost an inevitability that Havas and Aegis will get together and indeed that [Interpublic] will get together with somebody at some point in time," he said.

In the long term, WPP has a favorable outlook on the advertising and marketing-services industry, as marketers' need to differentiate their products "both tangibly and intangibly" remains.

WPP's net debt on Dec. 31, 2008, was $4.36 billion, compared with $1.83 billion a year before, aggravated by a $822 million debt acquired on the purchase of market-research company TNS in October. WPP's equity-market capitalization is about $6.83 billion.

Contributing: Rupal Parekh

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