WPP braces for 'another difficult year'

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The U.S. market is improving, but WPP Group still anticipates a rough ride in 2003 after a weak showing last year.

WPP-parent of such holdings as Ogilvy & Mather Worldwide, Hill & Knowlton and Wunderman-reported weak results for 2002. Net income dropped 67.6% for the year to $132.3 million on revenue of $5.88 billion, a drop of 2.8% from 2001.

Overall revenue was down 6% after factoring out currency fluctuations and acquisitions, said Group Finance Director Paul Richardson. Revenue declines came from all disciplines, except for information and consultancy revenue, which rose 1.4%. Advertising and media revenue dropped 1.7%, specialist communications was down 3.3% and public relations was hardest hit, with a 10.9% drop.

U.S. revenue was down for the year but showed improvement by year end, when it posted a 2% increase in the fourth quarter, the first positive in seven quarters, said Mr. Richardson.

`Rogue factor'

But Chief Executive Martin Sorrell warned that U.S. revenue dropped again in January by 1% as clients became more cautious over the possibility of war in Iraq. The Mideast military action is "the rogue factor" in 2003, Mr. Sorrell said. This year appears as "another difficult year [but] not as difficult as 2002," he said.

WPP's stock, traded in the U.S. as American depositary receipts, slumped below $30 for the first time since January 1999 on Feb. 25, the day after the earnings report. That's down 72% from WPP's all-time high of $105.88 in March 2000.

WPP is targeting organic revenue growth of 0.5% in 2003, with operating-profit growth of 5% to 10% for the year. A full recovery will have to wait until 2004, Mr. Sorrell said.

Meanwhile, the company will focus on completing the integration of its acquisitions of Young & Rubicam (purchased in September 2000) and Tempus (purchased in December 2001), controlling costs and improving its creative product, he said. The Y&R integration is two-thirds completed, with the main ad agency the last part left.

on To france?

WPP plans to make strategic acquisitions in 2003, mainly in marketing services and consulting and outside of the U.S. Mr. Sorrell singled out France as a market of interest where WPP does not have a large presence.

Another possible acquisition, of Interpublic Group of Cos.' NFO Worldwide, did not progress, however. Mr. Sorrell said WPP bid on the market-research company, but "we got blown out in the first round." U.S. private transactions remain very richly priced, he said.

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