WPP makes major changes at the half-year mark

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LONDON--WPP Group reported strong pre-tax profits of $182.4 million for the six months ended June 30, up 20% from the same period a year ago. Revenue was 13% ahead of the year-ago period at $1.65 billion. New business wins fueled the rise, with the company reporting net new business billings in the first half of 1999 of $1.6 billion, up 25% over the comparable period.

The company also announced plans to form a new-media parent company called wpp.com to coordinate all WPP's new media activities across all its operating brands. WPP said if wpp.com were a separate company its revenue for the whole of 1999 would be $100 million, derived from three main areas.

First, WPP has made direct and indirect minority investments totaling $20 million in outside companies, including Peapod, BroadVision, Talk City and Quokka. Second, WPP holds minority investments in Internet and interactive marketing services companies, such as U.K. Web agency Syzygy and United Media of Germany. Third, WPP receives interactive revenues from wholly owned operating companies including global Web development company OgilvyInteractive, JWT Connect, media buying and planning specialist MindShare, research company MBInteractive, U.S. hi-tech and PR companies AlexanderOgilvy and Blanc & Otus, and Internet recruitment consultancy Bravant.

The non-executive chairman of wpp.com is author and well-known Internet industry leader Esther Dyson, who recently became a WPP non-executive director. The chief executive of wpp.com will be Eric Salama, WPP's strategy director.

WPP also said Aug. 16 that it's reviewing compensation plans for its key executives. Plans are being developed and discussed with major share holders. Details of proposed plan, which would replace WPP's existing Capital Investment Plan, in place for thelast five years, could be released as early as this week.

The existing CIP dates back to Sept. 4, 1996, and required WPP Chief Executive Martin Sorrell to invest $3.2 million in order to acquire 1,129,305 ordinary shares. The maximum number of performance shares entitled to Mr. Sorrell under the CIP and the similar Notional Share Award Plan is 6,445,912 shares. The performance criteria for receiving the shares were based on WPP's share price rising to certain targets over a sustained period. Also, WPP's share price had to outperform the FTSE 100 Index and the company's earnings per share growth exceed certain targets tied to the growth in the Retail Price Index.

All the criteria were reached by Dec. 31, 1998, and Mr. Sorrell could cash them in on Sept. 4. The shares are valued at an estimated $57 million.

Copyright August 1999, Crain Communications Inc.

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