Currency Fluctuations Impact Revenues of $1.43 Billion

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NEW YORK (AdAge.com) -- WPP Group sounded a cautiously positive note for the rest of the year as it reported flat results for the first quarter.

WPP, parent of advertising agency networks Ogilvy & Mather Worldwide, J. Walter Thompson Co. and Young & Rubicam, posted first-quarter revenues of $1.43 billion, down 3.9% from the same period last year, or up 1.4% after factoring out the effects of currency conversions. Organic growth -- after factoring out currency and acquisitions -- was flat.

Like most overseas holding companies, London-based WPP does not report full quarterly results.

Encouraging trend
The revenue trend is encouraging, although currency fluctuations are shaving nearly five percentage points off revenue growth, said Paul Richardson, group finance director. The strength of the British pound against the U.S. dollar is only partly offset by the weakness of the pound against the euro, he said.

Advertising and media revenue rose 3.1% after adjusting for currency, helped by strong new business at media services units MindShare and Mediaedge:CIA. Information and consultancy was the best-performing sector, with revenue up 4.6% after adjusting for currency, while public relations continued to suffer, down 3%, though the sector is showing some improvement, Mr. Richardson said. He compared the quarter's 3% decline with the 11% decline in the second half of 2002.

New business was stable, with $656 million in new accounts during the first quarter, compared with $700 million in the same period a year ago, Mr. Richardson said. Among regions, the North American revenue grew 1.4%, the second consecutive quarter of revenue growth in the U.S. market. Continental Europe, Asia-Pacific and Latin American markets also showed growth, but the U.K. market was down 3.5% for the quarter.

Ad markets are stable
The underlying conditions of the ad market are now stable, but 2003 is still likely to be a flat year, Chief Executive Martin Sorrell said. Marketers remain cautious about spending and they have recently used the war and the outbreak of the severe accute respiratory syndrome known as SARS as excuses to hold off spending, he said.

"I'm neutral to positive about how I feel about things generally," Mr. Sorrell said. The war in Iraq had less of an impact in the first quarter than expected, and January and February revenues were down year-over-year, but March was flat. The lack of a war effect was a surprise, he said.

"It's stabilization but without any oomph. This is nothing to get excited about, but it's better than where we were a year ago," he said.

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