WPP Posts Higher Profit; Beats Analysts' Estimates
WPP Group Plc, the worlds second-
biggest advertising company, said profit rose 6.9 percent in
2007, boosted by acquisitions of Web agencies and account wins
from customers including Dell Inc. and Fortis.
Net income climbed to 465.9 million pounds ($925.8 million)
from 435.8 million pounds a year earlier, the London-based
company said today in a statement. Revenue gained 4.7 percent to
6.19 billion pounds. WPP reiterated that a slowdown in ad
spending is more likely to come in 2009 than in 2008.
Chief Executive Officer Martin Sorrell made 37 acquisitions
last year including digital agency Quasar Media of India and U.S.
company Schematic. He said last month the fourth quarter was the
best ever for new orders at WPP, the owner of Ogilvy %26amp; Mather
Worldwide and the Hill %26amp; Knowlton public relations firm.
“2007 has been a very good year and so far we have seen a
similar pattern as weve gone into 2008, Sorrell said in an
interview with Bloomberg Television today. “Theres a lot of new
business activity.
WPP shares fell 15 pence, or 2.5 percent, to 596.5 pence in
London trading. The benchmark FTSE 100 Index declined 1.4
percent.
“The January start should provide some comfort and means
that the bears who have been cutting forecasts are now waiting
for a slowdown, Credit Suisse analysts Ellie Lawford, Simon
Baker and Nick Bertolotti said in a note. “We are happy to
remain buyers given the companys general resilience, ability to
hold margins and lack of a structural headwind.
`Well Positioned
Sales excluding acquisitions and currency swings rose 5
percent last year, matching the median analyst estimate of 5
percent growth. On that basis, sales also rose 5 percent in
January. Earnings per share before goodwill impairment and the
amortization of acquired intangibles rose to 46 pence from 42
pence a year earlier, topping the median estimate of 44.5 pence
in a survey of seven analysts by Bloomberg.
“WPP is well positioned to gain market share due to the mix
of the groups geographic and discipline exposure, Ingenious
Securities analyst Iain Daly said in a note. “A relatively
robust outlook statement from the industry bellwether should help
restore a degree of confidence in the state of the marketing
industry.
Sales excluding currency changes and acquisitions rose 4.9
percent in the fourth quarter. Sales on the same basis at French
rival Publicis Groupe SA gained 4.2 percent, while they increased
6.6 percent at Omnicom Group Inc., the worlds largest owner of
ad agencies.
Account Wins
Dell, the worlds second-largest personal computer maker,
awarded WPP its advertising account, valued at $4.5 billion over
three years, in December. In October, WPPs Grey Group Inc.
agency won a $200 million global account from financial-services
company Fortis.
WPP also said today it acquired a majority stake in Team Y %26amp;
R Holdings, a holding company for several advertising agencies
and public relations firms in the Middle East and North Africa.
The company will continue to make “small and medium-sized
acquisitions in 2008 to expand the Internet business and the
presence in emerging markets, which are the companys two
fastest-growing areas, Sorrell said today.
WPP said that “2008 should be a better year than 2007,
against the views of most economic forecasters, who predict a
gloomy 2008. The company reiterated its operating profit margin
targets of 15.5 percent in 2008 and 16 percent in 2009.
The company said today that “in the short-term, growth in
advertising and marketing services expenditure may remain in low
to medium single-digit territory.
2009 Slowdown
In January, Sorrell reiterated his forecast for the
worldwide ad industry of 5 percent to 6 percent expansion in
2008, boosted by the Olympics, the UEFA Euro 2008 soccer
tournament and the U.S. presidential election. The turmoil in
financial markets wasnt affecting the industry yet, he said.
WPP reiterated today that a slowdown in ad spending may come
in 2009 as a new U.S. government might cut spending and raise
taxes. Growth of the Chinese economy may also slow next year
because the government probably needs to fight inflation after
the Olympics, the company said.
Sorrell also said today that “2010 may be a different
story as the FIFA World Cup in South Africa, the Winter
Olympics in Vancouver and the mid-term Congressional elections in
the United States will stimulate economic activity.
WPP proposed a final dividend of 9.1 pence per share,
resulting in a full-year dividend payment of 13.45 pence, 20
percent more than the previous year. The company also said a
rolling buyback program will continue at 4 percent to 5 percent
of outstanding share capital in 2008.
