UPDATE: WPP Soars On Margin Improvement, Revenue Outlook
By Ruth Bender, Of DOW JONES NEWSWIRES
(Adds detail, background, analyst and CEO comment.)
PARIS -(Dow Jones)- WPP PLC, the world's largest marketing company by revenue,
was the second-highest riser on the bluechip FTSE 100 Friday after it said
market conditions were "less worse" and margins improved strongly compared with
the first half on cost cutting.
WPP, which owns advertising agencies including Ogilvy & Mather, Young &
Rubicam and JWT, said it is on track to meet its goal of posting a second-half
operating margin in line with the prior-year as trading conditions improved.
"There is little doubt that consumer and corporate confidence has recovered
somewhat from the panic levels of the fourth quarter of 2008 and first quarter
of 2009," the company said in a statement.
Investors reacted positively, and by 1029 GMT WPP shares were up 4.9%, or 27p,
to 572p, clearly outpacing a 0.3% rise in the FTSE 100.
Still, Chief Executive Sir Martin Sorrell said it remains too early to call a
recovery, in contrast with Maurice Levy, CEO of Paris-based rival Publicis
Groupe SA (PUB.FR), who earlier this week said advertising markets has started a
"slow and gradual recovery."
"I think it is wrong to call the end of a recession based on sequential
improvements...I only declare victory when like-for-like revenues are up again,"
Sorrell told Dow Jones Newswires.
Sorrell expects the sequential improvement to continue into the fourth quarter
of 2009 and into 2010, resulting in flat revenue next year.
The advertising industry has been hit hard by the global recession that saw
companies cut ad spending and forced advertising agencies to cut jobs as revenue
dwindled.
WPP said its headcount was down 10% at the end of September to 101,333
compared with 112,565 at the end of 2008, meaning headline operating margins on
a like-for-like basis declined by just 0.7 margin points compared with last
year.
"There is a very strong improvement in margins from 1H," said Exane BNP
Paribas analyst Charles Bedouelle, adding cost cutting is at full speed now. He
rates WPP at outperform.
Like-for-like revenue, a closely watched metric in the advertising industry
that strips out the impact of acquisitions and exchange-rate movements, fell
8.7% in the three months ended Sept. 30, an improvement from the 10.5% drop in
the second quarter, mainly driven by a better performance in the U.S.
Seven analysts polled by Dow Jones Newswires had forecast a drop of 8.9%.
Third-quarter revenue rose 17% to GBP2 billion, boosted by the integration of
recently acquired market research firm Taylor Nelson Sofres and the benefit of
weaker sterling, closely matching the GBP2.03 billion forecast by analysts.
WPP's organic revenue beat peers, with the exception of Publicis, which
Tuesday posted a drop of 7.4%.
WPP's share price has gained about 32% since the start of the year as it is
viewed as well-positioned to weather the downturn due to its size and strong
position in emerging markets.
The group, whose clients include Unilever N.V.(UN), Johnson & Johnson (JNJ),
and Ford Motor Co.(F), said it won net new business billings of GBP730 million
in the third quarter.
WPP recently moved its headquarters to Dublin for tax purposes, but it still
reports in sterling.
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@
dowjones.com
(END) Dow Jones Newswires
10-30-090658ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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