WPP interims reflect a stronger US economy

The chief executive of WPP, Sir Martin Sorrell, warned that there will be no return to the boom years of the late 90s despite unveiling better-than-predicted interim results last week.

The UK-based holding company reported revenues down by 2 per cent to £1.91 billion and profits down by 5 per cent to £202.9 million for the first six months of the year.

However, an improved operating margin and a 3 per cent boost in revenues for July gave WPP some reason for cheer. Taking into account currency variations, revenue was up 2 per cent.

Sorrell predicted ad growth of between 3 per cent and 4 per cent next year based on an increase in US govern-ment spending, the Athens Olympic Games and the 2004 European Football Championships.

WPP's financial performance reflected a slight improvement in US economic conditions but it said that this had been countered by continuing recession in the UK and other parts of Europe. It said that the advertising sector was "climbing out of the bath", a reference to Sorrell's description of the advertising recession as "bath-shaped".

However, it also warned that "plans, budgets and forecasts of revenue will continue to be made on a conservative basis and considerable attention is still being focused on achieving margin and staff cost to revenue or gross margin targets."

Revenue in WPP's advertising and media management division rose by 3.7 per cent and now accounts for 46.2 per cent of total revenues. It reported that the advertising businesses generated new business totalling £1 billion.

However, WPP's PR and branding divisions suffered a decline in revenues.

Looking forward, Sorrell unveiled a three-stage series of objectives.

In the short term, WPP's aim is to weather the recession. Its medium-term target is to better integrate Young & Rubicam, Tempus and Cordiant. Looking further ahead, it wants to develop its services in fast-growing geographical areas.

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