Media Buying, Economy Drive WPP Earnings, Position It For Run At Grey

by Joe Mandese, Aug 20, 2004, 12:00 AM

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Proclaiming that "levels of activity in 2004 will once again match, or surpass, the levels of activity seen in the internet driven boom year of 2000," WPP Group, in a first half earnings report released Friday morning, projected a relatively healthy outlook for the ad industry and its own performance for 2004 and beyond. " Our revenue forecasts for the year continue to be in excess of budget and there are significant new business opportunities at both the network and parent company levels," the company said, citing media buying services as its strongest growth sector.

"Media investment management like-for-like revenue comparisons started to improve in October 2002, and then significantly from April 2003, primarily driven by the strong United States upfront media buying season," reported WPP, the parent of both MindShare and Mediaedge:cia. "This growth continued for the remainder of 2003 and the first six months of 2004, where again network television costs rose faster than inflation."

WPP said that overall advertising services follow a similar pattern, but were not quite as strong as pure media services during the first half.

Total revenues rose 13.3 percent to $2.026 billion during the half, while advertising/media buying increased 14.7 percent to $937.7 million for the half.

Despite the relatively strong results and improving market conditions, WPP cautioned that "concerns remain" over the U.S. economy, especially given the uncertainty of the U.S. presidential election.

"Whoever is elected will have to deal with a substantial fiscal deficit, a weak dollar and risks of inflation, not aided by high oil and commodity prices. Higher interest rates may slow the US economy, which continues to be the primary driver of the global economy, despite the increasing intra-dependency and insulation of the Asian economy," the company warned investors.

Meanwhile, the strong results appear to put WPP in a good position to move forward with its expected bid to acquire Grey Worldwide. In a briefing with financial analysts, WPP chief Sir Martin Sorrell seemed to indicate WPP's intent, noting that Grey has good clients, good people. We'll continue to take it seriously."

The Grey board reportedly has set a deadline for acquisition offers of early September.

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