• by Paul Gough , February 29, 2004

WPP Group--the second-largest agency holding group and parent of MindShare and Mediaedge:cia--Friday reported an increase in full-year 2003 revenues, and said it expected an even better 2004. However, it pulled back on what could happen in 2005.

Full-year revenues rose 5.1 percent to $6.16 billion for the London-based company. Growth, which had been stagnant in the first half of 2003, accelerated in the second half for the entire company. Organic revenue growth in the advertising division-- about 47 percent of revenues--rose 2 percent. Mindshare and Mediaedge:cia generated $1.8 billion in net new billings in 2003.

"For the first time in a long time, there's a lot of new business about and some very big pieces," said Sir Martin Sorrell, chief executive officer of WPP.

WPP said that Group M, parent company for the media shops, had been formed, and that a third independent brand is planned to complement Mindshare and Mediaedge:cia.

Sorrell said that conditions in 2004, which had improved in 2003 over the year before, would be better because of the "quadrennial effect": The presidential elections and overall political spending in the United States, the Summer Olympic games in Athens, Greece, and, to a lesser extent, the European football championships. He said that WPP wasn't likely to get a huge part of the spending on political advertising, but that tightened inventory would drive media rates up and help the company's commission- based revenues.

Noting the mostly double-digit increases in earnings for the fourth quarter reported by many companies, Sorrell said that advertisers seem to be in better shape than they had been.

"The positions of our clients is much stronger, but they haven't opened up the spigot, the tap, on spending," he said. "As we go through the year, they will become more comfortable."

He said five categories had been relatively strong through the recession: Government, health care, packaged goods, oil/energy, and value retailing. He said that other sectors, including financial services, telecom, and media/entertainment, are returning.

At the same time, Sorrell said there was at least one cloud on the horizon, tied to what happens in the United States' presidential elections.

"We're out of the bath, but we're a little bit concerned that we might take a shower in 2005," he told analysts during a conference call Friday. "The reason for that is what happens after the first Tuesday in November. Whether it's Kerry, if he finally gets through as it looks likely, whether it's Bush being re-elected, both are going to be faced with escalating government expenditure and a very high fiscal deficit."

Sorrell said that there are some worries about the weak dollar and potential inflation, as well as the deficit.

"All the good work of the '90s under [Clinton administration Treasury Secretary Robert] Rubin and [Federal Reserve Chairman Alan] Greenspan seems to have disappeared, and we're back to where Reagan was," Sorrell said. "Whoever gets in will have to deal with that issue."

He said that the outlook might be clearer toward the end of the year.

"There's a little bit of nervousness around, I think, as to what's happening or what will happen in 2005, and we're just signaling that," Sorrell said.