WPP In 1Q: 4.5% Gain in Ad/Media Sector, New Billings Down

The media business is a growth driver for WPP Group, although it saw a slower first-quarter growth rate when media is combined with advertising as a sector.

Discounting currency fluctuations, such as a major drop in the American dollar, WPP Group posted a global 4.5% gain in its advertising/media sector in the quarter. While a notable gain, it marked a considerably slower growth rate than the 19.1% increase it showed in the same quarter a year ago.

U.S. performance, which accounts for 40% of company operations, was not broken out. The company as a whole reported revenues of $2.7 billion--an increase of 4.3% on a like-for-like basis, excluding currency fluctuations and acquisitions.

However, new business billings for WPP this quarter--in all sectors--were down by more than half, versus a year ago, $2.34 billion in 2006 versus $1 billion this quarter. "We have been a little disappointed in the first quarter," CFO Paul Richardson said in a presentation Friday. Some of the decline can be chalked up to MindShare winning the $750 million Sprint/Nextel account in the quarter last year.



This time around, Mediaedge:cia picked up the media business for Macy's ($200 million) and Energizer ($130 million), but WPP executives were frustrated by MindShare losing the $500 million Twentieth Century Fox business.

Of the 1Q global wins, advertising accounted for more than half--at $523 million, with media at $484 million. WPP did not break out the results of the U.S. operations in the sector. But the holding company said the media business continues as a strong performer, with the area combined with direct/Internet/interactive marketing growing at 11% on a like-for-like basis. A year ago in first quarter, WPP said media investment showed the strongest growth across the company--the same as in 2005.

WPP's 4.5% growth in the ad/media sector worldwide (which accounts for 46% of its business) in 1Q is based on a would-be lack of currency fluctuation. Factoring in an 11% decline in the American dollar versus the British pound year-to-year, revenues dropped 2.2% to $1.26 billion. A year ago, they jumped 24.9% to $1.29 billion.

Across the company in the just-completed first quarter among WPP's four sectors, public relations/public affairs showed the strongest growth rate with a 13% increase (Hill & Knowlton performed well), followed by branding and identity/health care/direct-Internet-interactive jumping 9%-plus (Wunderman in the digital space was a driver), then the ad/media unit's 4.5% increase and information/insight/consultancy up in the 1% range.

WPP said it experienced solid growth in all geographies except the UK. The Middle East, with a 22% increase, was the fastest-growing area.

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