WPP profits improve 57%

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The Independent Online
BY MARTIN FLANAGAN

The renaissance of WPP, Martin Sorrell's advertising agency, continued apace yesterday with a 57 per cent leap in 1994 profits, contrasting starkly with the continuing woes surrounding Saatchi & Saatchi, its arch-rival.

WPP, bailed out by the banks over two years ago as debts threatened to engulf it, revealed that in 1994 pre-tax profits jumped to £85.3m (£54.4m).

Like-for-like revenues increased over 5 per cent, with net new billings of more than £1bn against £700m in 1993, while operating profit margins increased by 1.2 per cent to 7.9 per cent.

Average net debt was clipped by 26 per cent to £268m against £361m in 1993. Net debt at 31 December was £38m. The shares rose 6p to 109p.

The worldwide marketing services industry continued to improve in 1994, Mr Sorrell said. Further strength in the US was reinforced by increased activity in mainland Europe.

North America contributes the 40 per cent lion's share of WPP's profits.

Growth in the emerging markets of Asia Pacific and Latin America continued, while positive political initiatives had improved economic prospects in Africa and the Middle East.

WPP's main media advertising arm, contributing three-quarters of group operating profits, boosted revenues by 5.5 per cent. Ogilvy & Mather generated new net billings of over £326m, while the other main operating company, J. Walter Thompson, gained new net billings of £222m.

Market research registered strong performances across the board, with revenue up 9.2 per cent.

Public relations has still not seen a significant recovery, and WPP said the aim this year for its Hill and Knowlton company, which reduced losses in 1994 by 18 per cent, was to break even. Overall PR revenues were down 5 per cent. Specialist communications revenues improved by 5 per cent.

WPP, regarded by City observers as one potential beneficiary of the Saatchi imbroglio, said like-for-like revenue growth this year would probably be in mid-single digits due to economic uncertainty, particularly in the US and Britain.

But it said it was still possible to achieve a further 1 per cent return on sales growth this year and next.

A final dividend up 15 per cent at 0.75p makes a total of 1.135p. WPP said that, given its improving cash situation, it was looking to renegotiate its existing bank arrangements earlier than the current maturity date of June 1997.

A reduction of 1 per cent in the company's borrowing rates would trigger annual savings of £3m-£4m, the group said.

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