UN Unilever NV

WPP PLC (WPP.LN), the world's largest marketing company by revenue, Friday said it still expects organic revenue growth to return in the second quarter after declines moderated in recent months, and expects profitability to improve this year.

The Dublin-based group said organic revenue, a closely watched measure in the advertising industry that strips out acquisitions, disposals and currency effects, was down 7% in the fourth quarter of 2009, compared with a 9% drop in the third quarter, and "almost the same in January 2010, against January 2009, an encouraging return to stability."

Still, the company cautioned that even though this return to stability seems widespread both geographically and functionally, "there is no marked growth as yet, even against weak comparatives."

"We have clearly moved from a period of staring into the abyss to 'less worse' and now to stabilization, if not growth, as yet," WPP said in a statement.

The group confirmed that for the full-year 2010 it expects organic revenue to be flat and that it targets for its operating margins to rise one margin point to 12.7%, and another half margin point to 13.2% in 2011.

Still, pressure on agency fees continues.

"Things are still tough, clients are still being very demanding, focused on costs, which tends to be more so in Western Europe and the U.S.," Chief Executive Sir Martin Sorrel told Dow Jones Newswires in an interview.

While Sorrell conceded that WPP was slow to react to falling revenue in the first half last year, he said accelerated cost cuts in the second half, mainly through headcount reductions, should improve profitability this year.

At 1212 GMT, WPP shares were trading down 0.8%, or 5p, to 619 pence as analysts were slightly disappointed by weaker-than-expected improvement in organic revenue in the fourth quarter.

However, "clear guidance on margin improvement is a positive" after rival Publicis (PUB.FR) guided for flat margins in 2010, Execution Noble Research said, keeping its buy rating on the stock.

WPP, which owns advertising agencies including Ogilvy & Mather, Young & Rubicam and JWT, said like-for-like revenue fell 8.1% in 2009. Six analysts polled by Dow Jones Newswires had forecast a drop of 7.6%.

Organic revenue fell most sharply in Western continental Europe and the U.S while Argentina, India and Poland were the only countries to have posted organic revenue growth in 2009, WPP said.

On a reported basis, revenue rose 16.1% to GBP8.68 billion, boosted by the integration of recently acquired market research firm Taylor Nelson Sofres. The figure was roughly in line with the GBP8.69 billion forecast by analysts. On a constant currency basis, revenue rose 4.9%, mainly reflecting the weakness of sterling against the U.S. dollar and euro.

Net profit for the full year was GBP437.7 million, down only slightly from the GBP439.1 million posted last year.

Profit excluding items and before tax--which the company terms headline operating profit and which analysts use to gauge operating performance--was GBP1.02 billion in 2009, down 9% from GBP1.12 billion last year and slightly above the GBP1.01 billion forecast by analysts. The closely-watched headline operating margin was 11.7%, as in particular severance costs weighed on profitability in 2009 due to sharp headcount reductions.

Advertising agencies have had a tough 18 months as the world's major advertisers cut spending in response to the credit crunch and economic downturn, forcing agencies to cut costs and shed thousands of staff.

But in the past six months there have been signs of improvement, with organic revenue declines slowing and most industry executives predicting a return to growth by the middle of this year.

WPP, whose clients include Unilever N.V.(UN) and Johnson & Johnson (JNJ), said net new billings totaled GBP3.13 billion in 2009, with a very strong net billings inflow in the first two months of 2010 of almost $2 billion.

The company said it will pay a second interim dividend of 10.28 pence a share, stable from last year.

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@dowjones.com

Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jun 2024 bis Jul 2024

Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jul 2023 bis Jul 2024