Chatty, Cautious Optimism Accompanies WPP Earnings
The hard news surrounding WPP plc and its group of advertising agencies is that its 2009 billings and profit were down from 2008’s level, while its revenue was flat. But commentary accompanying its financial results release was a step away from the typical drab-as-dishwater rhetoric.
First, the figures. WPP, the multinational advertising conglomerate which includes Ogilvy & Mather Worldwide, JWT, Y&R Advertising, Grey and other firms under its umbrella, saw its billings drop nearly 12%, from $67.38 billion in 2008 to $59.39 billion in 2009. While its revenue remained stable, at $13.6 billion for both years, its profits dipped 12% as well, from $934.2 million a year ago to $819.9 million.
But the company’s earnings release offered insight into current and future trends, often in light language. “We seem to have moved from staring into the abyss post the Lehman Brothers crisis, to a ‘less worse” phase in the second half of 2008 and a stabilisation [sic] phased towards the end of 2009 and the beginning of 2010,” according to the company’s financial release.
WPP even managed a knock-on-wood moment when discussing its outlook for 2010. According to its earnings report, this year “should be a more stable year (famous last words!)”. it attributed its optimism to “several mini-quadrennial events that will help – the Winter Olympic Games in Vancouver, the Asian Games in Guangzhou, the FIFA World Cup in South Africa, the World Expo in Shanghai and last, but not least, the mid-term Congressional elections in the United States, which should, on the basis of past experience, add approximately 1 percentage point to industry growth rates.”
But was the company commenting or whining (or, in keeping with the British spellings throughout its release, “whinging”) when it observed “consumers and clients exhibit continued caution – consumers concerned about high levels of unemployment and clients continually conservative in a low growth environment, achieving lowered market profit expectations, by getting there ugly, by cutting costs and focusing on efficiency. Sadly, the fact that you cannot cost-cut your way to prosperity has not been accepted – as yet”?
Give the firm credit, though, for offering macroeconomic reasons why its services will create opportunities for its units. According to WPP, “the outlook for the advertising and marketing services industry appears favourable [sic]. Overcapacity of production in most sectors and the shortage of human capital, the developments in new technologies and media, the growth in importance of internal communications, the need to influence distribution and the new focus on corporate responsibility issues such as climate change, underpin the need for our clients to continue to differentiate their products and services”.
Peppered within its commentary were hard figures – assuming constant currencies, its North American operations saw a revenue dip of 8.1%, while United Kingdom revenue was off 6%. Western continental Europe’s revenue fell 10.2%, and its Asia-Pacific and Latin American operations saw revenue declines of 6.8%, all from 2008’s levels.
Broken out by focus, there was some good news for direct marketers: The company’s branding and identity, healthcare and specialist operations, which include digital, direct and interactive marketing, saw the smallest declines, with revenue across all operations off only 6.2%, compared with 7.4% for public relations and public affairs, 8.5% for advertising, media and investment management and 9.5% for consumer insight.
