Ad firm WPP upbeat on profits
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LONDON, England (Reuters) -- Britain's WPP, the world's third-largest advertising and marketing company, said on Friday the outlook for 2004 was good and the long-term view favorable as it posted a forecast-beating annual profit.
WPP, home to ad agencies J. Walter Thompson and Young & Rubicam, said that with several major quadrennial events looming, prospects ``look good, with worldwide advertising and marketing services spending set to rise by at least 3-4 percent.''
The Olympic Games, U.S. presidential election and Euro 2004 soccer championship are all set to contribute heavily to what could be a bumper year for the advertising market.
WPP's headline pre-tax profit rose 18 percent to £473.4 million ($881 million) in 2003, on revenue up five percent to £4.1 billion. Analysts on average expected a profit of £436 million, with estimates in a £401-£454.4 million range, according to Reuters Research.
WPP shares, which have outperformed the media sector by five percent over the past year, were down 1.4 percent at 622 pence by 0900 GMT, valuing the company at £7.2 billion.
"The numbers were excellent but they had a good run up ahead of the results so it is just a case of travelling and arriving,'' said a trader at a European bank in London.
A dealer at a British broker agreed: "We like it. The results were fine. It has been a good performer so it is up for a bit of profit taking.''
WPP shares had risen just over 10 percent in the past dozen sessions to near a recent 20-month high at 648.5 pence.
Its upbeat outlook may be all the more welcomed by the industry given chief executive Martin Sorrell is traditionally regarded as one of the more cautious voices in advertising.
Sorrell's comment a year ago that the sector was stuck in a bath-shaped recovery with "deep corrugations'' reverberated through the industry.
"We are definitely out of the bath,'' Sorrell said on Friday, adding: " am not a serial pessimist, I am a serial realist.''
WPP's operating margin rose to 13.0 percent from 12.3 percent in 2002. Sorrell said he wanted 13.8 percent this year and the target for 2005 would likely be around 14-15 percent.
Sorrell injected a note of caution beyond this year's political and sporting events, saying one worry in the United States was "what a re-elected or newly-elected president might have to do about a fiscally-driven large government deficit, a weak dollar and rising inflation after the first Tuesday in November.
"United States government spending is already rising at levels not seen since the Vietnam War in 1967. We would not want to take a shower in 2005.''
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