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WPP 2009 Results: Bright Spots in Latin America


The Board of WPP plc ("WPP") announces the unaudited preliminary results for the year ended 31 December 2009, the Group's twenty-fourth year and which include the results of Taylor Nelson Sofres plc, ("TNS") for a full year for the first time. Although 2009 was a brutal year overall the Group adjusted its cost base, after a difficult first six months, to falling like-for-like revenues, achieving the same pro-forma operating margins in the second half of 2009, as in the same half of 2008. Headline operating profits were GBP 675 million in the second half of 2009 versus GBP 342 million in the first half, with GBP 665 million in the second half of 2008.

Review of operations — a game of two halves:

2009 was a very difficult year and a tale or game of two halves. Like-for-like revenues, although relatively stable in the final quarter of 2008 post the Lehman crisis, fell by almost 6% in the first quarter of 2009 and the rate of decline accelerated to almost 11% in the second quarter. The Group was relatively slow to react to this in the first half, with headcount only falling by 2.8% on average and 5.8% point-to-point, although more rapid cost reduction, in response to these accelerating revenue declines, might have damaged the franchise.

Despite the overall slow-down in the industry growth rate, three engines of relative growth remain: new markets, new media and consumer insight. Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, iconically represented by the BRICs and the Next 11 markets (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam), continued to grow faster and now represent almost 27% of the Group's approximately $13-14 billion pro-forma revenue. As did new media and the application of technology in the form of internet, PC, mobile, video content, search and social networks, which also account for almost 27% of Group revenues. And finally, as did consumer insight, which now accounts for over 26% of Group revenues.

On a constant currency basis, the Group grew at 4.9%, with like-for-like revenue down 8.1%. Geographically, the impact of the recession was least felt in the United Kingdom and Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe. It was most keenly felt in North America and Western Continental Europe, particularly in the first six months. There was relative improvement in the United States in the third quarter which continued into the final quarter of the year, with like-for-like revenues down 6.1%. Although the United Kingdom showed some softening in the third quarter compared with the second quarter, there was a marked improvement in the final quarter, with like-for-like revenues falling less at -4.6%. The relative improvement in Western Continental Europe and Asia Pacific in the third quarter continued, with both regions showing significantly "less worse" growth in the final quarter. The Middle East continued to be challenging in the second half, while Latin America had a relatively strong year overall.

Future prospects:

Geographically, there are relatively brighter spots budgeted in Asia Pacific, Latin America and the Middle East and Africa, reflecting the continued relative strength of the BRIC and Next 11 markets. Central and Eastern Europe, as a whole, remains relatively flat, with Russia recovering as the oil price rises. At $60-70 per barrel, the Russian economy works. Western Continental Europe is budgeted to be relatively weak, with France, Germany and Spain still challenging. The United Kingdom is budgeted flat, with the United States showing a little growth. Latin America remains the healthiest region.


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