Ireland-based advertising giant WPP Group plc. (WPPGY), released its trading update for the first quarter of 2011,on April 28. The company reported its top-line year-over -year growth of 7.0% to £2,223 million (US$3,557 million).
Revenue growth was attributed to strength across all geographical regions and communication services sector. On a constant currency basis, revenue grew by approximately 8.4%. Excluding the impact of acquisitions and currency fluctuations, revenue was up 6.7% in the reported period.
From a geographical perspective, WPP Group experienced a noticeable growth in Asia Pacific, Latin America, Africa, the Middle East and Central & Eastern Europe; where revenue grew by 14.2% year over year and 12.6% on a constant currency basis.
This was followed by 7.7% and 7.1% growth in the United Kingdom and North America, respectively. On a constant currency basis, revenue in the United Kingdom grew by 7.7% and in North America by 9.9%.
Western Continental Europe registered a 0.7% year-over-year revenue decline and a growth of 2.2% on a constant currency basis.
Of the four business segments, revenue from Advertising & Media Investment Management segment increased 11.6% year over year to £899.0 million (US$1,442.1 million) and accounted for 40.4% of the quarter’s total revenue. Consumer Insight revenue (24.9% of total revenue) of £552.8 million (US$886.8 million) grew by 1.9%.
Branding & Identity, Healthcare and Specialist Communications (25.3% of total revenue) revenue was £563.4 million (US$903.6 million), up 6.3% year over year while revenue from Public Relations & Public Affairs grew 4.1% to £207.9 million (US$333.4 million).
Net new business billings won during the quarter was £841 million (US$1.346 billion); attributed to incremental business from existing and new clients and consolidation in the industry.
Exiting the first quarter of fiscal 2011, net debt was £2,598 million (US$4,157 million), down 16.4% year over year. In the quarter, the company repurchased 7.8 million shares (0.6% of issued share capital) for £64 million, or £8.12 per share.
For the twelve months ended March 31, 2011, the Group’s free cash flow was £1.169 billion (US$1.870 billion) while capital expenditure, acquisitions, share repurchases and dividends were £727 million (US$1,163 million).
Outlook
For the full fiscal year, management expects revenue growth, excluding the impact of acquisitions and currency fluctuations, to be over 6%. Based on the results in the first three months of 2011, management anticipates that its full year margin would exceed the company’s margin improvement target of 0.5%.
Based in Dublin, Ireland, WPP Group together with its subsidiaries provides advertising and communications services worldwide. The Group faces competition from its peers like Interpublic Group of Companies Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA.
We currently maintain an Outperform recommendation on the company.
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