WPP Posts Strong Third Quarter Amid Ad-Slowdown Fears
WPP Group (WPPGY), one of the biggest advertising holding companies in the world, on Monday reported strong revenue growth for the third quarter in the face of mounting fears of an ad spending slowdown.
London-based WPP, which just wrapped up its $4.8 billion acquisition of Young & Rubicam, said third-quarter revenue rose 26%, aided by increased spending by its North American and European clients on advertising and consulting.
Revenue rose to 679.4 million pounds ($988 million) from 537.8 million pounds ($781 million) in the same period a year ago. North American revenue rose 30% to 309.5 million pounds ($449 million), while revenue gained 27% in continental Europe to 122.1 million pounds. The company's public relations unit, which includes Hill & Knowlton, posted growth of 45%.
Shares of WPP, which now owns three of the world's 11 biggest advertising agencies, rose $1.88 to $62.50 in afternoon trading.WPP added $1.2 billion in new business in the quarter, 14% more than the $1.1 billion it grabbed in the year-ago period. Clients like Ford (F) and Nike (NKE) handed WPP new assignments, and the company added Goldman Sachs (GS), Motorola (MOT) and Sun Microsystems (SUNW) to its roster of clients. The deal to acquire Y&R -- the largest in the history of the ad industry -- enabled WPP to lay claim to three of the 11 biggest agencies in the world. The company also owns Ogilvy & Mather Worldwide and J. Walter Thompson. On a pro forma basis, WPP said that combined revenue for the nine months would have risen more than 19% from the same period last year. Gareth Thomas, analyst with Commerzbank, called the results "excellent." "Concerns about [an] advertising slowdown are not justified in the third quarter results, although [they] only arose at the very end of the quarter and so are more likely to be evident in the fourth quarter," Thomas wrote in a report he issued Monday. He rates the stock a hold. The results come as evidence of an slowdown mounts. Trade publication Mediaweek on Monday declared that the ad spending binge that media and advertising companies have gorged on for the last several year is finished. "No matter how you cut it, the party is officially over," the magazine said. "Ad-sales executives across all the major media are witnessing a slowdown in the marketplace on a level they haven't seen since the early 1990s." Ad and media stocks have endured a bumpy 2000. Since the beginning of the year, WPP Group is down around 23%. Fellow ad giants Omnicom (OMC) and Interpublic (IPG) have suffered as well; Omnicom is down 17% and IPG 29%.
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