Mixed Results Reflect Internet Switch, Says WPP

Online research is cheaper but more profitable, says WPP, and that's why its research division's revenues are stagnant while its margins are buoyant. The Group's information, insight and consultancy firms saw organic growth of only 1.3% in Q2, but gross margin improved 5.9%.

Revenues in the second quarter improved slightly after a poor Q1 and were up 3.3% on a constant currency basis, but only 1.3% once acquisitions are excluded. Taking the first half of 2007 as a whole, the firm's research revenue declined by 1.6% to £431.8 million, from £438.9m for the same period in 2006.

In its earnings statement, WPP commented: 'As more market research is executed on the web, both revenue and direct costs are reduced. As a result, gross margin is probably the better measure of performance.'

Estimated net new business billings of £1.565 billion were won in the first half of the year and the Group continues to benefit from consolidation trends in the industry, winning several assignments from existing and new clients.

In contrast, total WPP Group revenue in the period rose to £2.92 billion - up 2% in absolute terms but a healthy 7.7% at constant exchange rates. The firm said that the UK remained its slowest-growing region in the second quarter, with revenues up 3.7%, and gross margin up 4.9%, reflecting the relative scale of market research revenues in the country.

WPP CEO Sir Martin Sorrell, said in the statement: 'The group's performance in the first half of the year mirrored the continuing good economic conditions. Western Europe improved, although the UK remains relatively weak.'

WPP research agencies include Lightspeed Research, Added Value, Millward Brown and Research International. The group home page is at www.wpp.com.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.