A communication services businesses, which operates through a number of multinational and national advertising and marketing services companies that are organised into four business segments.
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WPP Group plc, founded in 1971 is a worldwide communication service provider. The company is best known for its advertising agencies like JWT and Ogilvy and Mather. WPP together with its subsidiaries offers a whole gamut of communication and media related services in over 100 countries. The company divides its business of operations into four specific segments: Advertising and Media Investment Management; Information Consultancy; Public Relations; and Branding, and Specialty Communication. Advertising and Media Investment Management provides around half of the over all revenues, while branding and specialty communications also provide significant contribution and are emerging as important drivers in developed markets.
Worldwide media advertising spending is hovering at whopping $367 billion, with industry witnessing a healthy growth in 2006. Advent of new media, and increased penetration of online and mobile segments is creating a need for diversified content providers. The future also looks promising with forthcoming major events like Cricket World Cup, Beijing Olympics and U.S Elections that will act as the driving forces for the communication industry. WPP being one of the major worldwide players will benefit from these key events.
WPP has a long history of acquisitions, helping it to generate inorganic growth. While the current performance of the company is notching up double-digit revenue growth due to strong performance in developing markets, with stock price also witnessing a healthy rise.
The company’s future outlook is also looking impressive with continued acquisitions that are helping to create synergies and aiding to further increase the mammoth portfolio. Its strong new business pipeline, like the recently acquired $200 million media buying account of Federated Department Stores is sure to have a positive impact. Additionally, considering the positive industry outlook, impressive performance of the acquired Grey Worldwide and a strong balance sheet to aid future synergies, makes WPP Group a good buy.
WPP Group, the world's second-largest advertising company, recently announced its first quarter results. The softness in the U.S. market, followed by the 11 percent decline in the USD against sterling seen during the quarter, caused a negative impact on company’s top line, with revenues registering a decline of 0.7 % to 1.37 billion GBP. However the comparable revenue, which excludes acquisitions and currency moves, improved 4.3%. The rise can be attributed to strong growth in Asia Pacific, Latin America, Africa and the Middle East, continuing to compensate for weaker growth in the UK and US.The company recently announced acquisition of 24/7 Real Media, the online ad agency, for $649 million in an all-cash deal. The focus of various major players in the online advertising space can be cited with similar acquisition carried out by Google and Microsoft. The likely emergence of next generation of internet the Web 2.0, can act as the major catalyst for online advertisings, which is expected to cross $33 billion in 2007. This move can also be seen as WPP’s move to curb Google dominance in online advertising space. Going ahead, the company has kept the outlook for fiscal 2007 intact, as WPP estimates to achieve over 5% organic growth in the fiscal. This target of growth, though quite modest will be quite difficult to achieve, especially when one considers the current stagnant nature of the US and UK markets. Still 2008 could be the year to watch for, with US presidential elections, Olympic Games in Beijing, and European football championships, all lined up to benefit this multinational advertising giant. Further the margins are also set to improve and a slight improvement in currency or US and UK markets will massively spruce-up the top-line, making WPP a good stock for the long term investor.