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Revenues up at WPP as it reveals slow road to recovery

LONDON - WPP Group reported revenues up 11% in the third quarter, reflecting slow continued growth in the US and weakness in the UK market as it reiterated its positive outlook for 2004.

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The third quarter was WPP's first £1bn-revenue quarter and, including the acquisition of Cordiant Communications, revenues were up by almost 11%, but were up just more than 1% without the Cordiant deal.

WPP reiterated its positive outlook for 2004 citing the US Presidential election, the Athens Olympics and the European Football Championships, and said that, while the improvement would be US-centric, it is likely to spill over into the UK market.

Sir Martin Sorrell, WPP chief executive, said: "The impact of heavy political advertising in the US on media rates and supply will strengthen advertising and marketing services spending. This will spill over into the UK. In addition, there is evidence of clients switching their attention from three years of cost management to top-line revenue growth. We are climbing further out of the bath."

The rise in revenues pushed WPP highers this morning sending its shares up 2.78% in morning trading to 558.5p.

WPP said that the UK continues to be affected by the recession with revenues up by just over 6%. In North America, revenues were up over 8% and continental Europe up over 11%. However, its strongest performers were Asia Pacific, Latin America, Africa and the Middle East, where revenues were up 17%.

WPP added a note of caution and said that the worry remains that 2005 might see inflation as a result of government deficit spending on both sides of the Atlantic.

It added that commodity prices, the long-end of the bond market and gold prices may be signalling this already, and a returned incumbent or new US president might have to take corrective action.

By sector, advertising and media investment management was strongest, with revenues up almost 14%, public relations showed no sign of improvement as revenues were almost flat, and branding and identity, healthcare and specialist communications were up over 9%.

The group reported net new-business billings of £402m during the third quarter, making a total of £1.7bn for the first nine months. WPP said it was continuing to benefit from consolidation and was ranked equal first for net new-business gains in the William Blair & Company survey for the first nine months of 2003.

WPP's third-quarter revised forecast indicates that the group's operating margin for the second half of the year is likely to be stronger than that for the first half and in line with the revised margin target of a minimum of 13%, following the acquisition of Cordiant.

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