A tale of two halves

Our reported revenue growth of almost 21% reflected the strength of the euro and US dollar against sterling, as well as the impact of TNS. On a constant currency basis, which excludes the impact of currency movements, revenues were up 9.0%. On a like-for-like basis, excluding the impact of acquisitions and currency, revenues were up 2.7%. Revenue, including 100% of associates, is estimated to total over £8.9 billion.

2008 was largely a year of two contrasting halves. A strong first half (although second-quarter growth wobbled a little), with like-for-like growth of 4.3%, which compares with overall growth of 5.0% for 2007, and a weaker second half with slowing organic growth of 1.4%, as the impact of the sub-prime and insurance monoline crises, that started towards the end of 2007, was intensified by the collapse, emergency acquisition and restructuring of financial institutions in many parts of the world.

Revenue growth slowed as the year progressed: on a like-for-like basis, growth of 4.8% in the first quarter slowed to 3.8% in the second, 3.0% in the third and then flattened to 0.1% in the final quarter of the year. However, we suffered less in the final quarter than some of our major competitors, who experienced negative overall growth. This trend will continue in the immediate short term: our own budgets prepared late last year indicate a like-for-like revenue decline of 2% for 2009, whilst more recent forecasts for the advertising industry as a whole indicate a decline of 4% or more, so we expect to continue to increase market share in spite of the downturn. Our total revenue in 2008 surpassed that of all our competitors, regaining the No.1 position for the third time.

Like-for-like revenue growth was positive across all regions other than North America, which was almost flat, although revenues in the fourth quarter were stronger than forecast. There were conflicting trends in North America as, on the one hand, smaller businesses may be more rapidly affected by the recession and, on the other hand, FMCG companies may be maintaining their brand investment spending, even in more difficult times.

Asia Pacific, Latin America, Africa and the Middle East continued to be the fastest-growing of our geographic regions, with Africa and the Middle East being the fastest-growing sub-region. Asia Pacific remained strong across the region, with mainland China up almost 9% and India up 21%, although Japan and Australia were weaker. Continental Europe and the UK, although suffering from the deterioration in economic conditions, both grew over 2% like-for-like. In 2008, Continental Europe remained two-paced, with Western Continental Europe softer and Central and Eastern Europe, Russia and the other CIS countries, in particular, more buoyant. Of the big five Western European markets, Spain and Italy were weakest, France and Germany were stable and the UK was stronger.

Markets outside North America now account for over 65% of our revenues, up from 62% in 2007 and 58% five years ago. The influence of the faster-growing markets outside North America and Western Europe is increasing rapidly.

Constant currency1 revenue growth by geography %

Constant currency revenue growth by geography

Headline PBIT2 margins by geography %

Headline PBIT margins by geography

Revenue by geography £m

Revenue by geography

1
See definition in the Financial glossary.
2
The calculation of headline PBIT is set out in note 31 of the financial statements.