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Penny Machines

Cherries
oil on canvas
22 x 20 in
1981

Penny Machines
oil on canvas
23¾ x 29¾ in
1961

Stack of Books
oil on canvas
30 x 24 in
n.d.

Seven Suckers
oil on canvas
19 x 23 in
1970

Twin Jackpots
oil on canvas
30 x 46 in
1962

Ties
oil on canvas
20 x 26 in
1980

Cake Slices
oil on canvas
20 x 16 in
n.d.

Revenue declines varied by sector

As seen in the first half of 2009, Branding & Identity, Healthcare and Specialist Communications (including direct, digital and interactive) was least affected by the recession, with the improvement in the Group’s healthcare businesses, seen in the second quarter, continuing in the second half, with like-for-like growth in the final quarter of the year.

The pressure continued on the Group’s Advertising and Media Investment Management businesses, with clients continuing to seek greater and greater effectiveness and efficiencies, in markets where there is little inflation and, as a result, little pricing power and an over-supply of old and new media inventory. The pressure seen by Media Investment Management in quarter two, continued into the third quarter, but eased significantly in the final quarter.

Public Relations & Public Affairs also experienced a substantially ‘less worse’ position in quarter four, with like-for-like revenues down less than 5%. Consumer Insight (formerly Information, Insight & Consultancy) saw sequential quarterly improvement in the second half, with a marked improvement in the final quarter as clients appeared to return to more stable spending patterns. November and December showed the lowest Consumer Insight monthly revenue declines of 2009.

In constant currencies, Advertising and Media Investment Management revenues fell by 8.6%, with like-for-like revenues down almost the same at 8.5%. Although cost actions were taken by the year end, the impact of revenue declines resulted in the combined annual operating margin of this sector falling by over 3.0 margin points.

In 2009, Ogilvy & Mather Worldwide, JWT, Y&R Advertising, Grey and United generated estimated net new billings of almost £800 million ($1.2 billion) and GroupM, the Group’s media investment management company, which includes Mindshare, MEC, MediaCom and Maxus generated estimated net new billings of £1.8 billion ($2.9 billion).

Consumer Insight revenues grew almost 63% in constant currencies, largely as a result of the acquisition of TNS in October 2008, with like-for-like revenues down 9.5%. Gross margin fell less by 7.7% on a like-for-like basis. Overall reported margins fell by 2.6 margin points to 8.5% in constant currency. This performance reflected planned integration costs in relation to the merger of Kantar and TNS and the impact of the recession.

Public Relations & Public Affairs improved in the second half, with like-for-like revenues down 6.7% compared with -8.2% in the first half and particularly in the US and the UK. The final quarter showed a more marked improvement with revenue down less than 5%, which was the least worst quarterly decline of the year. All of the Group’s businesses in this sector improved in the final quarter, particularly Burson-Marsteller, Hill & Knowlton and the Group’s specialist public relations businesses. On a constant currency basis, operating margins fell by 1.2 margin points and remained strong, as action was taken to reduce costs, with average headcount down significantly.

The Group’s Branding & Identity, Healthcare and Specialist Communications (including direct, digital and interactive) also improved in the second half, with like-for-like revenues down 5.6% compared with -6.9% in the first half and even better at -5.3% in quarter four. As mentioned above, the Group’s healthcare businesses showed positive growth in the final quarter of almost 2%, with the UK up over 10% and the US up over 3%. The Group’s direct, digital and interactive businesses also performed better in the final quarter in North America, the UK, Western Continental Europe and the Middle East & Africa. The US showed positive revenue growth of over 1% in quarter four. On a constant currency basis, overall operating margins for the sector were down by 2.3 margin points to 10.2%.

Constant currency by sector
Headline PBIT by sector
Revenue by sector
1
See definition in the Glossary
2
The calculation of headline PBIT is set out in note 31 of the financial statements.

Marketing services rose to over 61% of our revenues in 2009, up from 56% in 2008, largely due to the impact of TNS on Consumer Insight. It is no longer accurate to call us an advertising agency, we are a communications services company.

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