Revenue by communications services sector and brand

The pattern of revenue growth also varied by communications services sector and company brand. The table below gives details of the proportion of revenue and revenue growth by communications services sector for the first six months of 2009:


 
 
 
Communications
services sector
Constant
currency1
revenue
as a %
of total
Group

Reported
revenue
growth
09/08
%
Constant
currency1
revenue
growth
09/08
%
Like-
for-like2
revenue
growth
09/08
%
Advertising, Media
Investment Management
38.4 8.1 (7.5) (7.8)
Consumer Insight 26.3 131.0 97.4 (10.3)3
Public Relations &
Public Affairs
9.4 13.3 (6.9) (8.2)
Branding & Identity,
Healthcare and Specialist
Communications

25.9

14.5

(4.5)

(6.9)
Total Group
100.0 28.4 8.6 (8.3)4
1
Constant currency growth excludes the effects of currency movement.
2
Like-for-like growth excludes the effects of currency movements and the impact of acquisitions.
3
Gross margin (7.9%).
4
Gross margin (7.8%).

By communications services sector, Branding & Identity, Healthcare and Specialist Communications (including direct, internet and interactive) was least affected, with continued improvement in the Group’s healthcare businesses in the second quarter. The pressure continued on the Group’s Advertising, Media Investment Management businesses, with clients, given the current economic climate, seeking greater and greater value and economies. Media Investment Management came under greater pressure in quarter two. Public Relations & Public Affairs also saw some deterioration compared with the first quarter. Consumer Insight, as in the first quarter, was most affected by the recession at the revenue level, although not at gross margin.

Direct and digitally-related activities now account for 25%, or $1.7 billion (an annual run rate of almost $3.5 billion) of the Group’s total revenues, which are running at the rate of over $13 billion per annum. Very pleasingly, a leading independent research firm recently cited three of the Group’s interactive agencies (OgilvyInteractive, VML and Wunderman) amongst seven interactive agency “leaders”.

In the first half of 2009, over 61% of the Group’s revenues came from outside Advertising and Media Investment Management, compared to almost 55% last year and the Group’s strategic objective of two-thirds.

Quantitative disciplines (Digital and Consumer Insight), now account for 48% of Group revenues, almost meeting the Group’s strategic objective of one-half.

Advertising and Media Investment Management

On a constant currency basis, Advertising and Media Investment Management revenues fell by 7.5%, with like-for-like revenues down 7.8%. Reported operating margins fell by 5.7 margin points to 10.1%, as the Group’s businesses were impacted by and reacted to the worsening economic situation, with significant severances in the first half, particularly in Western Continental Europe, reducing operating margins by over 2.0 margin points.

These businesses generated estimated net new business billings of £934 million ($1.448 billion).

Consumer Insight (previously Information, Insight & Consultancy)

Following the acquisition of TNS in October 2008, the Group’s Consumer Insight revenues grew by over 97% in the first half, but fell by 10.3% like-for-like. However, gross margin only fell by 7.9%. Reported operating margins fell by 3.9 margin points to 6.2%. As with other parts of the Group, like-for-like growth was increasingly affected in the second quarter, particularly in North America, Continental Europe and Asia Pacific. The worldwide integration of TNS custom research and Research International, began in the second quarter and should be substantially completed by the end of 2009. In addition, other operations of both TNS and Kantar, in media, health, retail and their related panel activities, were consolidated and now operate on a joint basis for the benefit of clients.

Public Relations & Public Affairs

In constant currencies, the Group’s Public Relations & Public Affairs revenues fell by 6.9%, with like-for-like revenues down 8.2%. The increased pressure in the second quarter was most marked in Continental Europe and Latin America. Reported operating margins fell 4.4 margin points to 11.7%.

Branding & Identity, Healthcare and Specialist Communications

The Group’s Branding & Identity, Healthcare and Specialist Communications (including direct, internet and interactive) constant currency revenues fell by 4.5%, with like-for-like revenues down 6.9%. This service sector showed relative improvement in the second quarter, primarily as a result of improvements in the Group’s healthcare businesses in the US. Reported operating margins were down by 5.1 margin points to 5.5%.

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