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 Background to Results
 A company spokesperson provided the following background to results:
 1991 was an extremely difficult year and the first since 1983 in which the company's profitability failed to improve. With the end of the Gulf War in March 1991 it was believed that prospects for recovery were good in both our major markets of the United States and the United Kingdom. However, these prospects did not materialize. Client expenditures at best remained static and in many cases did not meet expected levels. As a result, the group's budgeted level of revenues was not achieved; and, although significant adjustments were made to the cost base, costs could not responsibly be reduced sufficiently in the short term for margins to be protected -- particularly after the inclusion of reorganization and rationalization costs.
 These adverse factors affected the whole of the marketing services sector and many of its clients; and to a significant extent, the continuing profitability of the group is an indication of the strength of the group's business franchises and the quality of the people who constitute them.
 Review of Operations
 1991 revenues were 4.7 percent down on the previous year, 5.2 percent in constant currencies. Operating costs, including reorganization and rationalization expenses, were roughly the same as the previous year. Excluding these expenses costs were down 1.0 percent.
 Staff levels fell throughout the year, and by the year-end were 8 percent down against the previous year: from 22,308 to 20,514. Salary costs, however, in constant currencies, showed a decline of only 2.3 percent. When clients reduce levels of expenditure, they continue to expect at least the same levels of service. Accordingly, average salaries rose as higher quality staff were retained or hired and outstandingly successful offices rewarded.
 Some outstanding performances were achieved and deserve recognition. Functionally, market research and some direct marketing, design, sales promotion and specialist communications companies met their targets. Geographically, stronger performances were registered in Continental Europe and Southeast Asia.
 Revenues by sector fell by 13 percent in non-media advertising; by 11 percent in public relations; by 3 percent in media advertising; and by 2 percent in specialist communications. They were flat in market research and manufacturing; and rose by 8 percent in strategic marketing services.
 Geographically, revenues fell by 8.8 percent in the United States, 5.5 percent in the United Kingdom and rose by 1.4 percent in the rest of the world.
 In 1991, the group added net new business revenues of over $262 million (149 million pounds) equivalent to net billings of $1,750 million (995 million pounds). The Goldman Sachs Advertising Industry Survey, published in February of this year, ranks the group first of the five publicly quoted holding companies surveyed in terms of net new business gained in 1991.
 Media Advertising
 In 1991 Ogilvy & Mather Worldwide included Cole & Weber; Ogilvy Direct -- the largest direct marketing agency in the world; Ogilvy Adams & Rinehart; and Promotional Campaigns Worldwide. Total revenues fell by 5 percent and operating costs by 2 percent (despite reorganization and rationalization costs accounting for 2 percent of total).
 Operating margins were 8.0 percent excluding the surplus property cost of Worldwide Plaza.
 Ogilvy & Mather Worldwide generated net new business billings of over $478 million (271 million pounds.)
 J. Walter Thompson Company's revenues fell by 3 percent and operating costs rose by 1 percent including reorganization and rationalization costs of 1 percent. Operating margins were 6.3 percent.
 J. Walter Thompson Company generated net new business billings of over $443 million (251 million pounds.)
 Before reorganization and rationalization costs and including the profit on the sale of its shareholding in Abbott Mead Vickers PLC, Scali, McCabe, Sloves Inc. made a pre-tax profit. Revenues fell by 9 percent and operating costs were flat. Operating issues have now been addressed and recent significant new business wins should result in an improvement in profitability in the near future.
 Conquest Europe's revenues were flat and operating costs rose by 8 percent.
 Public Relations
 The public relations sector of our business was significantly affected by the Gulf War and the recession.
 Hill and Knowlton's revenues fell by 11 percent and operating costs by 2 percent. As a result, after reorganization and rationalization costs, Hill and Knowlton made a loss.
 Market Research
 Research International had another excellent year. Revenues rose by 5 percent and operating costs by only 1 percent. As a result, profits almost doubled for the second successive year.
 Millward Brown also performed strongly in the United Kingdom and the United States.
 At MRB Group strong performances were registered at MRB UK and Japan MRB.
 Strategic Marketing Services,
 Non-Media Advertising and
 Specialist Communications
 Several of our companies in these sectors peformed particularly well -- including Anspach Grossman Portugal, Thomas Ferguson Associates and Mando Marketing. All other companies performed reasonably well with the exception of SBG in packaging design and McColl Group and Walker Group/CNI which were both severely affected by difficulties in the retail and property markets.
 Our manufacturing division had another successful year, with profits of over $0.5 million (0.3 million pounds).
 Business Mix and Growth
 The group employs 20,514 people in 625 offices in 64 countries.
 We service over 300 of the Fortune 500 companies; and 868 major national or multinational clients in two or more functions. This contrasts with 830 last year and reflects the increasing opportunity for cross referral between activities both nationally and internationally.
 The group works with 330 clients in three or more services (311 at December 1990); and with 155 clients in five or more countries (149 at December 1990).
 Sales and Profits by Function
 Functional divisions in 1991 accounted for the following proportions of group sales and operating profit:
 Strategic marketing services, 1 percent and 2 percent; media advertising, 51 percent and 65 percent; public relations, 10 percent and 1 percent; market research, 12 percent and 11 percent; non-media advertising, 12 percent and 1 percent; and specialist communications, 14 percent and 20 percent.
 Manufacturing still accounts for under 1 percent of both.
 Sales and Profits by Geographical Area
 Geographical regions in 1991 accounted for the following proportions of group sales and operating profit:
 United States and Canada, 45 percent and 44 percent; United Kingdom, 22 percent and 17 percent; and the rest of the world, 33 percent and 39 percent.
 Cross Referrals
 The benefits of cross referrals continue to show themselves. In 1990, 18 percent of new business revenues, or $45 million, came from business opportunities brought from one group company to another. In 1991, these figures remained at 18 percent or $49 million. Moreover, we estimate potential revenues of over $80 million were generated through referral. Greater attention is being given to converting these opportunities and it is hoped that the conversion ratio will continue to increase from the present 60 percent.
 Balance Sheet
 At the year end, net debt totalled $625 million (334 million pounds) against $573 million (297 million pounds) at the end of 1990 or $580 million (310 million pounds) in constant currencies. Net debt averaged $835 million (472 million pounds) in 1991 against $764 million (432 million pounds) in constant currencies in 1990 primarily due to cash earnout payments of $37 million (21 million pounds). Further earnout payments are estimated to total $124 million (70 million pounds) in the period 1992-95, of which $67 million (38 million pounds) are in cash. This compares with a total of $195 million (110 million pounds) at the end of 1990.
 In 1991 capital expenditure totalled $34 million (19 million pounds) against depreciation of $46 million (26 million pounds).
 The group traded within its banking convenants in 1991. Long term projections suggest adequate profitability and cash flow to meet its financial needs and obligations, and eventually to restore dividend payments. However, budgets for 1992 suggest little economic recovery. If this proves to be accurate, bank covenants will have to be adjusted and further cash facilities negotiated. Depending on the timing and strength of a recovery in the group's revenues and earnings, debt repayments currently scheduled for 1993 may require renegotiation. These issues are currently under discussion with the group's banking syndicate.
 At the same time, the group with the cooperation of its banking syndicate is assessing alternative ways of making significant improvements to the group's capital structure, including through asset disposals.
 Some specific examples of possible asset disposals would be: the sale of Scali, McCabe, Sloves Inc.; the flotation of the group's Japanese and Southeast Asian interests; and the flotation of the group's market research business.
 Meanwhile, progress continues to be made in operational ways of improving profitability and cash flow.
 Resolution of these financial issues will enable management to concentrate exclusively on maximizing the group's long term performance on behalf of clients, employees, investors and other stakeholders.
 Future Prospects
 In the first two months of 1992, group companies have been awarded a number of significant new assignments, totalling more than $60 million (34 million pounds) in net revenue or $400 million (228 million pounds) in net billings.
 Despite there being no significant upturn in business in the first two months of 1992, the group has operated in accordance with its budget. Revenue were approximately the same as in the previous year and operating costs were slightly down.
 Staff costs account for about 55 percent of revenues. A thorough review of salary costs has shown that fixed salary levels throughout the group are broadly in line with or slightly above marketing services industry levels.
 Comprehensive compensation policies are being introduced throughout the group which are designed to increase the relative significance of variable, short and long term incentives.
 Office costs are the group's second largest cost category accounting for about 10 percent of revenues. As a result of the recession and the consequent reduction in staff numbers, the group has considerable excess and unlet property. Every effort is being made to sublet or otherwise dispose of this excess. It is primarily located in the depressed property markets of New York and London; amounts to approximately 10 percent of worldwide office space; and is costing approximately $20 million a year.
 Of the group's functional divisions, advertising and public relations are still the most affected by the recession. Retail design, real estate advertising, recruitment advertising and some parts of sales promotion also continue to suffer.
 Operations performing well include: strategic marketing services; market research; direct marketing; some design, sales promotion and audio-visual companies; and specialist communications companies such as healthcare.
 Geographically, trading conditions in the United States, the United Kingdom, Canada, Scandinavia, Australia and New Zealand remain difficult. Better performances are to be found in France, Germany, Spain, the Netherlands, Belgium, Austria and Southeast Asia. In the last few months, there has been some improvement in Brazil and Japan.
 Many of our clients have set themselves annual profit growth targets of between 5 percent and 10 percent. Given the maturity of most of the product markets in which they operate, and the low rates of population growth in their major consumer markets, achievement of such objectives is dependent on a combination of three related actions: revenue growth; cost containment; and acquisition.
 Despite the recession, stock market values remain high, particularly in the United States, making acquisitions by our clients no less expensive than they were in the 1980s; and cost cutting has become more and more difficult as opportunities are progressively exhausted. As a result, it seems probable that clients will increasingly concentrate on growing revenues, with increases in market share being the principal contributor to growth objectives. In circumstances of this kind, the demand for marketing services traditionally increases.
 Longer term trends will contribute to this demand: we are likely to see continued increases in the speed of technological change; the geographical and functional complexity of our clients' businesses; the fragmentation of communications media; and the power of retail distribution.
 In the absence of economic recovery, and given political uncertainties on both sides of the Atlantic, it is too early in the year to predict its outcome with any confidence.
 What is certain, however, is this: given the group's remarkable functional and geographical strengths, and the continuation of its new business record, no company of its kind is better placed to capitalize on the recovery when it comes.
 -0- 3/16/92 AA NY014
 (WPPGY) CO: WPP Group plc ST: IN: ADV SU: ERN

GK-TS -- NY014A -- 8241 03/16/92 11:05 EST
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Date:Mar 16, 1992

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