Moody's lifts WPP outlook to positive

Moody's Investors Service said it changed the outlook on WPP Group plc's Baa2 senior unsecured ratings, including its £400 million 2% senior unsecured convertible bonds due April 11, 2007, to positive to recognize the company's strong operating performance in 2006, including an increase in operating margins to 14.5%; a further incremental improvement in the flexibility of the company's cost base; and stronger debt protection measurements, including a drop in the adjusted average net debt to around 2.8x for 2006 from 3.1x for 2005.

The outlook change also factors in Moody's expectation that WPP will remain on a positive operating trajectory with continued visible organic growth and commensurate profit development, which should allow WPP to generate sufficient cash flows to accommodate a stepped-up share repurchase program, a progressive dividend and the continuation of a program of small to medium-sized add-on acquisitions while not materially deteriorating debt protection measurements.

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