WPP Battens Down Job Hatches as Investment Bank Slashes Forecasts

21 October 2008

LONDON: All job offers made by WPP Group but not accepted by the candidate must be withdrawn immediately. Nor may WPP operating companies use head-hunters and managers must clamp-down on the use of freelance and temporary staff.

So decreed ceo Sir Martin Sorrell in an email to all senior executives, which was later leaked to UK ad trade weekly magazine Campaign.

The restraints have been applied in the light of the current economic crisis and its expected effect on WPP's clientele, many of whom have already slashed forward advertising plans.

According to Sorrell's email: "Preliminary results for September show another month in which even our recently prepared forecasts for revenues have not been achieved."

Moreover, headcount growth since August had exceeded revenue growth "by a significant factor".

The suspensions remain in force until at least until the upcoming group budget review in February 2009.

  • Optimism rather than realism colours WPP's profit forecast for 2010, opines independent global investment bank Collins Stewart in a note to investors.

    The bank's report on the world's second largest marketing services conglomerate posits that WPP and its ilk are "cyclical laggards" and likely to take longer to recover from the economic downturn.

    In the light of which it slashed its forecasts of WPP's  earnings by 15% next year and by 32% in 2010.

    The current consensus figures, says the bank "are far too high ... agencies are late-cycle plays and we believe that agencies' recovery is likely to lag other media sub-sectors, as they have done in the past". 
    Shifting into über-gloom mode, Collins Stewart says its forecasts "may in fact be optimistic".

    It avers that its prognostications do not "necessarily represent a worst-case scenario, noting that the ad downturn of 2001 to 2003 was relatively mild in GDP terms. "This time around GDP declines could drive greater falls in ad growth."

  • Data sourced from BrandRepublic (UK) and Media Guardian (UK); additional content by WARC staff