WPP revenues continue to fall

03 June 2009

LONDON: WPP Group, the marketing services conglomerate, has reported that like-for-like sales fell by 6.7% in the first four months of this year, and also argues that the general market situation grew "worse" in April compared with the opening quarter of 2009.

The world's biggest holding group by sales recorded a slide in like-for-like revenues of 11.1% in Q1 this year, and chief executive Sir Martin Sorrell has also previously predicted the current downturn will essentially be "L-shaped".

Following its annual general meeting, the company stated that constant currency revenues increased by over 10% from January to April 2009.

Despite this, however, it also posited that the "one great certainty in times of great uncertainty is that every business re-examines its ways of working with a heightened intensity."

As such, "habits and long-standing relationships are no longer taken for granted. As if for the first time, every expenditure has to demonstrate its worth – or run the risk of de-selection."

Conditions were said to be particularly adverse in the US, UK and Continental Europe, while Eastern Europe "still show some revenue growth for the first four months of 2009."

Other markets facing significant challenges include Spain, Italy, Japan and Singapore, while Latin America, China and Africa are "still showing like-for-like growth", although India endured a relatively slow April due to the country's general election.

While arguing the markets were currently displaying a "greater degree of confidence", Sorrell added that "to date, whilst hearts and minds might be a little bit better, we don't see that in terms of chequebooks."

Overall, WPP stated that total revenues were "below budget" for the year so far, but operating profits and margins remained ahead of target.

For 2009 as a whole, revenues are likely to decline in the "mid-single digits", meaning its short-term focus will be on "balancing staff costs and headcount" – the latter having declined by 3.7%, or 4,300, in the first four months of the year.

Its advertising and "media investment management" operations have proved most resistant to the downturn, while insight and consultancy are the "most affected" areas of WPP's operations to date.

A new renumeration and bonus scheme for WPP's leadership was also approved at the AGM, which will allow Sorrell to invest £12.5m ($20.8m; €14.6m) in company shares, and then reclaim five times this figure if the company meets its targets.

Data sourced from WPP Group; additional content by WARC staff