WPP's like-for-like revenue down 5.8% in first quarter

Sir Martin Sorrell's advertising group reports revenue below budget in first three months and unlikely to recover until 2010

Sir Martin Sorrell's WPP, the world's largest advertising company, has reported like-for-like revenue down 5.8% year on year in the first three months of 2009.

WPP, which owns ad agency networks including JWT and Ogilvy, issued a trading update this morning which said the like-for-like changes reflected the impact of cuts in client spending in reaction to the global financial and economic crisis in the final quarter of last year.

"The first half of 2009 will clearly be very difficult, with the second half, although continuing to be tough, likely to improve relatively. Any recovery, of sorts, will probably come in 2010," the company said.

WPP reported that revenue rose by 36% to £2.12bn compared with £1.6bn in the first three months last year, reflecting the acquisition of TNS in October and the effects of the weaker UK currency.

"The final quarter of 2008 and especially December, with flat group revenues, were better than expected, the first three months of 2009 were markedly different, although the rate of decline eased in March, perhaps reflecting some stabilisation or maybe restocking of inventories," the company said.

WPP said that by the end of March it had reduced headcount by 2% to 109,408. It said 2,280 staff had left compared with March 2008.

The company flagged the possibility of further cuts, saying that short-term focus would remain "balancing the likely fall in revenues against staff costs and headcount".

Excluding the effect of currency movements, WPP said revenue grew by 11% year on year. Revenue at its US operations, its biggest market, dropped less than 1%, while Latin America, Africa, Asia and the Middle East rose 15%.

Continental Europe continued to show strong revenue growth in the first three months of the year, up 25%.

Revenue from the advertising and media investment management sectors fell by 3.5% on a like-for-like basis.

Public affairs and public relations sectors were down 4.3%, excluding the effect of currency movements.

The worst-affected areas of the business were branding and identity, healthcare and specialist communications (including direct, internet and interactive) which fell by 5%, excluding the effect of the weakening pound.

WPP said that while revenue was below budget, operating margins were ahead and cost-cutting had offset revenue shortfalls.

In the medium and longer term, WPP said it would aim to improve operating profits by 10% to 15% a year.

WPP previously said it expected revenue to fall by 2% this year. Sorrell described the company's current position as "difficult", adding that he expected the situation to worsen throughout 2009, with some slight improvements toward the end of the year.

Sorrell said headcount had dropped by 3% from the end of December to the end of March but that further cuts would be needed in line with performance throughout the year.

"We have to balance it with revenues for the rest of the year, it's impossible to say [exact number of potential job losses]. Last year we added 4% to headcount; we over-hired," he said.

Smaller businesses that worked in marketing services areas were likely to be the hardest hit by fall in revenue, Sorrell added.

WPP's businesses in the US would remain under the most pressure, he said, while non-traditional markets, including China, India and Latin America, were likely to be stronger, along with sections of the Middle East. "Despite what people say about Dubai, it has been quite good for us," he added.

Following the results announcement, WPP's share price fell to 416p at 9.05am this morning, down 6% from its overnight figure.

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Oliver Luft

The GuardianTramp

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