Profits at WPP, parent of OgilvyOne and Wunderman, down by nearly 50% with growth "unlikely" in 2010

LONDON - WPP, parent of DM agencies OgilvyOne and Wunderman, saw pre-tax profits ...

...fall 47% to £179m in the first six months of 2009, with like-for-like revenues falling 8.3% as the recession accelerated.

However the group is predicting an improved picture for the second half of this year.

"The impact of the recession on the group's profitability in the first half was severe," said WPP in an interim statement. "Although action was taken to reduce staff and discretionary costs, such as travel, training and personal costs, as revenues came under pressure, this reduction was insufficient as revenues fell faster than budgeted."

WPP had planned for a 4% drop in like-for-like revenues in the first half of 2009 but experienced a decline that was double this estimate.

2010 will not see a dramatic improvement, WPP said. "Although there is little doubt that CEOs and CMOs feel better about the general economic environment, Armageddon or apocalypse now having been averted, there is little evidence of better heads and stouter hearts translating into stronger order-books or investments," WPP said.

Top line summary of WPP results Jan-June 2009

– Pre-tax profits fell 47%
– Like-for-like revenues fell 8.3%
– Most impacted division was consumer insight, down 10.3%
– Like-for-like headcount down almost 6%
– Most impacted region: Western Europe, excluding the UK, where revenues fell 10.5%.

WPP's measures to shed staff included a reduction in headcount at its flagship UK DM agency, OgilvyOne London. Overall WPP's like-for-like headcount is down almost 6% compared with June 2008 and more than 7% compared with July 2008.

Geographically, the United States and Western Continental Europe were the worst hit regions for WPP in the first six months, with like-for-like revenue growth down 10.1% in North America and down 10.5% in Western Europe. Revenue growth in the UK fell 5.3%.

In Europe only Poland and Russia showed like-for-like growth over the first six months.

"The impact continued to intensify in the second quarter, though results for July did indicate a 'less-worse' picture," the company said. "The second half is forecast to show a marked improvement in profitability, both absolutely and in terms of maintaining second-half margins at prior years levels."

WPP said that top-line revenues in 2010 were likely to come out "even steven" despite the expected positive impact of events including the football World Cup in South Africa.

Clients would be "looking for growth, advice and resources in the BRICS and Next 11, in digital communications and in understanding consumer motivations," WPP said.

Sector wise, the firm's advertising, media and investment management operation experienced a 7.8% fall in like-for-like revenues. In the public relations, branding and healthcare division, there was an 8.2% drop in revenue, and the consumer insight operation, the largest components of which are research groups Kantar and TNS, fell by 10.33%.




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