Yes, we’re still in that recession. London-listed advertising giant WPP on Tuesday reported worse than expected Q109 earnings, but CEO Sir Martin Sorrell is sticking to his prediction that H209 will be better than H1 and that some recovery will take place in the advertising economy next year. “Reportable” revenues rose 35.6 percent year on year to £2.11 billion — but that’s only a 11.1 percent increase in constant currency terms and in like-for-like terms total revenues were 5.8 down on Q108. In dollar terms the UK contributed $360.1 million (£246 million) in revenue, a 15.9 percent year on year drop in constant currency terms.
That’s below the number WPP had budgeted for — Sorrell predicted a 2 percent revenue drop for 2009 as a whole — but the company stresses that operating margins are ahead of budget and that the decline was offset by cost-cutting measures, mainly redundancies. The company blames cuts in client spending due to the sub-prime housing crisis and the collapse of of the Lehman Brothers investment bank in September as the main causes for the fall. The rate of decline had slowed in March, perhaps suggesting some stabilisation.
– Digital growth: WPP says “structural pressure on traditional media” continued in the developed nations — digital media grew faster in terms of spending but at a lower rate than in previous quarters. More after the jump.
– Sorrell defiant: There was no doom-mongering from Sorrell in an appearance on BBC Radio 4’s Today programme this morning, just stern realism. “We’re not pushing back,” he insisted, “we said in 2010 there would be a recovery of sorts.” He admits it was a faster fall in the Q1 than expected and that the company “under-forecasted what was going to happen.”
– US suffers, emerging nations resilient: Again, it was the wealthy western nations where WPP saw most of its decline: economic pressures were “keenly felt” in the US, though the UK was “less affected”. Spain, Italy and Denmark were “particularly affected” but emerging economies in Latin America, Africa, the Middle East, and Eastern Europe including Russia and Poland experienced like-for-like growth.
– Headcount down: To meeting the decline in revenue, and in common with its big-league advertising rivals, WPP has been reducing its staff rosters: as of March 31 it had 109,408 staff, a reduction of 2,280 or two percent since March 2008.
– Debtwatch: The company has net debt of £3.42 billion, reflecting the purchase of TNS last year, compared to an overall market capitalisation of £9.3 billion.
– Outlook: The top priorities now are “balancing the likely fall in revenues against staff costs and headcount”, though WPP is sticking to its plans to improver operating profits by 10 to 15 percent a year.