Update: WPP slips as profits nearly halve

26th Aug 2009 11:17

Advertising giant WPP's half-year profits nearly halved as the firm continued to feel the impact of the global economic contraction, which intensified in the second quarter.Pre-tax profit for the six months fell 47% to £179.3m, which the group said was caused by the "severe" recession and higher sterling translation of interest costs on Euro-denominated debt.Revenue rose 28.4% to £4.289bn but on a like-for-like basis, which excludes the impact of acquisitions and currency, it fell 8.3% in the first half. WPP said it was a "surprise" that revenues fell faster than budgeted as it expected it to fall only 4% in the period, although July did indicate a 'less-worse' picture.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, it said.Sir Martin Sorrell, the chief executive, also gave his views about the economy, saying the recovery will be "an italicised L" shape. "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 - at least, yet," he added.Geographically, the impact of the recession was felt most in US and Western Continental Europe in the first six months. Only Latin America and Africa remained relatively unscathed, the only region or continent showing like-for-like growth in the first-half. "April, May and June showed progressive deterioration in like-for-like growth, although July showed some sequential improvement," said the group.As at 30 June 2009, the number of people in the group fell by over 5,800 or 5.2% compared to the pro-forma figure at 31 December 2008. As at 31 July 2009, the number had fallen further to 6.3% to 105,393. The group said its like-for-like headcount is now better balanced in comparison to the reduction in like-for-like revenues."Although it is still very early to budget or forecast what may happen in 2010, top line revenues will probably be 'even Steven', despite the positive impact of the Winter Olympics in Vancouver, the World Expo in Shanghai, the Asian Games in Guangzhou, the FIFA World Cup in South Africa and the mid-term Congressional elections in the United States," said Sorrell.Interim dividend was left flat at 5.19p per share.