- Andrew McMains

NEW YORK WPP Group today reported declines in profit, revenue and operating margin for the first half of 2009, as the recessionary headwinds of the first quarter grew stiffer in Q2.

In dollars, the U.K.-based holding company saw its after-tax profit fall 59 percent to $169 million, from $411 million in the first half of 2008. At the same time, revenue declined 3 percent to $6.40 billion, from $6.59 billion in the same period last year.

First-half organic revenue slid 8 percent, after first-quarter organic revenue fell nearly 6 percent. Competitors such as Omnicom Group, Interpublic Group and Publicis Groupe have experienced similar declines.

WPP ended the first half with an operating margin of 7.5 percent, down significantly from 13 percent in the first six months of 2008. (The margin and profit figures exclude revenue from the company's minority stakes in agencies such as CHI & Partners. With minority interests included, the margin slid to 8 percent from 13.6 percent and profit fell 54 percent to $217 million.)

In a statement, WPP attributed the declines to the impact of the global recession. And although the company cut costs by laying off staffers and reducing discretionary expenses such as in travel, "this reduction was insufficient as revenues fell faster than budgeted," WPP said in a statement.

"Like-for-like revenues were budgeted to fall by almost 4 percent in the first half and fell, in fact, by over 8 percent with the deterioration against budget even greater in the second quarter, which was a surprise."

Severance costs also drove up expenses and those costs are expected to continue in the second half.

At the end of June, WPP's headcount totaled 106,683, down 6 percent from the total of 113,208 as of June 2008. July staff cuts further reduced the total to 105,393.

WPP is now forecasting flat revenue next year "despite the positive impact" of client spending behind events such as the Winter Olympics in Vancouver, the World Expo in Shanghai, the FIFA World Cup in South Africa and the mid-term congressional elections in the U.S.

See also:

"MDC: Q2 Profit Up Despite Revenue Slip"

"IPG's Q2 Revenue, Income Plummet"

"Omnicom Takes Big Hits in Revenue, Profit"

"Organic Revenue Slides at Publicis"