WPP Preps More Layoffs, Lowers Margin Targets

NEW YORK WPP Group today revised downward its 2009 margin targets and said more layoffs are on the way, adding further gloom to the ad industry's prospects for the year. But the London-based holding company was more confident about 2010, predicting a tempered recovery.
 
"2009 was always likely to be a weaker year, but the unprecedented current financial crisis has triggered a vicious recession across the globe," the company said in its 2008 earnings statement. "Although the economic gloom has heightened recently, with further earnings disappointments, surprise dividend cuts, continued financial restructurings and rights issues, we still believe there will be a recovery of sorts in 2010."

WPP, which initiated staff reductions and a hiring freeze in the fourth quarter, has set an additional target of cutting 2,000 jobs this year, about 2 percent of its global headcount of 112,262.

WPP said its 2008 operating margin was 15 percent, below its target of 15.3 percent. The company lowered its 2009 target to 14.3 percent. WPP had estimated margins could improve to 16 percent in 2009, but that projection was made a year ago, well before the economy began its steep decline.
 
In 2008, WPP's pre-tax profit climbed 3.8 percent to nearly $1.1 billion on a 20 percent revenue increase to $10.7 billion. However, in constant currency terms, pre-tax profit slipped 13 percent on a 9 percent increase in revenue. (Click here for complete WPP financials.)
 
North America, which accounts for 35 percent of the company's revenue, turned in the worst performance: it was flat on a like-to-like basis. Emerging markets in Asia Pacific, Latin America, Africa and the Middle East, which total 24 percent of the company's overall revenue, rung up an 8 percent increase.

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