NEW YORK WPP Group today reported a 5.8 percent drop in like-for-like revenue -- which excludes revenue from acquisitions such as its October 2008 purchase of research giant TNS -- for the first quarter of 2009. The London-based holding company attributed the drop to cuts in recession-motivated client spending. Overall revenue for the quarter totaled slightly less than $3.1 billion.
By region, North America was affected most by the recession, with like-for-like Q1 revenue down 9.2 percent to about $1.15 billion. The company said the combined Asia-Pacific, Latin America, Africa and Middle East regions fared a bit better, down 1.4 percent with total revenue of $690 million.
By communications services sector, advertising and media investment dipped 3.9 percent to $1.19 billion -- though the company stressed that media investment fared better than advertising. Branding and identity, healthcare and specialist communications services fell 7.9 percent to $805 million. Like-for-like revenue in the information insight and consultancy sector was down 6.4 percent, while public relations and public affairs revenue showed a comparable decline of 6.1 percent.
The company said that digital media expenditures grew faster than traditional media but at slower rates than in the past.
While revenue was below expectations, operating margins were ahead of budget as shortfalls were offset by cost reductions. On a pro-forma basis, the headcount dropped 2 percent from the average for the same period last year. As of March 31, the staff count fell 3.1 percent to 109,408, compared to the pro-forma figure as of Dec. 31, 2008, per the company. (Download WPP's complete Q1 financials.)
As expected, average net debt for the quarter was almost $5 billion, up from a little more than $3 billion in the first quarter of 2008, with the increase due largely to the $2.3 billion TNS acquisition.
For the rest of 2009, the company said it would continue to focus on balancing revenue declines against staff costs and headcounts. "The first half will clearly be difficult," the company said in a statement, adding that the second half will rough as well, but maybe less so. "Any recovery of sorts, will probably come in 2010." Improvements in operating profits, margins and staff cost to revenue ratios remain key objectives in the medium and longer term, WPP said.
WPP rival Omnicom Group yesterday said its Q1 revenue took a 14 percent drop, down 6.6 percent on an organic basis.