WPP sees profits fall

WPP has seen profits fall by 5.8 per cent, and recorded almost a flat growth of 2.7 per cent in 2008, according to its preliminary results for the year, which have been published this morning.

The advertising and marketing services giant is predicting flat operating margins for 2009 and 2010, having revised them down to 14.3 per cent and 14.8 per cent respectively.

Commenting on reports in the Guardian that chairman Sir Martin Sorrell plans to axe 2000 jobs at the group over the next year, a WPP spokesman confirmed that the company was looking to reduce headcount in line with falling revenues, but said that as staffing levels had fallen over the last two quarters, this process was almost complete.

WPP described 2008 as ‘a year of contrasting halves’. The first half saw revenues grow by 4 per cent, in comparison with 2007’s overall 5 per cent. But the second half of 2008 saw growth of just more than 1 per cent.

The company’s design portfolio, which includes Landor, Fitch, Coley Porter Bell, The Brand Union and Lambie-Nairn, sits in WPP’s branding and identity, healthcare and specialist communications group. This group showed the slowest growth in 2008 for WPP, up by 7.6 per cent on the previous year.

WPP claims that slow growth in the healthcare and specialist communications overpowered ‘particularly strong’ revenue growth in its direct, Internet and interactive businesses, leading to an overall poor performance for the group.

However, Lambie-Nairn, The Partners, Fitch’s Asian arm, The Brand Union and Landor were singled out as having performed particularly well in the branding and identity sub-group.

Looking at its future prospects, the company names bright spots in Asia-Pacific, Latin America and the Middle East, with the US and Western Europe remaining relatively weak.

WPP’s UK-based businesses posted revenues of £954m in 2008 compared with £890m the previous year, a rise of 2.2 per cent. Its Asia-Pacific, Latin America, Africa and Middle East businesses together grew by 8.4 per cent to reach £1792m.

‘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,’ says WPP in an accompanying statement.

The statement continues, ‘If there is a characteristic that straddles all our companies, it is a fascination with the human mind and how it responds to different stimuli. We have stressed before the crucial importance of insight – some new understanding that, in turn, reveals an opportunity.’

Martin Sorrell is interviewed in the next issue of Design Week.