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WPP says ‘brutal’ 2009 resulted in 16.1% fall in headline profits, expects more stable 2010

|Includes: WPP PLC (WPPGY)

In its full-year results statement, advertising and media communications group WPP (LSE: WPP) said that 2009 was ‘a brutal year’. In the twelve months ended 31 December 2009, Like-for-like revenue fell by more than 8% from a year earlier and at £812m, headline pre-tax profit was down 16.1% compared to £968m in the previous year. WPP’s diluted headline earnings per share was down 20%, at 44.4p.

WPP said it had adjusted its cost base after a difficult first six months, and the full-year was a ‘game-of-two-halves’. “We seem to have moved from staring into the abyss post the Lehman Brothers crisis, to a less bad phase in the second half of 2009 and a stabilisation phase towards the end of 2009 and the beginning of 2010”. WPP’s headline operating profits were £675m in the second half compared to £342m in the first, furthermore it said like-for-like revenue declines slowed in the last two quarters of the year.

The company said part of its strategy is to ensure that variable staff costs are a significant proportion of total staff costs and revenue, providing flexibility to deal with volatility in revenues and recessions or slow-downs. WPP’s headcount was reduced during the year, with 12.3% decrease to 98,759 people from 112,663 at the previous year end.

The company believes that 2010 should be a more stable year noting several key events, including the Winter Olympics, the FIFA World Cup and the World Expo in Shanghai, which are expected to drive the advertising and communications industry. Additionally the company noted that the US mid-term Congressional elections historically add approximately 1 percentage point to industry growth rates.

WPP said it has budgeted for flat like-for-like revenue growth in 2010, with a mildly weaker first-half and stronger second-half.  

Geographically, the company believes that the Asia Pacific, Latin America and the Middle East and Africa represent relatively brighter spots, with Central and Eastern Europe remaining relatively flat and western continental Europe budgeted to be relatively weak. WPP said the UK is budgeted to be flat and the US is expected to show a little growth.



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