Sorrell bemoans 'brutal' year as WPP profits plunge

Last year was tough. But Sir Martin Sorrell says things are getting 'less worse' for his advertising empire.

by
Last Updated: 31 Aug 2010

WPP is the world’s biggest advertising group, so its results – and the sage pronouncements of its CEO Sir Martin Sorrell – are widely seen as a good indicator of the health of the overall economy. As you’d expect, it had a pretty tough time in 2009: WPP saw pre-tax profits plunge 16% to £812m in a year Sorrell described as ‘brutal’. However, he also suggested that business perked up slightly in the second half of the year – and with events like the World Cup likely to boost ad spend in the coming year, he thinks 2010 should be a lot better. Although it’s all relative, of course…

Sorrell described 2009 as a game of two halves. After a rotten first half, in which WPP found itself ‘staring into the abyss’, the second half saw a ‘less worse phase’ (apologies to the grammarians among you), followed by a ‘stabilisation phase’ towards the end of the year (November was apparently the first encouraging month). This came too late to rescue the 2009 numbers – like-for-like revenues were down 8%, including a 6% drop in the UK – or to prevent the decimation of its workforce in a cost-cutting drive to protect the bottom line (in fact it was worse than that – 14,000 WPP staff got the chop, which is nearly one in eight).

However, it does bode reasonably well for this year. And with January revenues basically flat year-on-year, it’s off to a reasonable start. ‘2010 should be a more stable year,’ said Sorrell (though he did add the caveat: ‘Famous last words’, the japester). That’s partly thanks to events like the World Cup, the Asian Games and the Congressional mid-terms, which he reckons will contribute an extra 1% to global ad spend. But generally speaking, it sounds like it will be a mixed year for WPP. Its new media offering – online, mobile, social media content and so on – is expected to have another good year, even as its old-style services struggle. And it’ll be increasingly reliant for growth on emerging markets like India and China, with Western markets likely to be flat at best.

So as ever, WPP’s position seems to be quite similar to that of the economy more broadly: it’s still licking its wounds after a rotten 2009, but at the moment, it looks as though this year will be a better one. And Sorrell remains pretty bullish on the future of his core markets: he reckons that in an increasingly saturated market, producers will be under pressure to differentiate their products. That’s great news for advertisers – particularly those in the new media space, we imagine.


In today's bulletin:

Sorrell bemoans 'brutal' year as WPP profits plunge
Sell the Acropolis and some of your islands, Germans tell Greeks
VT Group opens books to Babcock's £1.3bn bid
Twitter hits 10 billion - but FTSE 100 slow to catch on
The Sharp End: Don't call me a bouncer

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today