Advertising giant WPP reported a 47 per cent drop in profits and predicted 2010’s big events like the FIFA World Cup and US Congressional elections will fail to lift performance.
The firm said reported pre-tax profits were £179.3 million in the six months to June 30, down from £338.5 million a year earlier.
WPP said the impact of the recession on its profitability in the first half was “severe” and its efforts to cut costs, including slashing its workforce, were “insufficient as revenues fell faster than budgeted”.
Group revenues were £4.3 billion, up 28.4 per cent on last year but down 8.3 per cent on a like-for-like basis, which excludes the impact of acquisitions and currency movements.
The figures reflected a 7.8 per cent like-for-like fall in advertising revenues and a 8.2 per cent decline for public relations and public affairs.
Chief executive Sir Martin Sorrell said: “Although it is still very early to budget or forecast what may happen in 2010, top-line revenues will probably be ‘even Steven’, despite the positive impact of the Winter Olympics in Vancouver, the World Expo in Shanghai, the Asian Games in Guangzhou, the FIFA World Cup in South Africa and the mid-term Congressional elections in the United States.”
The firm said the like-for-like fall in revenues was a “surprise” as it had predicted a 4 per cent decline.
But it forecast the second half of the year would show a “marked” improvement in profitability as the effects of its headcount reductions begin to be felt and severance payouts no longer weighed.
The group has axed around 6,900 jobs – or 6 per cent of its global workforce – since the end of last year and it has signalled further cuts as it struggles with deteriorating revenues.
Sir Martin said the improvement in profitability would be reinforced by easier comparisons with a weaker prior year.
He added: “Although there is little doubt that chief executives and chief marketing officers feel better about the general economic environment, Armageddon or apocalypse now having been averted, there is little evidence of better heads and stouter hearts translating into stronger order books or investments – at least, yet.
“Things look better, as they naturally should, partly because of easier comparatives.”
Among its global markets, western Continental Europe suffered the biggest slump in like-for-like revenues, down 10.5 per cent, this was followed by a 10.1 per cent decline in the US and a 5.3 per cent fall in the UK.
The rest of the world was down 4.7 per cent.
WPP said the US, UK, Australia and New Zealand continued to be most affected along with Spain, Italy, the Netherlands, Denmark and Portugal in western Continental Europe.