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NEWS26 August 2009

WPP’s like-for-like insight revenue down 10% in first six months of 2009

Financials UK

UK— Like-for-like revenue was down 10% in WPP’s consumer insight division in the first half of 2009 as the impact of the recession intensified, leading to worse than anticipated results.

Reported revenue for the division was up 131% to £1.12bn thanks to the acquisition of TNS last November.

Stripping out the effects of the takeover, and that of currency fluctuation, insight is revealed as the hardest hit of all WPP’s service sectors in the period – with advertising and media down 7.8%, PR falling 8.2% and branding, healthcare and specialist communications declining 6.9%.

Group chief executive Sir Martin Sorrell (pictured) has previously described consumer insight as one of WPP’s “engines of growth”, but the division’s like-for-like revenue performance has declined sharply since the first half of 2008 when growth was 5%, falling to 2% in the second-half of the year and dropping still further into negative double-digits for the first six months of 2009.

Headline profit before tax and other adjustments (PBIT) was up 39% in the division to £68.6m – which includes contributions from TNS. PBIT margin decreased, however, from 10.1% to 6.1%.

WPP’s research and insight businesses include Kantar, Millward Brown, Added Value, IMRB International and The Futures Company.

Revenue for the WPP group as a whole was £4.29bn, up 28.4% on a reported basis. Like-for-like revenue was down 8% against a budgeted decline of 4%.

Sorrell had warned in July that business conditions had worsened in the second quarter of the year, following a 6% organic decline in the first three months of the year – and with staff costs pegged to revenue gains and losses this meant more job cuts were on the cards.

At the end of the first quarter headcount was down by 3,500 or 3% to 109,408, compared with the pro-forma figure at the end of last year. By the end of June the number of people in the group versus 31 December 2008 had decreased by 5,800 or 5.2%. At 31 July, headcount was down 6.3% against the start of the year to 105,393.

“The group’s like-for-like headcount (down almost 6% compared with June 2008 and over 7% compared with July 2008 ) is now better balanced in comparison to the reduction in like-for-like revenues,” said WPP, “and the second-half is forecast to show a marked improvement in profitability.” Profit before tax was down 47% to £179.3m in the first half.

It is not known to what extent WPP’s consumer insight businesses have been affected by the reduction in headcount. However, some of the £52m in cost-savings resulting from the integration of TNS are known to have come from the elimination of overlapping job functions. In Germany, following the merger of TNS Infratest and WPP’s Research International, the combined workforce was reduced by 4%.

@RESEARCH LIVE

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