Advertising gloom casts pall over WPP

LONDON, April 22 in a Reuters story writer Sonya Dowsett reports that the WPP Group (WPP.L), the world's second biggest advertising group, revealed on Monday there had been no pick up in its battered industry since the end of last year as it reported a slip in first quarter revenues.

``The first quarter is pretty similar to the fourth quarter of last year,'' Chief Executive Martin Sorrell told Reuters. He said there had been ``no change whatsoever'' in market conditions and the outlook was hard to call. Shares eased 2.5 percent.

The advertising industry was hit last year by fall-out from the dot-com collapse, an economic downturn and the aftermath of September 11. While many investors are holding out for a recovery this year, the big question is when and how quickly.

Smaller British advertising company Cordiant added to the downbeat mood on Monday when it said profits had more than halved last year and forecast no revenue growth this year.

Stripping out the effect of WPP's many acquisitions, revenues fell by almost nine percent from the same quarter last year, in line with analysts' expectations.

``They will have to register some strong growth in the second half in order to hit their operating margin target,'' said one fund manager who holds WPP stock.

``However, they'll benefit from more favourable comparatives later in the year in terms of revenue growth because of the dire end of last year.''

ON TARGET FOR MARGIN GOAL

WPP, whose clients include U.S. carmaker Ford said first quarter results indicated the group was on target to achieve budgeted operating margins -- a key measure of profitability in the industry.

WPP, second to Interpublic Group of Cos. Inc.in the global advertising industry, aims for a margin of 15 percent in 2002 and 15.5 percent in 2003, with an eventual aim of reaching 20 percent.

First quarter reported revenues fell by over two percent to 945.8 million pounds from 966.4 million with U.S. markets slumping by seven percent on a constant currency basis.

The group sweetened falling revenues with net new billings of 500 million pounds ($724 million) during the quarter, although the lion's share of this ($600 million) had already been announced in February.

``We believe this confirms that the pitching activity has now returned to normal levels, after a tough fourth quarter following September 11 events,'' said Stephanie Rousset, analyst at ABN Amro.

The investment bank rates the stock a ``hold'', compared to ``buy'' and ``add'' respectively for rivals Aegis (AGS.L) and Publicis (PUBP.PA).

Net debt at end-March stood at 1.5 billion pounds, up from 987 million one year ago.

The shares were down 2.5 percent, or 19-1/2 pence, at 757-1/2 pence by 1030 GMT. The stock is now trading above levels seen before the September 11 attacks in the United States.

The shares fell to a low of 428 pence in the days following the attacks -- the lowest level in around two and a half years.