Sorrell declines to call 'victory' as slump slows

WPP chief executive forecasts a 'LUV'-shaped recovery around the world

WPP's chief executive Sir Martin Sorrell remained cautious as revenue declines slowed at the advertising giant in the third quarter, but said Armageddon had been averted and conditions in the market were "less worse".

Revenues at WPP, which owns a network of media and advertising companies including Burson-Marsteller and Ogilvy & Mather, fell 8.7 per cent in the three months to the end of September.

Yet the shares soared 6 per cent as the results marked a stronger performance than the previous quarter, when revenues fell 10.5 per cent.

Sir Martin said while the declines were "helpful", he was not celebrating yet: "I don't think you should take too much from declining sequentials; the quarter was still negative. We won't declare victory until our like-for-like revenues are growing." He would not be drawn on which quarter the group would return to growth, but admitted that the comparative numbers would become easier.

The advertising market plunged in the wake of the credit crunch as companies cut their ad budgets, especially following the collapse of Lehman Brothers in September last year.

Sir Martin said: "There is little doubt that consumer and corporate confidence has recovered somewhat from the panic levels of the fourth quarter of 2008 and first quarter of 2009." WPP believes the next two quarters will see further improvement and repeated its assertion at the half year statement that budgeted revenues would be "even-stevens" next year.

"Confidence, however, remains fragile amongst consumers, because of the shadow of high unemployment levels and amongst corporates, because Armageddon and Apocalypse Now were barely avoided in September 2008," Sir Martin warned, adding: "The real test may come when governments and independent central banks decide to reduce or withdraw fiscal and monetary support."

WPP's US business showed improvement, with 6.1 per cent growth, after an 11.3 per cent fall the previous quarter.

While there was some improvement in Europe, the UK declined 9 per cent.

"The US suffered first and Western Europe followed," Mr Sorrell said. "The US is strengthening so hopefully, by that pattern, Western Europe should follow."

WPP also revealed it cut 11,000 employees "as our businesses balance revenues and costs more effectively".

Sir Martin believes the economy will show LUV as it recovers. "A 'LUV'-shaped world economic recovery seems the most acute description in the alphabet soup debate on the shape of the current economic cycle," he said. It referred to an L-shaped recovery in Western Europe, a U shape in North America and V in the emerging markets.