Scores of staff in Britain to be made redundant Global advertising firm WPP will cut a total of 7,200 jobs this year, many in Britain, Europe and the US, where growth has been falling as the recession forces companies to slash their advertising and marketing budgets. About half this number has already been lost, with the rest expected to go by the end of 2009, sources close to the company say. WPP is on target to reduce its global workforce by over 6% to 106,000 by the end of 2009, either through severance or by not replacing staff who leave. Scores of people in London, as well as elsewhere in the UK, could be affected. The company's actions illustrate the severity of the slump that is hitting industries across the globe and leading to ever higher rates of unemployment. London-based WPP, headed by Sir Martin Sorrell, is one of the biggest advertising agencies in the world, with clients that include Ford, Colgate, IBM, HSBC and Kellogg's. But the downturn is forcing multinationals to rein in their marketing expenditure as profits plunge and trading conditions dive to levels not seen since the end of the second world war. Research published by Morgan Stanley says the slump looks as if it will be far more challenging than 2001 and 1991. The broker says: "A synchronised demand-drop is visible across all industries and regions, led by marketing-heavy sectors such as autos, finance, pharmaceuticals and technology. Digital and Asia are now potential liabilities rather than refuges." Last week, Sorrell indicated that WPP's like-for-like revenue would probably fall by around 5% this year, about double what he predicted two months ago. But the company has been buoyed by an aggressive acquisition strategy that fed through to figures in the first quarter: total revenue surged by 11%, if recent purchases are taken into account and foreign exchange fluctuations are ignored. Nevertheless, its share price has taken a beating as investors worry about its debt pile of £3.75bn. Morgan Stanley said in a recent note: "[WPP] has by far the highest leverage, and has delivered weaker growth rates than competitors in recent quarters. It has also performed poorly in the last two recessions." The company last week strengthened its balance sheet via a £450m convertible bond issued to investors to help pay down over £1bn debt drawn to purchase rival advertiser TNS last year. At the end of March, Standard & Poor's, the credit rating agency, revised its outlook on WPP from stable to negative. "The outlook revision reflects our view that the significant deterioration of economic and advertising conditions worldwide may lead to significantly slower-than-expected deleveraging at WPP. It is likely that WPP will suffer a greater revenue decline, on an organic basis, than it has budgeted ... deleveraging will be difficult before 2010." But City supporters of WPP, which owns agencies such as J Walter Thompson and Ogilvy & Mather, point out that the company has the most balanced portfolio of all the big advertising companies, deriving a relatively larger proportion of revenue from services that span direct marketing, research and public relations. It also has a bigger presence than competitors in fast-growing markets in Latin America, China and India.Advertising giant WPP to axe 7,200 jobs
Sunday, 3 May 2009
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