WPP Plc, the world's largest advertising company, reported lower sales for the first four months of 2009 and said it is cutting jobs to safeguard profitability. At the same time, its shareholders approved a controversial proposal that would give chief executive Sir Martin Sorrell and other top executives big rewards for outperforming rivals amid the advertising downturn.
Sales excluding acquisitions and currency swings declined 6.7 per cent from a year earlier, the company said in an e-mailed statement on Tuesday. Business was worse in April compared with the first quarter, it said.
''For the remainder of 2009 the short-term focus will continue to be on balancing staff costs and headcount, against the fall in revenues,'' the company said. The number of employees dropped by 4,300, or 3.7 per cent, in the first four months. Over half the people who left did so voluntarily, the London-based WPP said.
In April, WPP reported that like-for-like revenues in the first quarter were down 5.8 per cent. But ''there will be recovery of sorts in early 2010,'' and ''signs of recovery will come in Asia first'', Sorrell said following the shareholder meeting today in Dublin.
Sales declined in the US, the UK and continental Europe in the first four months of 2009, while revenue increased in eastern continental Europe, Latin America and Africa. The company said revenue was less than budgeted for the four months, while headline operating profit and headline operating margin exceeded the budget.
''Six months ago everyone expected an Armageddon and people now see some relief that the world didn't fall apart,'' Sorrell said.
The company added that by communication sector, advertising and media planning and buying continued to be the "least affected" by the recession.
Public relations, public affairs and branding and identity, healthcare and specialist communications – including direct, internet and interactive marketing – were "a little more affected". Information, insight and consultancy were the "most affected" of WPP's businesses.
WPP will cut a total of 7,200 jobs this year, the Observer newspaper reported 3 May, without saying where it got the information.
The company also said that pre-tax profit was significantly down year on year due to factors including severance costs, higher interest charges and amortisation of intangible assets in relation to the acquisition of research group TNS.
Pay hikes amid downturn
At the shareholder meeting in Dublin, 24.8 per cent of shares cast opposed or abstained on a new executive-remuneration package that has attracted criticism from some corporate-governance experts. By European standards, the vote against the plan was a sizable display of dissatisfaction.
The plan allows executives to be rewarded with free shares of WPP if they agree to not sell some of their current holdings and if WPP hits certain performance targets. In return for holding on to up to $19 million of his WPP shares for five years, Sir Martin could receive five times as many shares free - but only if WPP's return beats eight of its nine competitors.
If WPP's return is in the middle of its peer group, executives would get 1.5 shares for every one they pledge to the scheme. The companies used to compare WPP's performance include Omnicom Group Inc, Interpublic Group of Cos and Publicis Groupe SA.
Sir Martin declined to comment on the shareholder vote or his remuneration. He bought WPP in 1986 and turned it into the world's largest marketing company by revenue. His current WPP stake is valued at £74 million ($122 million), according to regulatory filings.