Sir Martin Sorrell: 'economic recovery is LUV-shaped'

by Noelle McElhatton, marketingdirectmag.co.uk 30-Oct-09, 09:51

LONDON - WPP today updated CEO Sir Martin Sorrell's 'L-shaped' prediction for the current recession, saying that recovery from this downturn was 'LUV-shaped'.

It did so as it announced that third quarter like-for-life revenues dropped almost 9%, though direct and internet revenues were "least affected" by the economic downturn.

WPP is parent of direct agencies OgilvyOne, G2 and Wunderman.

The LUV shape is made up of an L-shaped recovery for western Europe, a U-shaped one for North America and a V-shaped one for Brazil, Russia, India, China and the "next 11" emerging economies.

The group's branding & identity, health and specialist communications sector, which includes direct and online marketing, was the "least affected" by the downturn, with revenues down 6.6% in the third quarter.

Worse hit was WPP's advertising and investment management operation that saw like-for-like revenues fall 9.8%. WPP owns some of the world's largest advertising networks including JWT and Ogilvy.

The group's PR and public affairs division dropped 8.5%, an improvement on the 9.7% decline in the second quarter.

Revenues for consumer insight, which include research giant TNS, "remained challenged" WPP said, falling 10.2%.

But there are signs that WPP's overall revenue decline is slowing. The fall in like-for-like revenue at -8.7% was slightly ahead of analysts' predictions and an improvement on the 10.5% decline recorded in the second quarter.

"As the company's revenue growth figures for the third quarter indicate, things are certainly 'less worse' than the second quarter and July, August and September have all shown improvement over April, May and June," WPP said.

WPP predicted an improvement in performance heading into 2010, but that this depended on macro economic issues.

"This sequential quarterly improvement should continue into the fourth quarter of 2009 and into 2010, for the same reasons, although the real test may come when governments and independent central banks decide to reduce or withdraw fiscal and monetary support to avoid higher interest rates and inflation."

WPP continued to reduce headcount in the third quarter. Staff numbers were down to 101,333 by 30 September, a decrease of 10% or some 11,232 staff compared to the end of last year.

The group's US business put in its best quarterly performance of the year, the UK operation's revenues were down 9% compared with an 8.2% decline in the second quarter.

The new LUV acronym has already captured the imagination of the press, some of whom treat Sir Martin Sorrell as an economic guru.