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WPP revenues fall as Sorrell remains downbeat on recovery

LONDON - WPP Group revealed that revenues were down 2% in the first five months at its AGM today, where chief executive Sir Martin Sorrell reconfirmed his downbeat view on recovery, pushing the group's share price down.

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WPP shares fell by as much as 8% following the immediate issuing of the statement. Shares quickly regained some ground after the initial fall, rising to 566p.

WPP said that it was unlikely to hit its 2002 margin target of 15%, despite a significant reduction in costs by its operating companies. WPP's margins have been hit by the weakness in revenues in the first five months of 2002, and the possible continuation of this trend for the latter part of the year.

Sir Martin surprised few when he again stated his view that recovery is further off than many people in the industry have previously predicted.

Many in the industry had pointed to the second half of 2002, but with the second half almost upon the industry the signs of recovery have failed to materialise.

Sir Martin has previously said that he does not expect to see full signs of recovery until 2004. He said that WPP's view remained that recovery will be gradual -- saucer- or bath-shaped, rather than U- or V- or W-shaped -- and will be American led.

"2002 will be better than 2001, and 2003 better than 2002, but pronounced recovery will have to wait until the US Presidential elections and the Athens Olympic Games of 2004," he said.

By sector, Sir Martin said advertising and media investment management was flat, information and consultancy up over 6%. However, hardest hit were public relations and public affairs, which were down over 11%.

Direct marketing again showed its worth as WPP reported that branding and identity, healthcare and specialist communications, which includes direct marking, were down just over 3%.

On a like-for-like basis, excluding the impact of acquisitions and excluding the impact of currency, revenues fell by over 8%. This compares with 2001, when like-for-like revenues were down by 3% and reflects the continuing impact of the world economic recession, which accelerated during the latter part of 2001 as a result of September 11 and continued into 2002.

WPP said this had primarily affected its public relations and public affairs communications business and, to a lesser extent, branding and identity, healthcare and specialist communications, although healthcare and direct have been more resilient. Advertising and media investment management has been less affected.

Geographically, WPP said the US market remains primarily affected, with the UK, continental Europe, Asia Pacific, Latin America, Africa and the Middle East less so.

Sir Martin said that there would be ongoing efforts to reduce costs, which will include further staff reductions as part of its core financial strategy.

"We live in testing times. Over the last 12 months or more, every one of the 65,000 people who work for WPP companies and associates has been tested as never before; and in every respect, the figures we report today reflect proudly on their achievements. To make such numbers under such conditions is evidence of talent and dedication of the highest order," Sir Martin said.

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