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WPP shows signs of stabilisation as revenues fall

LONDON - WPP Group, owner of the Ogilvy & Mather and J Walter Thompson advertising agencies, reported revenues down by 4% in the first quarter with the UK being hardest hit, but said with a hint of optimism that it saw 'sigificant signs of stabilisation'.

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The UK was the hardest hit region, with revenues down by 3%. The US managed a rise of 1%, while in Continental Europe revenues were up by over 3%, as was the case in Asia Pacific, Latin America, Africa and the Middle East.

The news helped WPP shares to rise in early trading up 1.73% to 430.5p adding to gains made earlier this weak, which aided the media sector as a whole.

The decline in revenue beat analyst predictions, with Morgan Stanley forecasting an 8.8% decline for the quarter. On a like-for-like basis, excluding acquisitions and currency fluctuations, revenues remained flat, continuing the advertising group's trend of lessening the decline in revenues quarter by quarter.

Sir Martin Sorrell, chief executive of WPP, said in an interview on CNBC: "We are seeing significant signs of stabilisation. The trend of the first quarter is a little encouraging, but 2003 will continue to be difficult."

Revenue at WPP's advertising and media division, which includes MindShare and Mediaedge:cia, was up by 3%. In the public relations and public affairs division, which includes Burson-Marsteller and Hill & Knowlton, revenue fell by 3% for the quarter.

In a trading update issued this morning, WPP said that first-quarter operating margins are in line with budget, indicating full-year improvement of up to one margin point. It also said staffing levels had fallen by 1.4%.

The company had a very strong quarter for new-business wins, with billings of £410m in new accounts. However, Morgan Stanley warned this week that it did not think the new-business wins would offset the impact of Ford, WPP's largest client, cutting ad budgets, in the short term.

Sir Martin has said that he does not expect a full advertising recovery until 2004, which will see the Athens Olympics, US presidential elections and Euro 2004.

This morning, the company said: "The group continues to focus on its key objectives of improving operating profits and margins... continuing to develop the role of the parent company in adding value to our clients and people, developing our portfolio in high revenue growth geographical and functional areas and improving our creative quality and capabilities."

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