WPP reported their interim results and are showing continued weakness despite cost savings including redundancies of almost 6% of staff (6.500). The results were below analysts expectations. Part of the release goes into the reasons behind this drop:
The impact of the recession on the Group’s profitability in the first half was severe. Although action was taken to reduce staff and discretionary costs, such as travel, training and personal costs, as revenues came under pressure, this reduction was insufficient as revenues fell faster than budgeted. Like-for-like revenues were budgeted to fall by almost 4% in the first half of 2009 and fell, in fact, by over 8% with the deterioration against budget even greater in the second quarter, which was a surprise.
Further cost actions have been taken in the second quarter, which have also impacted profitability in the first half, through additional severance costs, but will improve the picture in the second half.