UPDATE 3-WPP growth disappoints after weak March, shares slip
(Adds more details, further reaction)
By Kate Holton
LONDON, April 25 (Reuters) - WPP Group Plc, the world's second-largest advertising company, reported first-quarter underlying revenue growth towards the low end of forecasts on Friday due to a slowdown in western Europe that hit its March figures. Its shares dropped almost 8 percent and dragged down media buyer Aegis Plc (AEGS.L), which has a strong presence in the region.
Chief Executive Martin Sorrell told Reuters he was happy with the group's performance and noted that trading had held up well in North America. But analysts were disappointed.
WPP reported like-for-like revenue growth -- the key industry measure which strips out the impact of acquisitions and currency fluctuations -- of almost 5 percent, below the average forecast of 5.4 percent in a Reuters poll of analysts.
Omnicom Group Inc (OMC.N), the world's largest advertising services company, reported first-quarter organic revenue growth of 6.4 percent earlier this week.
"Overall these (WPP) results are likely to be seen as disappointing, given expectations of a robust quarter, although we expect not to see any significant earnings downgrades for the full year, given the reassuring comments on the outlook," UBS said in a note to clients.
At 1013 GMT WPP shares were down 7.6 percent at 582 pence, while shares in Aegis traded down 3.6 percent.
The group whose agencies include JWT and Ogilvy & Mather said early indications continued to show full-year like-for-like revenue growing faster than in 2007, despite the slower March, and said it was on course to achieve its full-year margin objective of 15.5 percent.
"First-quarter growth reflected the continued steady overall economic environment, despite the continuing uncertainty stimulated by the credit and liquidity crisis and the much heralded slowdown in the United States," the group said.
WPP said trading in January and February was strong across the board, and ABN Amro analyst Justin Diddams said this implied March organic growth of just under 3 percent.
Reported revenue growth rose 14.1 percent to 1.56 billion pounds ($3.1 billion), which was ahead of expectations at 1.51 billion pounds, which analysts attributed to the strength of the euro.
WPP said trading had slowed in March in western Europe, particularly in Germany, France and Spain, but North America had remained relatively strong and better than last year, despite talk of recession and the problems affecting major financial institutions.
"Eastern Continental Europe, Latin America, Asia Pacific, Africa and the Middle East remained in good shape, and the United Kingdom was stable," the group said.
The UK remained the slowest growing region, with revenues up almost 5 percent, though this showed an improvement over the final quarter of 2007.
Sorrell said problems within the financial market typically took six to 12 months before it was felt in the "real world". He has previously said he expects 2008 to be boosted by the Beijing Olympics, the Euro 2008 soccer tournament and the U.S. election.
He expects a weaker 2009 but a stronger 2010 with the World Cup and other events. (Editing by Will Waterman)
