Omnicom warns about job losses

In the week that WPP announced a 19 per cent fall in profits, Omnicom is warning that it may have to make job cuts in Europe.

The threat from the world's third-largest advertising group, whose agency empire includes the TBWA, DDB and BBDO networks, comes despite its having bucked the ad slump with a 9.8 per cent rise in net profits for the fourth quarter to £408 million. Revenues were also up, at £1.41 billion.

Meanwhile, both groups are taking different stances on the effect of a Middle East conflict. John Wren, Omnicom's chief executive, predicted the war would be brief and produce a release of pent-up spend once it ended.

But his WPP counterpart, Sir Martin Sorrell, warned that war with Iraq was threatening to wipe out the global ad industry's fragile recovery.

Sorrell said: "A bath-shaped or saucer-shaped recovery, where the upturn is gradual, still seems most likely, although the bath does seem to have some deep corrugations."

However, analysts said that, while disappointing, WPP's results remained impressive when compared with its rivals in the marketing services sector, and that the group was well placed to take advantage of the expected recovery in 2004.

WPP, whose stable includes J. Walter Thompson, Ogilvy & Mather and Young & Rubicam, revealed a 3 per cent drop in revenues to £3.9 billion for last year. While advertising and media management grew by 2.5 per cent, the group's PR and public affairs operations, which represent 11 per cent of revenues, were hardest hit.

Before goodwill and writedowns, pre-tax profits fell by 19 per cent to £400.6 million. But even this figure was ahead of most analysts' predictions.

Numis Securities this week attributed WPP's performance to its early anticipation of the advertising slowdown and decisive action to reduce its cost base.

At the same time, the group was protected by the diversity of its operating companies, an appropriate capital structure and prudent accounting policies, Numis said.