WPP Q1: Debt Doubles; "It's All Lehman Brothers' Fault"

WPP reported a 35.9 percent increase in Q1 2009 revenues to £2.117 billion, reflecting the acquisition of Taylor Nelson Sofres. But comparative revenues were down, WPP said, by 5.8 percent. Curiously, WPP’s statement blamed this on the Lehman Brothers collapse back in September:

On a like-for-like basis, excluding the impact of acquisitions and currency fluctuations, revenues were down 5.8%. This reflected cuts in client spending in reaction to the global financial and economic crisis, essentially after both the sub-prime crisis and the collapse of Lehman Brothers in September, as de-stocking followed declines in consumer spending.

Gaining the title of largest ad agency holding company on the planet has come at some cost. WPP doubled its YTD net debt to £3.4 billion. Another £176 million is due this year and then a massive £850 million lump is due in 2010. By comparison, Publicis’ net debt was flat.

European companies don’t talk about their expenses in off-quarters, so we don’t know how those interest payments are hurting the company. Since 2007, WPP has become increasingly less efficient. Where it once earned $1.17 for every dollar spent on staff and offices, it now gets only $1.13. WPP boss Martin Sorrell has a reputation for accepting lower fees to win business — it will be interesting to see in Q2 if the TNS acquisition helps or hurts WPP’s productivity.

• See previous coverage of WPP:
• WPP Accuses Spot Runner of $54 Million Scam; Was Sorrell Asleep at the Wheel?
• The Enfatico Fiasco: Isn’t This All Dell’s Fault?
• WPP’s Sorrell Calls Publicis’ Levy “Callous” in Remarks on Recession
• Sorrell’s Interest in Branded Content Is Explained by WPP’s Finances
• WPP’s Layoffs Plan Explained — Wall Street Doesn’t Believe Sorrell’s Rosy View of the Future
• WPP Q4: Lower Profits Increase Likelihood of More Layoffs