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WPP Group PLC (WPP.LN), the world's largest marketing company by revenue, Wednesday joined rival Interpublic Group of Cos. (IPG) in saying that, although sentiment in the world economy is improving, it isn't yet translating into new orders for expensive advertising schemes.

Chief Executive Martin Sorrell said that, although the downturn in the sector will level off due to weaker comparatives, there will only be a very slight pickup at best in 2010 due to events such as the soccer World Cup and Winter Olympics.

Interpublic Chief Executive Michael Roth last month said that it will take some time to get back to growth as clients continue to be cautious when it comes to committing resources in such an uncertain environment.

Dublin-based WPP, which owns advertising agencies including Ogilvy & Mather, Young & Rubicam and JWT, said further cost actions have been taken in the second quarter that should improve the picture in the second half - and that July already indicated a "less-worse" picture.

"The group's like-for-like headcount is now better balanced in comparison to the reduction in like-for-like revenues and the second-half is forecast to show a marked improvement in profitability, both absolutely and in terms of maintaining second half margins at prior years levels," the group said in a statement.

Organic revenue, which strips out the impact of acquisitions and exchange rate movements and is a closely watched metric in the advertising industry, fell 8.3% in the first six months of the year as advertisers continued to cut media spending across most regions. WPP said organic revenue fell steeper than the company had budgeted, which was "a surprise." Analysts had forecast organic revenue to fall 7.6%.

Net profit for the six months ended June 30 fell 48% to GBP108.4 million from GBP208.2 million last year, coming in below an average GBP200.8 million forecast by five analysts polled by Dow Jones Newswires. Profits were hit by its euro-denominated debt, with interest payments higher when translated into the weaker sterling.

The impact of the recession on profitability in the first half was severe, WPP said. Its headline operating margin before severance and one-off costs was 10%, WPP said.

At 0841 GMT, WPP shares were trading down 3.4%, or 17 pence to 503p, in a broadly lower FTSE 100 index. The stock has gained about 29% since the start of the year, despite the gloomy advertising outlook and fears about its balance sheet.

Kepler Capital Markets analyst Conor O'Shea said the results were very poor, noting that Europe, the U.K. and Asia more than doubled their rate of decline in the second quarter.

The advertising industry has been hard hit by the global recession, as ad spending is cut back and companies lay off thousands of workers as revenue shrinks.

WPP's unit GroupM currently forecasts global advertising spending to drop 5.5% in 2009 before slowly recovering in 2010 and Publicis's unit ZenithOptimedia has forecast global advertising spending will decline 8.5% this year.

The ad industry responds to downturns by cutting jobs as salaries typically represent about 55%-65% of an agency's expenses. WPP's headcount was down almost 6% compared with June 2008 and over 7% compared with July 2008, the company said, adding that additional severance costs dragged down profitability in the first-half.

Despite also reporting significant declines in revenue and profit, WPP's New York based rival Omnicom Group Inc. (OMC) and French Publicis Groupe SA (PUB.FR), last month indicated that the worst of the advertising downturn is over.

WPP, whose major clients include Unilever N.V.(UN) and Johnson & Johnson (JNJ), said it would pay an interim ordinary dividend of 5.19 pence per share, flat from last year, payable November 9.

Reported revenue for the first half was GBP4.29 billion, up 28% from GBP3.34 billion in the same period last year, boosted by the first-time integration of market research firm Taylor Nelson Sofres. Still, the figure was below analysts' expectations for GBP4.32 billion.

 
   Company Web site: www.wpp.com 

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 40; ruth.bender@dowjones.com