(Adds detail, background, analyst and CEO comment.)
By Ruth Bender
Of DOW JONES NEWSWIRES
PARIS -(Dow Jones)- WPP PLC, the world's largest marketing company by revenue, was the second-highest riser on the bluechip FTSE 100 Friday after it said market conditions were "less worse" and margins improved strongly compared with the first half on cost cutting.
WPP, which owns advertising agencies including Ogilvy & Mather, Young & Rubicam and JWT, said it is on track to meet its goal of posting a second-half operating margin in line with the prior-year as trading conditions improved.
"There is little doubt that consumer and corporate confidence has recovered somewhat from the panic levels of the fourth quarter of 2008 and first quarter of 2009," the company said in a statement.
Investors reacted positively, and by 1029 GMT WPP shares were up 4.9%, or 27p, to 572p, clearly outpacing a 0.3% rise in the FTSE 100.
Still, Chief Executive Sir Martin Sorrell said it remains too early to call a recovery, in contrast with Maurice Levy, CEO of Paris-based rival Publicis Groupe SA (PUB.FR), who earlier this week said advertising markets has started a "slow and gradual recovery."
"I think it is wrong to call the end of a recession based on sequential improvements...I only declare victory when like-for-like revenues are up again," Sorrell told Dow Jones Newswires.
Sorrell expects the sequential improvement to continue into the fourth quarter of 2009 and into 2010, resulting in flat revenue next year.
The advertising industry has been hit hard by the global recession that saw companies cut ad spending and forced advertising agencies to cut jobs as revenue dwindled.
WPP said its headcount was down 10% at the end of September to 101,333 compared with 112,565 at the end of 2008, meaning headline operating margins on a like-for-like basis declined by just 0.7 margin points compared with last year.
"There is a very strong improvement in margins from 1H," said Exane BNP Paribas analyst Charles Bedouelle, adding cost cutting is at full speed now. He rates WPP at outperform.
Like-for-like revenue, a closely watched metric in the advertising industry that strips out the impact of acquisitions and exchange-rate movements, fell 8.7% in the three months ended Sept. 30, an improvement from the 10.5% drop in the second quarter, mainly driven by a better performance in the U.S.
Seven analysts polled by Dow Jones Newswires had forecast a drop of 8.9%.
Third-quarter revenue rose 17% to GBP2 billion, boosted by the integration of recently acquired market research firm Taylor Nelson Sofres and the benefit of weaker sterling, closely matching the GBP2.03 billion forecast by analysts.
WPP's organic revenue beat peers, with the exception of Publicis, which Tuesday posted a drop of 7.4%.
WPP's share price has gained about 32% since the start of the year as it is viewed as well-positioned to weather the downturn due to its size and strong position in emerging markets.
The group, whose clients include Unilever N.V.(UN), Johnson & Johnson (JNJ), and Ford Motor Co.(F), said it won net new business billings of GBP730 million in the third quarter.
WPP recently moved its headquarters to Dublin for tax purposes, but it still reports in sterling.
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@dowjones.com