WPP sees "very tough" '09, but no negative growth

BARCELONA Nov 19 (Reuters) - The chief executive of WPP Group (WPP.L), the world's second-largest advertising company, said on Wednesday he expected 2009 would be difficult, but that conditions in October had not materially worsened.

"Business did not fall off a cliff as some surmised," Martin Sorrell told the Morgan Stanley annual Technology, Media and Telecoms conference in Barcelona.

Though 2009 would be "a very tough" year, he said he would be surprised if advertising budgets shrank. Sorrell would not make a forecast for the fourth quarter 2008, only saying that it was "difficult for clients to cancel at this time of the year" and that "making very short-term adjustments to media schedule is quite difficult".

"We have to see how the Q4 plays out, he said.

He would not make any detailed predictions for 2009, saying his group was going through budgets.

"I find some of the analysts' commentaries excessively pessimistic," he said.

"Financial markets will start recovering toward mid-year, and 2010 will see a recovery of sorts," he added.

Sorrell, just back from Washington, also said he believed the new U.S administration would come up with a bailout package for the distressed car industry early next year.

The car industry makes up 10 percent of WPP's business, with Ford and Volkswagen among its biggest clients.

Sorrell also expects the traditional media in developed markets to remain under pressure next year, with growth coming from new media and emerging countries such as India, China or Brazil.

"We will have to invest in those markets and take out headcount in more mature markets ... The key thing for us is to balance revenue and cost growth in terms of headcount," he said.

WPP's advertising agencies include Ogilvy & Mather and Young & Rubicam.

Sorrell reiterated what he said earlier this month that his group would still strive to meet its 2008 profit margin target despite the challenges from tightening global ad spending.

WPP has a margin target of 15.5 percent for 2008 against 15 percent in 2007.

Major international ad agencies Publicis (PUBP.PA), Interpublic Group (IPG.N) and Aegis (AEGS.L) have issued dire warnings about an industry slowdown recently as the unfolding financial crisis jeopardised corporate marketing budgets.

Some industry analysts have also projected a decline in the global advertising market in 2009. (Editing by Will Waterman)