U.K. advertising and public relations company WPP Group PLC (WPP.LN) Tuesday said like-for-like revenue for 2009 is likely to fall below budget as the economic slump continues to bite into advertising spend, meaning cost-control will remain a priority.

First quarter revenue, excluding the impact of acquisitions and currency, fell 5.8%, largely on weakness in the U.S., Continental Europe and the U.K., the company said. By sector, automotive, drinks, financial services, retail and telecoms were the worst performers, Chief Executive Martin Sorrell told Dow Jones Newswires in an interview.

"In the balance of 2009, the short-term focus will continue to be on balancing the likely fall in revenues against staff costs and headcount," the company said in a statement.

WPP has already shed a number of jobs, and on a proforma basis headcount, excluding associates, at March 31 was down 2% or 2,280 compared with last year.

Still, analysts said the trading update was disappointing and shares slumped in early trade. By 0849 GMT, WPP shares were down 6.9% at 610 pence with the FTSE 100 down 2.5%.

Revenue, excluding the impact of weak U.K. sterling compared with the U.S. dollar and the euro and the acquisition of Taylor Nelson Sofres, fell 5.8% in the quarter to March 31. Reported revenue rose 35.9% to GBP2.12 billion compared with GBP1.56 billion last year, reflecting the acquisition of TNS and the benefit from weaker sterling.

"We are in the process of reviewing our quarter one revised forecasts, but early indications are that like-for-like revenues will be below budget, closer to recent industry forecasts of mid-single digit declines, reflecting ontinued pressure in most regions," the company said.

In March, the company said it expected 2009 revenue to fall 2% on a like-for-like basis compared with 2008.

WPP said however that the rate of decline eased in March compared with January and February "perhaps reflecting some stabilization or maybe restocking of inventories."

"The cautious tone of the statement may be seen as disappointing, however we do not expect downgrades to consensus earnings which already factor in a (5% drop in) organic growth," UBS said.

Kepler said the fact that organic growth was lower in the first quarter "is not disastrous" as costs continue to be managed down. But Goldman Sachs said the downgrades to guidance could raise concerns about the scale of the potential deterioration of revenue in future.

WPP said that although revenue was below budget, operating margins were ahead of budget and revenue shortfalls were offset by operating cost reductions. Operating margins were down compared with the same quarter last year, partly due to severance costs as headcount was cut.

In March the company said it was targeting operating margins for 2009 at 14.3%, flat compared with 2008, and including the acquisition of TNS.

WPP's trading update follows first quarter results from U.S. rival Omnicom Group Inc.(OMC) Monday, when it posted a 23% drop in first-quarter net income as revenue fell, with international sales dropping sharply amid the stronger dollar. Earnings, however, came in well above analysts' expectations.

French rival Publicis Groupe (PUB.FR) reports Wednesday.

WPP owns advertising agencies including Ogilvy & Mather, Young & Rubicam and JWT; public-relations companies Hill & Knowlton and Burson-Marsteller; plus a range of research and consulting firms. Its major clients include Johnson & Johnson and Novartis AG.

Company Web site: www.wpp.com

-By Erica Herrero-Martinez, Dow Jones Newswires; 44 20 7842 9353; erica.herrero-martinez@dowjones.com