Omar Oakes
Aug 27, 2015

WPP reports surge in pre-tax profits but warns of 'misplaced' optimism

WPP, the world's largest advertising holding company, has reported pre-tax profit of $1.1 billion in the first half of 2014, up 44.5 per cent year-on-year.

Martin Sorrell, founder and chief executive of WPP
Martin Sorrell, founder and chief executive of WPP

UK revenues saw an increase of 9.7 per cent to $1.3 billion, according to interim results posted by the owner of MediaCom and Ogilvy & Mather.

The group’s global pre-tax profit of $1.1 billion represented an impressive 45.6 per cent growth in constant currency. This growth was attributed to net exceptional gains on the sale and revaluation of investments as well as improved operating performance.

Revenue was reported at $9 billion, up 6.4 per cent in constant currency, in the six months to 30 June 2015.

Operating profit in the UK was £142.7 million, up 1.1 per cent year on year, although the margin slipped from 13.7 per cent in H1 2014 to 12.7 per cent in the first six months of 2015. 

In the UK, WPP said the group’s media investment management business grew "less strongly" than the previous year, together with public relations and public affairs agencies which also grew slower. 

The company, founded and run by Sir Martin Sorrell, saw operating profit grow to $1.2 billion, up 48.5 per cent year-on-year.

But despite reporting what it called a "strong performance", WPP delivered a lukewarm commentary on the economic outlook and "misplaced" industry optimism.

In its 2015 interim statement, WPP said: "To survive in the advertising and marketing services sector, you have to remain positive, indeed optimistic, seeing the glass half-full and industry and company reports generally continue, understandably, to reflect that attitude.

"However, general client behaviour does not reflect that state of mind as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth.

"In addition, there seem to be little, if any, reason for an upside breakout from the current levels of real or nominal GDP growth, which previously remained stuck at around 3 per cent and 5 per cent respectively and below the pre-Lehman trend rate, which by definition was unsustainable."

WPP reported a 2.3 per cent rise in first half like-for-like net sales, which was in line with industry forecasts, and a 3.7 per cent increase for July, which it said was an indication of a stronger third quarter.

The outlook for 2015 would be "demanding", WPP said, but speculated 2016 could see a one percentage point uplift in growth thanks to big events like the US presidential election campaign, the Olympic Games in Rio de Janeiro, and the Uefa Euro 2016 football championships.

This article was first published on 
campaignlive.co.uk
 

Source:
Campaign UK

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