Sorrell warns of advertising industry’s ‘misplaced optimism’ as WPP revenues rise
INTERNATIONAL advertising giant WPP has said optimism in the industry “seems misplaced”, despite the group announcing a rise in reported revenue of 6.8pc to £5.8bn in the first half of the year.
Reported billings at the company rose 5pc to over £23bn in the first six months of 2015, with a rise in pre-tax profits of 44.5pc to £710m.
The group benefited from consolidation in the industry and winning a number of new assignments.
“Despite this strong performance, the apparent general industry optimism seems misplaced,” said the advertising group headed by Sir Martin Sorrell, the best paid chief executive in the FTSE 100. WPP also offered an analysis of the world economy, saying the group remained “unabashed bulls” on both Brazil and China, despite the collapse in Chinese shares.
While acknowledging that survival in the advertising industry required a “glass half-full” attitude, WPP said “general client behaviour does not reflect that state of mind”.
Cutting costs rather than revenue growth remained the focus for clients thanks to “tepid GDP growth, low or no inflation and consequent lack of pricing power”, WPP said.
Considering the outlook for the rest of the year, the group said “geopolitical issues” remained a top concern for business leaders, including the crisis in Ukraine, tensions in the Middle East and North Africa and the ongoing risk of Grexit or Brexit.
The company revised its forecast for the full year to expect like-for-like revenue and net sales growth of more than 3pc.
“All in all, 2015 looks to be another demanding year, although a weaker UK pound against a stronger US dollar may continue to provide some modest currency tailwind, which may be now more than offset by a stronger pound against the euro and the fast growth market currencies,” the group said in a statement.
WPP expects to achieve its targeted dividend payout ratio of 50pc by the end of next year.
This year’s interim dividend rose to 15.91p per share.