2nd UPDATE: WPP Lifts Outlook As US Leads Advertising Recovery
24 August 2010 - 12:59PM
Dow Jones News
A spectacular turnaround in the U.S. and steady improvement in
advertising markets across the globe Tuesday led WPP PLC (WPP.LN),
the world's largest marketing company by revenue, to raise its
revenue outlook for the full year.
Chief Executive Sir Martin Sorrell said that he now expects
organic revenue to grow around 4% this year, compared to the
group's previous forecast of 2%, as advertising markets have
recovered more quickly than expected.
"Our budget was originally for flat organic revenue, at the end
of the first quarter it went to 2% and now, at the end of the
second quarter, our forecasts indicate around 4%," Sorrell said in
an interview with Dow Jones Newswires. "That's pretty steady
sequential growth, except for June, when we saw slightly less
strong growth."
WPP's more upbeat outlook comes a month after French rival
Publicis Groupe SA (PUB.FR) raised its full-year outlook after
posting better-than-expected second quarter earnings.
In a sign of increased confidence, the Dublin-based owner of
advertising agencies including Ogilvy & Mather, Young &
Rubicam and JWT also raised its interim ordinary dividend to 5.97
pence a share, up 15% from last year.
"Mild expansion has replaced fear and stabilisation," WPP said
in a statement, adding that the recovery is particularly fast in
the U.S. "In our 25 years of existence, we cannot remember a more
speedy recovery or turnaround of a region."
Organic revenue, a closely watched measure in the advertising
industry that strips out acquisitions, disposals and currency
effects, was 8% in the U.S. in the second quarter, up from around
4% in the first quarter and against a 6% drop in the fourth quarter
of last year.
For WPP as a whole, organic revenue grew 2.5% in the first half
and almost 5% in the second quarter as clients spent more on
advertising and promotions across sectors and markets. July alone
was up almost 7%.
Clients from the automotive, financial services, telecoms,
technology and consumer sectors are increasing spending most
sharply while the travel industry, notably hotels and airlines,
remains tough, Sir Martin said.
Consumer goods companies such as Unilever PLC (UN, UL), a client
of WPP, have ramped up their marketing spend in recent quarters as
they look to boost volumes. Unilever's spending on advertising and
promotions grew 1.4 percentage points in the three months to June
30. U.S.-based consumer goods giant Procter & Gamble Co. (PG)
has also sharply increased ad spending to help boost market
share.
At 1021 GMT, WPP shares were down 20 pence, or 3.1%, at 650
pence in a lower London market, valuing the company at GBP8.14
billion.
"WPP shares are falling foul of a general market malaise despite
an upbeat outlook," said Richard Hunter, Head of U.K. Equities at
Hargreaves Lansdown Stockbrokers, adding that the group's outlook
is "realistic but unusually positive."
Still, Sorrell said there are reasons to be cautious for the
rest of the year and next year amid concerns about fiscal contagion
from Greece, Portugal, Spain and Ireland to other parts of Europe
and about how U.S. growth will evolve next year.
"Most clients are doing calendar-year budgets so they are doing
their budgets for 2011 at a time when there is a considerable
amount of uncertainty around," Sorrell said.
On a reported basis, WPP's first-half revenue rose 3.5% to
GBP4.44 billion, compared with GBP4.29 billion in the same period
last year, and above analysts' forecast of GBP4.41 billion.
Net profit for the six months ended June 30 was GBP150.8
million, up 39% from GBP108.4 in the same period last year.
WPP said its operating margin was 10.3% in the first six months,
up from 8% in the same period last year, and confirmed that its
margin should improve by at least one-percentage-point to 12.7% in
2010.
Net new business billings totaled GBP2.1 billion in the first
half, almost double the same period last year and included wins
from Bharti Airtel (532454.BY), pharmaceutical company Bayer AG
(BAYN.XE) car maker BMW AG (BMW.XE).
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54;
ruth.bender@dowjones.com
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