WPP Issues Warning on China -- Update
August 26 2015 - 7:04AM
Dow Jones News
By Nick Kostov
PARIS-- WPP PLC, the world's largest advertising holding
company, said Wednesday that an uptick in its North American
business helped it post a sharp rise in net profit, but warned that
highly volatile markets in China were a concern.
"We do well but it's in a restricted, tepid environment," Chief
Executive Martin Sorrell said in an interview. Companies are
cutting costs as they look to improve margins in a low-growth
environment, he said.
Mr. Sorrell is known for his colorful economic predictions and
WPP, which counts Ford Motor Co. and HSBC PLC among its clients, is
often seen as a bellwether for economic trends due to its reach and
sheer size.
Mr. Sorrell cautioned that although the company's performance
has been strong in 2015, the jittery markets in China are a concern
for the second half of the year.
China is WPP's third-largest market after the U.S. and the U.K.
and the group is the most exposed to emerging markets among the big
holding companies.
"Overall it's a worry, but it's a short term not a long-term
worry; we remain unabashed bulls," Mr. Sorrell said.
Mr. Sorrell said that his biggest concern is that a difficult
geopolitical climate would deter clients from investing for the
long term. "It's the lack of animal spirits and lack of willingness
to invest which worries me most," he said.
However, there are also brighter spots on the global economic
horizon, Mr. Sorrell said. Some key markets, such as North America,
which grew strongly in the first quarter, improved again in the
second quarter. Mr. Sorrell also said the U.K., Germany and Italy
provided cause for optimism as WPP's like-for-like sales in Western
continental Europe grew 4.6%.
Overall, net profit rose more than 50% to GBP566.2 million
($888.2 million) in the first six months of the year, while revenue
rose 6.8% to GBP5.84 billion.
WPP said like-for-like revenue--a metric that excludes
acquisitions and disposals--rose 4.5% in the second quarter. The
rise was a slight reduction from the first three months.
The advertising company's latest earnings come as the industry
grapples with a record number of big advertisers reviewing the
agencies they use in an effort to cut costs. Mr. Sorrell said the
reviews had been "good so far" for the company.
WPP, the owner of agencies including Grey and Ogilvy &
Mather, reaffirmed its full-year targets, saying it expects
full-year like-for-like net sales to grow more than 3%.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
August 26, 2015 06:49 ET (10:49 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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