U.S. Growth Offsets Chinese Jitters at Ad Group WPP

WPP Brands
By Kate Holton

LONDON (Reuters) – Britain’s WPP, the world’s biggest advertising company, said it was on track to hit its demanding full-year sales target after solid first-half demand in mature countries helped to offset a slowdown in China.

WPP, which handles the advertising needs of brands such as Ford and Unilever through agencies including JWT and Ogilvy & Mather, posted results showing it was performing broadly on a par with its two big U.S. rivals Omnicom and IPG and ahead of French group Publicis.

To hit its full-year like-for-like net sales target of more than 3 percent growth however, WPP will have to accelerate through the second half after posting a 2.3 percent rise in the first half and a jump of 3.7 percent in July.

Sir Martin Sorrell
Sir Martin Sorrell

Chief Executive Martin Sorrell, one of Britain’s best known businessmen, said trading in China had been “weak” in the second quarter compared with the first, although he expects that to rebound in the second half.

“The growth rate in China has clearly been affected by what is going on, irrespective of the stock market, underlying growth has been affected,” he told Reuters, in regards to the Chinese stock crash which has unnerved global markets.

He still calls himself an “unabashed bull” on China.

Sorrell has been a vocal champion of emerging markets, investing earlier than others. In previous years he has been able to counter muted growth in places like continental Europe with booming demand in Brazil, China and Russia.

Results on Wednesday showed the opposite effect, with net sales growth of 3.5 percent in North America in the second quarter, compared with just 0.7 percent from Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

Sorrell said he expected the strong performance in the U.S. to be maintained, despite a raft of media planning contracts from huge global brands that have come up for review, sparking increased competition.

The strong performance in the U.S. echoed the recent updates from Omnicom and IPG, which were also helped by buoyant corporate demand in their home market.

On a like-for-like revenue basis, the measurement used by WPP’s rivals, the British firm was up 4.9 percent, compared with 5.2 percent at Omnicom and 6.2 percent for Interpublic. Publicis reported growth of 1.2 percent.

“WPP’s ongoing ability to navigate treacherous economic conditions is likely to consolidate its favoured market rating, with the consensus of the shares as a strong buy likely to remain intact,” said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers.

Shares in the group were down 1.4 percent, on a par with the FTSE 100 Index.

Editing by Sarah Young and Keith Weir