WPP results ‘ravaged’ by strength of the pound
The world’s largest advertising company, WPP, reported a 1.5 per cent rise in profit to £532m in the first half of the year yesterday, hampered by the effects of a strong pound.
WPP reported that the strength of sterling had “ravaged” its billings and at a constant currency the same profits would have risen 15.6 per cent.
Despite the impact of currency, WPP’s results came in slightly ahead of forecasts with revenue growth of 2.7 per cent to £5.46bn.
While WPP’s Russian business remained strong during the first half of the year, chief executive Sir Martin Sorrell warned that the geopolitical tensions surrounding Ukraine and the impact of sanctions on Russia would weaken growth in the region during the second half of 2014.
“The sanctions must bite at some point, particularly when Germany is Russia’s biggest trading partner,” Sorrell told City PM
Germany is WPP’s fourth biggest market after the US, Britain and China, and could be most affected by sanctions against Russia due to the two countries’ relationship.
“One would expect there would be some impact, and in fact GroupM [WPP’s media billings company] have lowered their media forecasts for Russia from 10 per cent to six per cent for this year,” he added.
WPP’s total digital revenues were more than £3.6bn last year, and it raised its target of deriving 40 to 45 per cent of its revenue from digital and fast growth markets such as India, Brazil and China in the next five years, up from a previous target of 35 to 40 per cent, in the wake of the failed Publicis Omnicom merger in May.
“We’ve gained business [as a result of the failed merger], there’s a long list of new business, a lot of which comes from Publicis and Omnicom,” said Sorrell.
Digital currently accounts for 36 per cent of revenue, while fast growth markets account for 29 per cent.
WPP’s shares rose 1.39 per cent following the results to close up at 1,244p in London.