WPP trims revenue forecast

WPP, the world’s largest marketing services group, has trimmed its full year revenue forecast, blaming the ongoing Eurozone crisis and a slowdown in advertising growth in the US.

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The group – which owns agency networks including Ogilvy & Mather, Grey, JWT, Mindshare and Y&R – says it expects full-year like for like revenue to grow by 3.5 per cent, down from the 4 per cent it had previously predicted.

The entire advertising industry should see growth of 1 per cent this year, the company forecasts, boosted by Euro 2012, The Olympics and the US presidential elections in November.

Concerns remain over the Eurozone crisis and the US fiscal deficit, the company adds.

Looking further ahead, WPP expects the ad market in 2013 to be “more challenging” in the absence of such major global events.

Media agency network Carat, owned by Aegis, has just halved its forecast for global ad spend next year to 1.1 per cent.

For the six months to 30 June, WPP reported like for like revenue growth of 3.6 per cent to £4.97bn. Pre-tax profits rose 7 per cent to £358 million.

In the UK, like for like revenue rose 3.5 per cent year on year in the quarter to June to £307m, with its media planning and buying businesses Ogilvy Group and Hogarth showing “particularly strong growth”.

Growth in the UK and faster growing markets was offset by slower growth in the mature markets of the US and Western Continental Europe.

WPP’s North American business, which accounts for about 35 per cent of its revenues, marked a 0.6 per cent slowdown in like for like revenue growth in the second quarter, following a reduction in client spend in parts of its public affairs business in advance of the US general election. There are also declines in its custom research, call centre operations and parts of its healthcare businesses.

The group’s advertising and media buying arm was its strongest performer by discipline, with revenue up 5.9 per cent in the quarter to £1.07bn, although growth was down from 6.2 per cent in the first quarter. It now accounts for 42 per cent of its total revenues.

The consumer insight arm also marked a slight slowdown quarter on quarter, but the division reported a 0.8 per cent uplift in revenue year on year to £622m.

Public relations and public affairs revenues were up 0.3 per cent year on year to £234m in the period, but slowed from 1.9 per cent growth the previous quarter.

Sir Martin Sorrell, chief executive of WPP, says: “Data continues to reflect increased advertising and promotional spending – with the former tending to grow faster than the latter, which from our point of view is more positive – across most of the group’s major geographic and functional sectors. Quarter two saw a continuation of the strength of advertising spending in fast moving consumer goods, especially. Nonetheless, clients understandably continue to demand increased effectiveness and efficiency.”

Sorrell also used his company’s financial results to reveal that he is to move WPP’s headquarters back to London from Dublin in December, following the UK government’s decision to change corporation tax rules in February. The new rules mean foreign subsidiaries of UK companies will not be subject to tax unless an exemption is met.

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