WPP: ‘Companies need to stop cost-cutting and invest in brands’

WPP chief executive Sir Martin Sorrell has called on “risk averse” brands to switch focus from cost-cutting and invest in brand-building to drive growth.

Sir Martin Sorrell

The rallying call came as the JWT, Millward Brown, Grey and Ogilvy owner reported an 8 per cent increase in pre-tax profit to £1.4bn in 2012 on revenue up 3.5 per cent to £10.4bn.

Double digit revenue growth in developing regions Asia Pacific, Latin America, Africa and the Middle East offset sluggish returns from the US, down 0.1 per cent and Western European markets, which inched up 0.1 per cent. The UK bucked the trend, however, with the company reporting a 4 per cent increase in revenue.

Sir Martin says “increasingly cautious and risk averse” companies in those regions reporting flat or falling revenues should take the same approach as those in faster growing countries and “invest in brands to stimulate top line sales growth”.

“As a leading Chief Investment Officer of one of the largest investment institutions said recently, companies may be running out of ways of reducing costs and have to focus more on top line growth. Merger and acquisition activity may be another way of doing this, but maybe a more risky way than investing in marketing and brand and hence market share”, he adds.

On the outlook for 2013, Sir Martin predicted “another demanding year” in the absence of the Olympics and World Cup to lift marketing spend. The World Cup in Brazil and Winter Olympics in Russia in 2014, however, mean long-term prospects for the marketing services industry are better, he adds.

All the group’s business sectors but PR reported an increase in revenues with its advertising and media agency networks registering the steepest growth, up 5.1 per cent in the year.

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