WPP Upbeat For Fourth Quarter, Uncertainty For 2011
PARIS -(Dow Jones)- WPP PLC (WPP.LN), the world's largest marketing company by revenue, Friday was upbeat for the rest of the year and slightly more optimistic about next year, despite fears among clients of a slowdown in economic growth.
|"I think I'm slightly more optimistic about 2011 than three months ago," said Chief Executive Sir Martin Sorrell in an interview with Dow Jones Newswires, although he cautioned that the level of uncertainty about next year has increased.|
"Companies, our clients, have continuing concerns about Eurozone contagion and American consumer demand, deficit reduction, increased taxation, currency wars and protectionism at election time," WPP said.
Such fears are leading clients to shift their focus to high-growth markets such as China or Brazil, where WPP continues to look for small to medium-sized acquisitions, Sir Martin said.
Still, he said he was surprised by the speed of the recovery in advertising markets.
WPP in August raised its outlook for 2010, saying that organic revenue growth should be around 4% this year as advertising markets, particularly in the U.S., recovered faster than expected.
In the third quarter, group organic revenue growth, a closely watched measure in the advertising industry that strips out acquisitions, disposals and currency effects, was 7.5%, its strongest quarter for ten years. Organic revenue growth reached 4.1% in the first nine months of the year.
On a reported basis, WPP's third-quarter revenue rose 12% to GBP2.25 billion from GBP2.01 billion in the same period last year, and above analysts' forecast of GBP2.18 billion.
At 1007 GMT, shares in WPP were however trading down 0.3% to 717 pence, underperforming a higher London market, as investors were taking profits on the stock, which has gained about 18% since the start of the year amid the speedy recovery in the advertising market. Investors had widely expected WPP to post strong third-quarter revenue following comments from the CEO earlier in the week and reports from peers.
"Investors knew that July and August had accelerated from the second quarter, but the key new point is that September further accelerated despite the comparison base starting to improve," Exane BNP Paribas said in a note to investors. The bank rates WPP buy.
Last week, French rival Publicis Groupe SA (PUB.FR) raised its 2010 organic revenue growth target to around 6% after posting 9.2% growth in the third quarter. U.S.-based Omnicom Group Inc. (OMC) and smaller French rival Havas SA ( HAV.FR) also posted better-than-expected third-quarter organic revenue growth.
The Dublin-based owner of advertising agencies including Ogilvy & Mather, Young & Rubicam and JWT, warned however that the current strong sequential improvement in growth rates, particularly in the U.S., won't continue forever.
Organic revenue growth in the U.S. reached almost 10% in the third quarter, up from 8% in the second quarter, the U.K. posted growth of 7.4% and even Western Continental Europe, which has been lagging growth in the U.S., improved.
WPP, which is also the largest ad group by market capitalization, said net new business billings in the first nine months of the year rose 50% to GBP2.99 billion. Client wins included L'Oreal SA (OR.FR) in China as well as deals with Bayer AG (BAYN.XE) and Electronic Arts (ERTS).
WPP also said it is on track to exceed its 2010 margin target of one margin point improvement and that its 2011 margin should improve by at least half a margin point.
-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@ dowjones.com
Marcadores: Publicis Groupe