WPP sees signs of post-Brexit recovery in British ad market

Sir Martin Sorrell, chairman and CEO of WPP

LONDON: WPP, the world’s largest advertising group, reported a better than expected jump in first-half net sales and said its British operations showed signs in July of a “post-Brexit recovery,” sending its shares to a record high.
Run by high-profile businessman Martin Sorrell, the UK group said investments in technology had helped to reduce some costs, while the plunge in the pound following Britain’s vote to leave the European Union had helped reported revenues.
In the long term, however, Sorrell said clients were cautious about big investments as they wait to see what type of deal Britain can secure with its global trading partners.
The firm has little pricing power, he said, and the second half could be tougher than the first due to challenging comparative figures from last year.
“In April to June, we saw a slowdown in the UK before the vote and after the vote in July we saw some strengthening,” said Sorrell, a leading advocate of EU membership.
“So it’s mixed at the moment. It’s still very uncertain because what business wants is certainty and what the government wants is room to maneuver.”
WPP offers branding, media planning, market research and consultancy services, with clients including Ford, Unilever, L’Oreal and Tesco.
The group has been outperforming rivals in recent years, doing particularly well in the United States.
The owner of agencies Ogilvy & Mather, Young & Rubicam and JWT reported first-half like-for-like net sales up 3.8 percent, compared with analysts’ expectations of around 3.2 percent, due to strong demand in North America and continental Europe.
Reported revenue was up 11.9 percent to 6.5 billion pounds ($8.6 billion), helped by the weakness of the pound against the dollar and euro. On a like-for-like basis, growth hit 4.3 percent.
The group also nudged up its full-year revenue forecast, predicting growth of “well over” 3 percent compared with “over” 3 percent before, sending its shares as much as 6.3 percent higher to a record high of 1,857 pence.
WPP said its British operations had traded more strongly in July than the previous quarter, which it said perhaps reflected a “post-Brexit vote recovery” driven by a weaker pound.
After the June 23 vote, WPP said it would step up its drive to increase sales in its fast growing markets and new media divisions, aiming for them to make up 40-45 percent of revenue over the next four to five years, from 35-40 percent previously.
It will also look to grow more quickly in its major continental European markets.
“WPP’s first-half results are encouragingly strong with a decent beat on an underlying basis amplified by beneficial forex moves,” said Citi analysts, who have a buy rating on the stock.
The first-half update follows an impressive performance from French rival Publicis which reported strong underlying sales growth in July.