WPP Reports Growth, Fueled by U.S., Traditional Media

Predicts Slow 'Slog' for Economic Recovery

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LONDON (AdAge.com) -- WPP, the world's largest advertising group, has reported profit increased 36% to $376 million and revenue rose 3% to $6.85 billion in the first half of 2010, thanks to a strong six months in the U.S. and a surprise comeback for traditional media activity.

In North America, whose revenue accounts for 35.7% of the group total, revenue was up 5.5% over the previous year at constant currency.

A WPP statement said, "The expected 'LUV' recovery -- L-shaped in western Europe, U-shaped in the U.S. and V-shaped in the BRICs -- is now more 'LVV'-shaped, with the U.S. in particular recovering much more strongly than anticipated." "BRIC" refers to the developing markets of Brazil, Russia, India and China.

However, the group warned that continued U.S. recovery cannot be taken for granted. "There is concern about the Obama administration's attitude to business, particularly as profits, as a proportion of GNP, are virtually at an all-time high and the U.S. corporation tax yield is low, particularly at a time when all sectors of society are being asked to make a sacrifice," WPP said in the statement announcing the earnings.

The developing regions of Latin America, Asia Pacific, Central and Eastern Europe and Africa and the Middle East together increased revenue by only 0.9% at constant currency and together account for 25.9% of group revenue.

The U.K. performed well, with revenue up 2.7%  at constant currency for the first half of 2010, but again WPP cautiously predicted that European recovery is also potentially shaky: "There are still volatile fears of Eurozone fiscal contagion from Greece, Portugal, Spain and Ireland to other parts of Europe; fears of the impact of the U.K. government's new austerity programs and similar programs in France and Italy."

Western Europe, which includes France, Germany, Italy and Spain, grew only 0.8% at constant currency.

Traditional advertising has done well so far this year across the group, posting its first growth in revenue since the third quarter of 2008. Revenue was down 4% in the first quarter of 2010, but recovered to grow 4% in the second quarter.

The company predicted that the "most likely scenario is a growth 'slog,' particularly in mature geographical markets and traditional media markets, perhaps with inflation and higher interest rates in the long-term. In some senses, the recovery will not be for a long time."

WPP agencies include JWT, Ogilvy & Mather, Young & Rubicam, Grey, Hill & Knowlton, Kantar MEC, and Mindshare.

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