Q1 at WPP: Expect Growth, Brexit Talk and Sorrell's Opinions on Everything

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Martin Sorrell
Martin Sorrell Credit: Dario Pignatelli/Bloomberg

As CEO of WPP -- the world's biggest communications company -- Martin Sorrell's opinions count. This is particularly true in London, where WPP is based and where he'll be talking to analysts and media on the group's call tomorrow to discuss first-quarter earnings.

We know his opinion on the surprise U.K. general election (announced last week), which he told the BBC was "another excuse [for British business] to do nothing."

Sorrell is not afraid to speak out against Google and Facebook either. In the wake of fake news and brand safety issues, Sorrell has called for them to stop masquerading as technology companies and take on the responsibilities of a media company.

Even marketers come under fire. On an earlier results call for full-year 2016, he criticized clients for driving down costs, particularly via online auctions, which he blamed for WPP's loss of the Volkswagen media business last year.

WPP's first-quarter 2017 results presentation will likely see Mr. Sorrell expand on these topics. Alex DeGroote, a research analyst at Cenkos Securities, said, "I think the interesting features will be the impact of politics in Europe and the ongoing kerfuffle over Google and Facebook. Is it actually impacting adspend?"

The first quarter kicked off what looks likely to be a tough year for the industry. Here's what to expect from WPP:

1. Growth is an issue for all the major holding companies. One senior WPP executive said, "Now that China has slowed right down, where is the growth going to come from?"

WPP has made more acquisitions than its rivals over the last few years, which helps the numbers, but the pipeline of attractive companies of a good size may be drying up.

2. Brexit and European Union politics are having an unsettling effect. Sorrell hopes that the U.K. election in June will increase Prime Minister Theresa May's majority – and therefore strengthen her hand in Brexit negotiations – but he is still fundamentally opposed to the U.K. leaving the EU. U.K. growth has been stronger than expected, but may be falling off as Brexit-related inflation starts to take hold on the economy.

France's presidential election will be decided next month, in a May 7 run-off between National Front candidate Marine Le Pen and moderate Emmanuel Macron, and Germany goes to the polls in September. Signs are that the populist uprising that secured victories for Donald Trump and Brexit may be running out of steam, which could help economic stability in Europe.

3. Decent numbers. The continued weakness of sterling will help. DeGroote predicts about 2% growth and expects a pick-up in the second half of 2017.

But Greg Paull, co-founder and principal at ad agency consulting firm R3, warned, "The challenge is that marketers are thinking more short-term and it's getting tougher to lock down long-term revenues."

4. Horizontality. Well before Publicis Groupe came up with its "Power of One" positioning and Havas started opening "villages" to bring its companies closer, WPP was talking about horizontality: bringing together teams from different agencies to work across a single client.

The policy remains WPP's top strategic priority, and has proved particularly successful in times of slow growth. Recent recruits include Campari, Google, and Walgreens Boots Alliance, which join the likes of Team P&G for Procter & Gamble, Team Red for Vodafone, and Team Arrow Partners for Target.

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