With Revenues Up, WPP Says It's Still Bullish on China

Still, Giant Sounds a Note of Caution: Clients Are Being Cautious and Risk-Averse

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WPP, the world's biggest advertising holding company, reported first-half revenues up 6.8% on a strong performance in North America, and CEO Martin Sorrell said he was still bullish on China despite the turmoil in the stock market.

Martin Sorrell
Martin Sorrell Credit: Dario Pignatelli/Bloomberg

WPP maintained its 2015 forecast of like-for-like revenue growth of more than 3%. But it also sounded a note of caution about client sentiment in uncertain times.

"To survive and exist in the advertising industry, you have to be an optimist … When I listen to the broadcasts by our competitors, or by industry commentators, it's always very optimistic, 'How's everything? Fabulous, wonderful, nothing could be better,'" Mr. Sorrell said during a conference call with investors. "The reality of course is different."

A WPP statement said client behavior doesn't reflect the ad industry's optimism, "as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth." The statement added that "consumers and corporates both seem to be increasingly cautious and risk averse."

WPP, whose agencies include GroupM, Ogilvy & Mather and Grey, likened the current boom in media reviews to a "tsunami," saying the company's performance so far in that area had been "good, and further results will be announced towards the end of 2015 and into 2016."

WPP's revenues in the first six months of 2015 hit $9.17 billion, up 6.8% from the year-earlier period. On a like-for-like basis, excluding acquisitions, revenues were up 4.9%. Revenue in North America, the company's biggest market, was up 15.3% during the six month period. Profit before interest and tax grew 7.6% to $1.04 billion.

The markets of Asia Pacific, Latin America, Africa and the Middle East, Central and Eastern Europe saw revenues up a combined 6.9% in the first half. U.K. revenues were up 9.7%, while in Western continental Europe they dropped 8.1%.

The company said July's like-for-like revenue growth was 5%, which it said "indicated a likely stronger third quarter."

The WPP statement said its executives remained "unabashed bulls" on both Brazil and China, though concerns remained about China's currency devaluation and the stock market decline.

Mr. Sorrell said people should view the situation in China with perspective.

"This focus on China obviously is really important, because it's the second largest economy in the world, but we're talking about two quarters out of 30 years," Mr. Sorrell said. He added that having a strong local client base in China is an advantage. China is WPP's third biggest market.

"My sense is the local companies are doing better than the multinationals, partly because multinationals are seeing pressure put on operations around the world," he said. "I think actually the fact that we have a strong local business helps. Our strong local business – which is about 40% of the business -- buttresses us."

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