WPP Chief Martin Sorrell Upbeat on 'Quick' U.S. Turnaround

No. 1 Holding Co. Posts Modest First-Quarter Growth

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NEW YORK (AdAge.com) -- London-based WPP, the world's largest holding company, today reported a half-percent bump in revenue to $3.23 billion compared to the same period in 2009. That compares favorably to a 5.8% decline in the year-ago quarter and its 7.2% drop in the fourth quarter of 2009.

Martin Sorrell
Martin Sorrell
U.S. recovery is coloring WPP chief Martin Sorrell's rosy outlook, with the company projecting full-year organic growth to go up 2%. "The surprise is that the turnaround has been so quick," Mr. Sorrell told analysts this morning in reference to the U.S. market, which has seen organic revenue up 4.1% for WPP. The U.K and western Europe lag with single-digit declines.

Mr. Sorrell called out western Europe for the slowest growth by region, adding that the U.K. is the "least worst." He cited the increased presence of procurement departments in marketing activities as largely to blame for the slow European recovery, noting marketers' attitude toward spending is less favorable for Europe than it is for emerging markets.

"The vigilance that clients have on cost, in our view, has not relented," he said. "Finance and procurement continue to look for efficiencies. This is not a complaint, just an observation of what's going on."

WPP is operating with headcount down 10% year over year. By sector, branding, health care and specialist shops -- especially PR in the U.S. -- drove growth. Digital shops such as Schematic and 24/7 showed organic growth revenue of more than 9%. Digital, direct and interactive account for 27% of WPP's overall revenue.

"Direct, digital and interactive look set to over-perform this year," said Paul Richardson, the holding company's finance chief. Revenue for its consumer insight business, which includes WPP's $2 billion acquisition of TNS, now Kantar Media, was down by less than one percentage point. However, Mr. Sorrell added that data and research will increasingly be important for growth.

Big wins in the first quarter include: Group M's $600 million in billings for worldwide media for Bayer; worldwide media for Barcardi; Ogilvy's $90 million win of Ikea; and Grey's $200 million win of Direct TV business. The latter two are pieces of business that affect Interpublic Group of Cos.' Deutsch. The wins counter MediaCom losing a total of $120 million for Smuckers and Deutsche Bank. In total, WPP reports about $1.5 billion in new business for the first quarter.

As for acquisitions, WPP has more than $150 million in funds for the year, $20 million of which is already accounted for. WPP has entered into a joint venture with Scangroup through its Ogilvy network to strengthen its presence in sub-Saharan Africa. But don't expect WPP to go head to head with companies such as Dentsu or Cheil Worldwide snapping up buys in the U.S.

"There are transactions going on and pricing continues to be much higher in the U.S.," said Mr. Sorrell. "Buyers Japan and Korea have been at high valuations. U.S. remains expensive. Markets outside the U.S. are cheaper and more attractive."

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