WPP Reports Revenue Up 9% But Organic Growth Trails Rivals at 4.7%
WPP reported revenue growth of 9% for the third quarter of 2011, to $3.95 billion. But organic growth was just 4.7%, behind rival ad holding companies that are also reporting third-quarter earnings, and lower than WPP's own performance earlier this year, when organic growth reached 6.7% in the first quarter and 5.6% in the second quarter, compared to the same periods in 2010.
Chief Executive Martin Sorrell noted that WPP's growth in North America was slower than in the first two quarters, describing it as "respectable rather than spectacular."
Mr. Sorrell said that next year's big-spending events like the U.S. presidential election, the 2012 Olympic Games in London, and the European Football Championship will add about 1% to spending levels in the ad industry, bringing global ad spend growth to about 4%. His bigger concern is 2013.
"In the U.S., the big issue, for us and the industry, will be 2013, and dealing with the U.S. deficit after the election," he said in a call with U.S. analysts.
In interviews earlier in London, Mr. Sorrell also said that it is likely Barack Obama will be re-elected, but that the Republican Party's power in the U.S. Senate will result in a deadlock.
WPP's worst-performing sector was consumer insight, especially custom research, and particularly in mature markets. While advertising and media revenue grew by 12.5% in the third quarter, consumer insight revenue was up by just 0.7%.
The biggest revenue growth came from the BRIC countries -- Brazil, Russia, India and China -- at 19%, led by mainland China, with revenue growth of 26.6% in the third quarter.
WPP estimated net new business wins reached $2.2 billion in the third quarter, more than the entire first half of 2011, when net new business totaled $1.9 billion.
Regarding acquisitions, WPP said "There is still a significant pipeline of reasonably priced small and medium-size potential acquisitions, with the possible exception of digital acquisitions in the USA which remain overpriced, and Brazil, where the market appears to be over bought."
That means WPP is continuing to acquire small and medium-sized companies, focused on new markets, new media and consumer insight, the company said.
WPP said that the company has so far seen little, if any impact, on client spending from six "global risks," which WPP described as "feared euro contagion, lack of attention to the U.S. deficit, rising commodity prices, the impact of the tragic events in Japan, uncertainties caused by the Arab Spring and finally the possibility of the withdrawal of post-Lehman fiscal and monetary stimulus. ... However, the continuous macroeconomic gloom and despair in the media and elsewhere must have some impact on both corporate and consumer confidence."
The company also said that headcount was up by 3.8% at the end of September 2011, with 112,564 people employed at the group's companies around the world, from 108,452 a year earlier. Most of the increased hiring was in Asia, Latin America, Africa and the Middle East, Central and Eastern Europe, and one mature market -- the U.K.