Sharp upturn in trade at WPP

Sir Martin Sorrell
Sir Martin Sorrell
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The world’s largest advertising agency, WPP, said it expected to hit its full-year net sales and margin targets after seeing a sharp upturn in trading in July.

WPP, which handles the advertising needs of brands such as Ford and Unilever, reported a 2.3 per cent rise in first half like-for-like net sales, in line with forecasts, and a 3.7 per cent jump in July, which it said indicated a likely stronger third quarter.

The group, one of Britain’s best known companies and run by Sir Martin Sorrell, said as a result it expected to hit its target of full-year net sales growth of over 3 per cent, helped by an expected stronger second half.

It also reiterated its target for an improvement in the operating margin of 0.3 margin points.

Billings were up 5 per cent to £23.2bn in the first half of the year at WPP and headline profit before tax was up 12.1 per cent from £532m to £596m.

WPP said it had seen good growth across all its regions and in advertising and media, direct, digital and specialist communications.

The firm said it was also seeing good results from the “tsunami” of media contracts that were up for review.

“The group continues to benefit from consolidation trends in the industry, winning assignments from existing and new clients, including several very large industry-leading advertising, media and digital assignments, the full benefit of which will be seen reflected in Group revenue later in 2015 and into 2016,” it said.

WPP said it remained an “unabashed bull” on China despite fears over its economic slowdown. The advertising giant said concerns would continue surrounding the world’s second biggest economy following turmoil in global stock markets, which saw China slash interest rates for the fifth time in nine months yesterday to shore up its flagging growth.

WPP posted a better-than-expected 12.1 per cent hike in underlying pre-tax profits to £596m for the six months to the end of June, but figures revealed a slowdown in revenue growth in the second quarter.

Conditions in China contributed to easing like-for-like revenues, up 4.5 per cent in the second quarter against growth of 5.2 per cent in the first three months.

Once rampant growth in China has been pulling back, sending commodity prices tumbling on fears over lower demand from the country, while stock markets have responded with heavy falls.

Moves by China to devalue the yuan earlier this month fuelled worries over its economy, sparking the recent bout of equity volatility.

WPP admitted growth faltered across fast emerging markets, known as the Brics - Brazil, Russia, India and China.

But WPP said: “Concerns about China, aggravated by the recent RMB devaluation and stock market decline, and Brazil remain, although we remain unabashed bulls of both.”

WPP added 2015 would be another “demanding year”, warning over two “grey swans” as it cautioned of the impact of inevitable interest rate rises in the United States and uncertainty caused by a referendum on Britain remaining in the European Union.