Sir Martin Sorrell’s global advertising group WPP said it remained an “unabashed bull” on China despite fears over its economic slowdown.
The advertising giant, which is headed by chief executive Sir Martin, 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 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. China is WPP’s third biggest market.
It forms part of the group’s region covering Asia-Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, which saw the slowest like-for-like revenue growth across the group in the first half, at 3.6 per cent. The UK was the best performing region, with sales up 6.3 per cent on a comparable basis in the half-year, against 5.9 per cent in North America.
This came despite a significant slowdown in the second quarter as UK revenue growth almost halved to 4.6 per cent from 8.1 per cent in the previous three months as the group’s media investment management businesses grew less strongly.
WPP is the world’s biggest advertising group, with a host of agencies around the world, including JWT and Ogilvy & Mather.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “WPP’s strategy continues to deliver rewards, both in terms of where it has been and where it plans to go.”
But he added: “Perhaps less positively, the general economic backdrop has unsurprisingly led to a number of clients unwilling to plunge into advertising spending or, indeed, acquisitions, until the clouds begin to clear despite many of those companies being cash rich on their balance sheets. In addition, the lack of a major football event, Olympics or US Presidential election all remove large revenue possibilities this year - although each of these events will come into play in 2016.”
Sir Martin told BBC Radio 4’s Today programme that he remained a “raging bull in relation to China”.
He described events in China, where WPP employs 16,000 people, as a “correction”.
Sir Martin said the world had got much more cautious since 2008, adding that the “stock markets got overblown”.