Expansion has replaced the fear, says WPP as profits rise

WPP said better than expected economic conditions helped billings rise by 8 per cent to 20.3bn and boosted revenues by 3 per cent to 4.4bn in the half year to June 30.

The group also announced an increase of 15 per cent in the first

interim ordinary dividend of 5.97p per share, which can be seen as a sign of confidence in future performance.

WPP said: "The first seven months of 2010 certainly saw a significant recovery in revenue growth and profitability. Mild expansion has replaced fear and stabilisation."

Looking ahead, the firm said: "While politicians, journalists, economists, analysts and investors argue about double-dips, inflation or deflation, the most likely scenario is a slow growth 'slog', particularly in the mature geographical markets and traditional media markets, perhaps with inflation and higher interest rates in the long-term."

WPP saw revenue growth in all of its four geographic regions in the second quarter.

A spokesman told the Yorkshire Post: "If you look at it geographically, in Q2 2008, some of the geographical regions started to turn negative. By Q1 2009 all the geographic regions were negative.

"In Q1 2010 one of the geographic regions turned positive. All of them are now positive in Q2.

"It's been a big turnaround and North America has been particularly spectacular."

The company said its US business has continued to show "remarkably" strong growth with like-for-like revenues up 6 per cent in the year to date. The UK business improved substantially in the second quarter, with like-for-like revenues up almost 7 per cent, against minus 1 per cent in the first quarter.

Western Continental Europe remains difficult, said the company, although it saw a marked improvement in the second quarter, with revenues up 1 per cent, compared with minus 2 per cent in the first quarter.

Germany, Italy, Norway, Sweden and Turkey, showed relatively strong growth, but France, Spain and Portugal were still tough markets, said WPP.

In Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, WPP's revenues were up by 3 per cent in the second quarter compared with minus 2 per cent in the first three months, driven by particularly strong growth in most of South East Asia.

WPP said it hopes 2010 operating profit margins will return to the levels seen before the recession struck, but increasing headcount after a major reduction in 2009 would inevitably lead to higher costs.

The group, which is headquartered in Dublin, employs more than 141,000 full-time staff in almost 2,400 offices in 107 countries.

Investec analyst Steve Liechti said the improvement in the United States and traditional media was encouraging, but the macro economic uncertainties were likely to limit share price gains.

Shares closed last night at 644.5p, a fall of 26.5p or 3 per cent.

The 'luvvy' recovery

Sir Martin Sorrell's media and advertising empire WPP predicted a "LuVVy" shaped global economic recovery as it said America was bouncing back stronger than expected.

The group, which owns names such as Ogilvy & Mather and J Walter Thompson, said global economies were likely to avoid a much-feared double-dip recession.

Its previous forecast for a LUV-shaped recovery – referring to an L-shaped recovery in western Europe, a U shape in North America and V in the emerging markets – was now more a "LuVVy" rebound as the US performs better than expected, according to WPP.

It added: "The expected LUV recovery, L-shaped in Western Europe, U-shaped in the United States and V-shaped in the BRICs and Next 11, is now more LVV-shaped – LuVVy-shaped? – with the United States, in particular recovering much more strongly than anticipated.

"In our 25 years of existence, we cannot remember a more speedy recovery or turnaround of a region."