Sorrell warns financial crises will hit spending

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The Independent Online

The world's largest advertising group, WPP, has warned that the latest stock market crisis could hit client spending in 2012, as emerging markets and digital services helped the group post a surge in first-half profits.

WPP's chief executive, Sir Martin Sorrell, also expressed his concern that stock exchanges were "rarely wrong" about what lay ahead for the global economy. But he pointed to the boost the advertising industry would receive next year from the US presidential election and major sporting events, including the London Olympics.

Pre-tax profits at WPP, whose agencies include JWT and Ogilvy & Mather, rose 37 per cent to £334m, on revenues up 6 per cent to £4.7bn during the six months to 30 June. However, this was characterised by strong differences in its sales growth across different regions, with Brazil, Russia, India and China, the so-called Bric countries, leading the way.

Sir Martin said that last year the US and "traditional media" contributed strongly to its growth but "this year it is about China and India and the internet reasserting itself".

Investors gave the company's results the thumbs up, as shares in WPP jumped 43p, or 7.4 per cent, to 623p. The shares had fallen by about a quarter since it upgraded its 2011 earnings outlook in April. The company said: "So far so good in 2011, with forecasts in reasonable heart, but there are storm clouds and we still have to see how the latest stock market crisis affects consumer and client thinking and actions."

WPP warned that the "impact may not be felt until 2012", as most client budgets and plans were based on the calendar year. But Sir Martin struck an upbeat note on the expected boost in worldwide demand for advertising and marketing of between 1 and 2 per cent from the US presidential elections, European football championships and the London Olympics and Paralympics. Political spending for the US elections alone could reach $4bn.

However, Sir Martin said a key concern was the impact that a divided election result could have on the US economy and its deficit-reduction strategy in 2013. This could occur if President Obama was re-elected, but the Republicans controlled Congress.

WPP's digital revenues surged in the first half to account for 28 per cent, or $2.1bn of total revenues. The company added that it was raising its budget for acquisitions.

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