James Moore: Upbeat Sir Martin Sorrell’s going for growth – so why’s he moaning about sterling?

 

Outlook Behind the headlines, WPP, the world’s biggest advertising group, put together an excellent set of results for the first half of its financial year.

While rivals Omnicom and Publicis trotted up to the altar only for it all to collapse earlier this year as rows took the place of vows, WPP opened its arms to disaffected family members, picking up both high-profile clients and the creative people needed to keep them on board.

The company is now reaping the rewards of its rivals’ misstep and extending its lead over them. No wonder chief executive Sir Martin Sorrell felt confident enough to re-state the ambitious growth plans he originally announced as a response to the union while it was still in prospect.

Russia’s stand-off with the Ukraine is making him a bit twitchy. And the perennially depressing situation in the Middle East is never good for clients’ confidence. But with the global economy picking up in spite of it all, they are increasingly inclined to open up their wallets.

All this is reflected in WPP’s results, which were ahead of the City’s forecasts. Sir Martin predicted that the next year will be “demanding”, but a measure of his confidence in WPP’s business can be seen in the fact that the company hiked the first-half dividend by 10 per cent while promising to hit its target of paying out 45 per cent of its earnings ahead of schedule. It’s been busily buying back shares, too.

London’s investment community certainly got the message, marking the shares up on what was a generally slow day as far as the markets were concerned.

Why, then, the fuss about sterling, which Sir Martin said had “ravaged” the results?

Because the pound is strong WPP’s buoyant earnings in other currencies look rather flat when they are translated back.

The effect on the headline numbers was considerable this time around, but it’s hardly a new phenomenon, and the company will benefit when the position is reversed.

Moreover it wasn’t the results that were “ravaged” (as was widely reported) just some of the unadjusted headline numbers.

So Sir Martin’s bonus should be safe from any ravaging. That surely couldn’t have been what this was all about. Could it?

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