Markets crisis could prompt new spending dip, says Sorrell

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

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

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 America and "traditional media" contributed strongly to its growth but "this year it is about China and India and the internet reasserting itself".

In terms of its like-for-like revenues, WPP's Asia-Pacific, Latin America, Africa and Middle East and central and eastern Europe division was the star performer, delivering a 10.5 per cent sales growth. This compares with a lowly 2.9 per cent in western continental Europe, though the UK fared better by posting a 5.1 per cent sales growth and an 8.5 per cent rise in margins. Sir Martin said: "The world is moving at different speeds."

Investors gave its results the thumbs-up as shares in WPP jumped by 43p, or 7.4 per cent, to 623p. Its shares had fallen by around a quarter since it upgraded its 2011 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 are based on the calendar year. But Sir Martin struck an upbeat note on the boost in worldwide demand for advertising and marketing of between 1 and 2 per cent that the US presidential elections, football's European Championship and the London Olympics and Paralympics bring. Political spending for the US elections alone may 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 gets re-elected, but the Republicans get control of Congress. He said: "There would be deadlock again," in a reference to the recent negotiations between the Republicans and Democrats to raise the country's debt ceiling.

WPP's digital revenues surged in the first half to account for 28 per cent, or $2.1bn, of the group's total revenues.

The group also increased its targeted acquisition spend from £200m to £400m in 2011. The group said: "There is a very significant pipeline of reasonably priced small and medium-sized potential acquisitions.

"As a result, deals done continue to be of small and medium-sized companies, focused on new markets, new media and consumer insight, and will not now be limited to £100m per annum, but will more likely total around £400m this year."

LuV letters

* Sir Martin Sorrell, the chief executive of WPP, has never ceased to fascinate his followers with his colourful descriptions of paths expected for global economies. Yesterday, he was sticking to his earlier theory of the LuV - and LuVVy-shaped recovery, but said it was "battered". The V recovery is for Brazil, Russia, India and China, and the "Next 11", or the non-Bric countries, including Bangladesh, Indonesia and Mexico. Meanwhile, the US was on a U- or V-shaped path and Europe was flat or L-shaped.



* This year, he used football to describe the "Premier League", which comprised the Bric countries and the Next 11, as well as the Civets – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Of course, the Championship – England's old second division – was dominated by Germany and the US.



* Back in 2005, he was also in full flow with bathroom metaphors to describe his outlook for the advertising sector. He told a rather bemused bunch of analysts: "We're definitely out of the bath – but watch out for the shower."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
news
Sport
sportSo, how closely were you paying attention during 2014?
News
americasVideo message warns Sean Paul to stay away from Maldives New Year's Eve concert
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect