Martin Sorrell warns peers against 'Don Draperish' optimism ahead of EU vote

Despite WPP's strong performance Sir Martin Sorrel said investors should be cautious about the economic outlook

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The Independent Online

Sir Martin Sorrell said the always on “Don Draperish” optimism of the ad industry is misplaced, warning that Brexit could be one of the many issues facing business this year.

The comments from the chief executive of WPP came as the world’s largest advertising group pre-tax profits rose 7 per cent to £1.62 billion on billings up 3.1 per cent at £47.6 billion. The dividend for the year goes up 17 per cent to 44.69p a share. 

But, despite the strong performance Sir Martin Sorrel said investors should be cautious about the economic outlook as companies are focusing more on their profit targets rather than on growth.

“Despite this strong performance, the always on, Don Draperish general industry optimism seems misplaced,” Sorrel said.

 “General client behaviour does not reflect that state of mind, as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth,” he added.

A vote to leave the EU was just one of the many geopolitical issues facing business this year, according to the chief executive.

Martin Sorrell says clients are concerned about threats to global economy

“The continuing crisis in the Ukraine and consequent bilateral sanctions, continued tensions in the Middle East and North Africa and the continuing risk, despite the negotiated agreement, of a “Grexit”, or even more seriously now, a “Brexit” from the European Community top the agenda,” he said.

Jeremy Cook, Chief Economist at World First said Sir Martin Sorrell has rightly cautioned against "Don Draperish" optimism within WPP strong earnings results.

“There are few panaceas for the lack of Chinese growth, European inflation and the reaction function of the European Central Bank, while deflation and negative bond yields are not going to become suddenly unproblematic anytime soon,” Cook said.

Shares in WPP fell 0.8 per cent, or 12p to 1,527p in morning trading on the FTSE 100 index.

WPP, which celebrated its 30th birthday in 2015, landed new accounts from Tesco, Unilever and L’Oréal among others last year.