WPP climbs out of Sorrell's bathtub-shaped slowdown

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The Independent Online

The head of Britain's biggest advertising group signalled brighter times ahead for the beleaguered industry yesterday when he said the market was starting to see "shoots of recovery".

Sir Martin Sorrell, the chairman of WPP who last year described the advertising downturn as "bath-shaped" with a corrugated bottom, said:

"Certainly it seems as though we are starting to climb out of the bath."

WPP, whose agencies include Young & Rubicam and Ogilvy & Mather, said the United States in particular was seeing sustained recovery. It said the US market had not only stabilised, but also had started to show muted growth again. It has now seen 10 months of continuous, if limited growth, the company said.

However, WPP said the UK advertising sector remained "the most affected by recession". Sir Martin said: "Maybe things are not quite as strong as people want to believe."

WPP painted an upbeat picture of prospects, saying it expected the global market to grow by 3-4 per cent next year. This will be helped by the US presidential election, which is likely to have record figures spent on political advertising.

"That crowds out other advertisers and pushes rates up," the company said. Other boosts will come from the Athens Olympics next summer as well as the European Football Championships in Portugal next year. Asked whether the recovery was sustainable or was just a result of these special events, Sir Martin said: "The risk is that the government spending over-stimulates the economy and then there would have to be a correction. But we'll see next year."

Sir Martin revealed that he had held further communications with Nahed Ojjeh, the Syrian chess enthusiast who became embroiled in the bruising £266m bid battle for Cordiant Communications in which WPP emerged victorious last month. "We have exchanged pleasant notes," he said. "I have welcomed her as a shareholder and asked her what her motivation was [in getting involved] but she seems reluctant to tell me."

Active Value, the activist investor that tried to table an alternative plan to the WPP bid, is still thought to be pursuing legal action against Cordiant's board and its advisers UBS for what it says was an acceptance of a low offer. No papers have yet been filed.

Sir Martin said the integration of the Cordiant business into the WPP empire was proceeding as expected, with no further disposals planned.

WPP yesterday reported a 5 per cent fall in half-year, pre-tax profits to £203m, excluding exceptional charges. Like-for-like revenues were flat on last year though US revenues grew by 2.2 per cent. The UK was the worst performing region with a drop in revenue of 1.8 per cent. The main agencies did well with brands such as J Walter Thomson, Y&R and Ogilvy & Mather seeing growth of 5 per cent. New contract wins include Burger King, Coca-Cola classic, Abbey National and Golden Wonder crisps. Group operating margins dipped slightly to 12.3 per cent.

WPP shares have enjoyed a strong rally since the stock market reached its recent low point in March. "The likely recovery is already in the share price despite risks regarding an economic recovery across the globe," one fund manager said. "They've had a fantastic run recently, but now they are up with events."

The shares closed 8.75p higher yesterday at 578.5p.

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