WPP does not expect to see anysignificant economic recovery before 2010, the world's second largest advertising company said yesterday, as it warned that it fears 2009 will be "very tough". Sir Martin Sorrell, WPP's chief executive, said major sporting events in two years' time, including the football World Cup and the Olympic Winter Games, would provide the advertising industry with a major boost. But he warned that sales in the US and Western Europe are likely to fall next year, while growth in other markets will be limited.
WPP posted relatively robust performance figures for the first nine months of the year yesterday, when sales were buoyed by strong growth in Asia, Latin America, Africa and the Middle East, where revenues in the third quarter were up 16.5 per cent. By contrast, sales growth in the UK in the third quarter eased off to 2.9 per cent, compared to 4.6 per cent growth in the first half, while US revenues barely rose at all, after having been up 6 per cent in the previous six months.
Overall, WPP's sales were up 16 per cent during the third quarter, though this was partly due to a gain fromcurrency movements, with both the dollar and the euro rising sharply against the pound during the period.
Nevertheless, WPP said it had been disappointed by its trading over the past few months. In particular, it said that the much-anticipated "Beijing Bounce", a temporary upswing led by the Olympic Games, had not in fact materialised to the extent expected.
"There is no doubt that the disintegration in the financial markets has had, and will continue to have, a negative effect on consumer and corporate confidence," WPP added. "As a result, 2009 will be a very tough year".
Even so, Sir Martin is less gloomy than some of his competitors in the advertising sector, because he believes that while growth in emerging markets is likely to slow in line with the global economy next year, many of these countries will still outperform recession-bound Western nations.
"It's not as dire as the stock market Armageddon that some people have predicted," Sir Martin said. "If you ask me to say what I think the budgets will look like next year, I think they will be positive in terms of revenue growth."
Sir Martin's optimism steadied WPP's shares, which had fallen sharply in early trading as analysts absorbed the company's downbeat outlook. The company's value hasfallen close to a 10-year low over the past month, but the shares closed up 9.3 per cent last night at 363.5p.
The sell-off in WPP's shares in recent weeks had followed even more depressed trading statements from international rivals, including Omnicom, the world's largest advertising company, and Publicis, of France. Both companies have similarly warned that they believe 2009 is likely to be exceptionally challenging.
WPP has already made efforts to cut its costs this year, imposing a recruitment freeze across much of the group. Sir Martin has also incurred the wrath of the Government by announcing plans to relocate the company's tax base to Dublin, a move which the company has said it expects to provide significant tax savings.
Sir Martin has also presided over an ambitious expansion exercise, with 37 acquisitions made over the past 12 months alone. The offer period for its latest purchase, market research firm Taylor Nelson Sofres, which is to be combined with WPP's Kantar, expired on Tuesday, with 96 per cent of shareholders having accepted WPP's terms.
Acquisitions in the past year by WPP.Reuse content