Sir Martin Sorrell: beware of 'grey swans'

WPP's margins took a beating from emerging market currencies falling, even though sales and profits rose.

by Rachel Savage
Last Updated: 26 Aug 2014

- Read MT's interview with WPP chief executive Sir Martin Sorrell

When advertisers are doing well, you know the economy has hit a purple patch too - companies aren’t going to splash out on large campaigns if they’re short of cash. The results of ad giant WPP results are one to watch, then. Happily, results it posted this morning showed revenues and profits are up.
 
The advertising giant’s pre-tax profits rose almost 19% to £1.3bn in 2013, while revenues were up 6.2% to £11bn, boosted by a 10.9% surge in UK sales.
 
However, the group, which to Sorrell's considerable chagrin is due to be knocked off the world’s biggest ad agency throne when the merger of Publicis and Omnicom is finalised later this year, took a margin thumping from currencies collapsing in emerging markets at the end of 2013.
 
WPP’s reported margins fell 0.2% and it reduced its 2014 target for increasing its operating profit margin to 0.3% from 0.5%. That didn’t sit well with shareholders, who sent shares down almost 6% in mid-morning trading, even though the company announced it was hiking up its buyback programme from 1% to 2-3% of share capital.
 
For a man who has built his career on his ability to communicate, Sir Martin Sorrell managed to pull off a bizarrely impenetrable turn of phrase: ‘"Grey swans", or known unknowns remain - although most, if not all, of the latter are whiter. Black swans are the unknown unknowns, which by definition we do not know what they are.’ So there you go.
 
If anyone has the endurance to read further down the statement, they’ll discover Sorrell actually meant the risks to his business are more Eurozone shocks, Middle East and emerging market volatility, the US deficit, the Scottish independence and UK's potential EU referendum and Japan and China squaring up to one another in the South China Sea. Pithier slogans next time please.

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Marketing

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