George Osborne did a little dance in his checked pajamas this morning as an email from Sir Martin pinged onto his iPhone. ‘I’m coming home, Georgie,’ it read. It is a triumphant return for WPP. The ad giant has just posted first-half profits of £357.7m, up 7% year-on-year. Revenues are also up 5.5% to £5bn.
It's all a bit of a change of heart for Sorrell, who took his company ofshore for tax reasons in 2008. But now he says that the government has changed the regulations so he can return to Blighty.
Its spell abroad has been good for WPP, which is in fine fettle, growing 4% in the first quarter and 3.2% in the second. Not bad given its exposure to the eurozone and the economically volatile US. Its forecast for organic growth for the whole of 2012 has been revised down from 4% to 3.5% but business is still booming in Latin America, Asia and the Middle East, with like-for-like revenues up 9.7pc to £1.14bn. WPP’s digital business has also proved a jewel in its advertising crown, accounting for 32% of revenue from a standing start a decade ago.
So why is Sorrell coming back now? Could it be a PR exercise to divert attention from the WPP shareholder revolt over his pay in June? He's even voiced support for Clegg's emergency tax on the super-rich, a bracket which he fals firmly into.
Sorrell flew the coup back in 2008 after Labour reformed the rules on tax on foreign profits. WPP, which makes 90% of its revenue outside the UK, immediately upped sticks to Ireland, where corporation tax is just 12.5% to shrink its tax bill. Four years later, the Coalition has announced that the profits of foreign subsidiaries will no longer be potentially subject to tax unless an exemption is met.
WPP will hold a shareholder meeting in December to vote on a return to the UK – a move that has already been signed off by the board. ‘At least for the life of this government, there will be no tax cost to the group by returning its headquarters to the United Kingdom from Ireland,’ reads a statement from the company. But, with dissension in Coalition ranks bubbling away, who knows how long that life may be? In order to salvage his reputation, that’s a risk Sorrell is willing to take. ..