WPP trumpets 37% rise in profits

The largest advertising firm in the world has made an impressive start to the year. And CEO Sir Martin Sorrell says recent economic turmoil could be of benefit...

by Emma Haslett
Last Updated: 01 Mar 2012
If we’re on the brink of a double-dip then WPP, the largest advertising company in the world, has yet to be informed. The business, which owns ad firms such as JWT and Ogilvy & Mather, reported a first-half pre-tax profit rise of 37% this morning, to £334.3m, while like-for-like revenues also increased, by 6.1%. The company’s founder and chief exec, Sir Martin Sorrell, said it may actually have been helped by recent economic uncertainty. Although he also hinted that it could be another 10 years before the company recovers fully – whether we enter another recession or not.

The firm said its greatest strengths had been in digital (no surprise there) and emerging markets (ditto): according to its figures, ‘digital-related activities’ (ie. stuff on t’interweb) made up just over 28% of its revenues during the first six months of the year, up from 27.6% this time last year. And operations in Asia, Latin America and Africa rose by 12.1%. Less expected is that revenues in the US were also up, by 2.3%, while the UK apparently staged a ‘surprisingly’ rapid recovery, with revenues rising by 7.1%. Not bad.

What’s interesting about WPP’s figures is that usually, the ad industry (and companies as large as WPP in particular) is used as a bellwether for the economy as a whole. But Sorrell says that despite recent economic turmoil, things couldn’t be better, the reason being that companies are too nervous to spend money on things like factories and equipment, so they’re choosing to invest what little cash they do have in their brand instead, with the hope that they’ll be able to build up sales and market share.

Which is good for WPP at any rate. Although whether that’ll last is another question. Clearly, WPP isn’t entirely optimistic about the next few months: ‘the nearest historical parallel to the latest recession… seems to be the Great Crash of 1929, which took at least 10 years to recover from,’ it said. Although, as Richard Hunter, from Hargreaves & Lansdown, pointed out, it’s got the Olympics and the US Presidential Election to look forward to next year. Which, during the Great Depression, didn’t quite command the advertising budgets they do today…

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