WPP Flags Threats From China

In an interview with Sky this morning (26 August) ahead of his company’s interim results, Sir Martin said the end of an “unrealistic boom” in Chinese shares is worrying for global growth which could stunt the amount business executives pay his ad agencies.

WPP, the world’s largest marketing services group, reported like-for-like net sales growth of 2.1% in the second quarter to £2.6bn.

The emerging markets collectively known as the Brics – Brazil, Russia, India and China – are struggling to grow fast enough, which slowed the performance. The company told investors that “concerns about China, aggravated by the recent RMB devaluation and stock market decline, and Brazil remain, although we remain unabashed bulls of both”.

WPP said that geopolitical issues continued to be the top concern for business leaders, including fears of a possible exit by Britain from the European Union, the continuing crisis between Ukraine and Russian Federation, and tensions in the Middle East and North Africa. Like-for-like net sales have risen 2.3 percent in the period, which means that the company will have to pick up the pace in the second quarter to achieve its full-year target of more than three percent. WPP performed best in its UK division, with worldwide sales going up on a constant currency basis.

WPP maintained its 2015 forecast of like-for-like revenue growth of more than 3%.

WPP said first-half like-for-like net sales rose 2.3% and by 3.7% in July, which the company said indicated potentially stronger third quarter trading.

Over the past year, however, the picture is brighter, with WPP shares having strongly outperformed the index, rising 11 per cent as compared to a 10 per cent drop for the Footsie. Across the world, the group employs some 179,000 people in 111 nations, operating a variety of agencies, including J Walter Thompson and Ogilvy & Mather.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “WPP’s strategy continues to deliver rewards, both in terms of where it has been and where it plans to go”.

On Thursday, Sorrell confirmed on the BBC’s Today Programme that he was still positive about what China could bring.

He added: “In addition, the reduction of the still remaining, substantial, UK budget deficit, is being re-addressed in the context of a new fixed five year political cycle”.