WPP’s Martin Sorrell is ‘raging bull’ on Chinese growth

PARIS-WPP PLC, the world’s largest advertising holding company, said Wednesday that an uptick in its North American business helped it post a sharp rise in net profit, but warned that highly volatile markets in China were a concern.

He stressed that Chinese economic growth was fundamental to WPP’s future.

But WPP said: “Concerns about China, aggravated by the recent RMB devaluation and stock market decline, and Brazil remain, although we remain unabashed bulls of both”.

On a like-for-like revenue basis, the measurement used by WPP’s rivals, the British firm was up 4.9 percent, compared with 5.2 percent at Omnicom and 6.2 percent for Interpublic.

Sorrell identified two “grey swans”, or well-known issues whose effects are not yet known: the inevitable interest rate rises in the US and the UK, as well as the referendum on Britain remaining in the European Union.

WPP’s performance in the emerging Bric markets – Brazil, Russia, India and China – slowed in this quarter as Russia and China in particular came under pressure. 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.

‘Perhaps less positively, the general economic backdrop has unsurprisingly led to a number of clients unwilling to plunge into advertising spending or, indeed, acquisitions, until the clouds begin to clear despite many of those companies being cash rich on their balance sheets.

Investec Securities said the half year figures looked OK overall, with a higher dividend pay-out, despite slower growth in China and Russian Federation.

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

Sorrell said that WPP has seen strong like-for-like revenue and net sales growth in July, of 5% and 3.7% respectively, which “indicates a stronger third quarter as budgeted and forecast”.

WPP said it had seen good growth across all its regions and in advertising and media, direct, digital and specialist communications.

“They’ve had 30 years of growth and expansion, and hundreds of millions of people have been taken out of poverty and moved into a lower-middle or middle class”.

Sir Martin said the world had got much more cautious since 2008, adding the “stock markets got overblown”.