WPP shares hit despite 14% revenue growth

by Daniel Farey-Jones, Brand Republic 25-Apr-08, 09:15

LONDON - WPP shares have dropped 5% this morning despite a relatively upbeat trading statement reporting a rise in first quarter revenues of 14.1% year-on-year to £1.56bn.

The company's guidance said the outlook for WPP is steady despite the uncertain world economy

The marketing services group revealed North American revenue growth was "strong", at almost 10%,"despite the talk of recession". This backs chief executive Sir Martin Sorrell's theory that 2008 will be a good year for the group.

However, stock market activity may be a reaction to the following note of caution in the statement.

"Whilst January and Febraury were strong across the board, both geographically and functionally, and indeed stronger than last year, March was slower, somewhat surprisingly in Western Continental Europe."

The group's shares were marked down by 5.24% to 597p in trading this morning on the London Stock Exchange.

The UK is still the slowest growing region in the group, with revenues up almost 5%. Continental Europe was up more than 5%. This is a combination of contrasting markets: only 3% growth for activities in Western Europe compared to almost 26% for Eastern Europe.

Sector-wise, the best performing part of the group's business was the branding and specialist division, which includes direct and interactive. It grew revenues by 22% to £486.6m, and now accounts for 30% of group revenues compared with 28% a year ago.

The company won net new business worth £564m during the first quarter. It said it continues to benefit from "consolidation trends" in the industry.

Currency movements favoured the group, in contrast to its French rivals Publicis and Havas. If exchange rate changes are discounted, revenues grew by 9% instead of 14.1%.