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WPP set to cheer advertising sector with rise in profits

LONDON – WPP Group is to cheer the advertising market with what is expected to be a rise in profits when it reports its first half results on Friday after a number of global account wins during the past six months.

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It is understood that WPP will report profits before tax to be up by as much as 25% to £250m in the first half of this year.

WPP will report a rise in revenues of around 20% to about £2.4bn. Investment firm Smith Barney has raised its target price on WPP to 645p from 600p, and marginally upgraded underlying earnings forecasts. It also expects strong margins and an upbeat outlook, which helped boost WPP's share price.

WPP Group reported revenue growth in all regions, including a 14% rise in the UK, during the first five months of 2005 but it was Latin America and Asia that led the way.

WPP, owner of advertising agencies JWT and Ogilvy & Mather, has already had a buoyant start to 2005 after it reported revenues for the first quarter of the year up by 16% to £1.11bn, after its acquisition of Grey Global Group on March 7.

It has gone on to see its agencies win a number of major accounts including the £137m global Ikea media account, which went to two WPP agencies Mediaedge:cia and MediaCom. Michelin also appointed Mediaedge:cia to handle its European media account and WPP Group triumphed in the battle for Shell's $240m media account, which went to MediaCom and Maxus.

Latin America has proved to be the group's strongest market. In July when WPP reported revenues for the first five months up 14%, it was Latin America and Asia that were its biggest growth areas.

Last year Latin America was also the group's fastest-growing region, with Asia Pacific performing well.

WPP chief executive Sir Martin Sorrell said earlier this year that in terms of Asia Pacific, Latin America, Africa and the Middle East, WPP was "significantly stronger and faster than rivals".

On Friday WPP is expected to say that UK revenues have grown slightly, which will come as a relief as there had been fears that the UK ad market was struggling.

Last month the IPA raised fears of an economic downturn when it said marketing budgets have been cut in the UK for the first time in nearly two years with television adspend hard hit.

The IPA's Bellwether Report said marketing budgets were cut on average during the second quarter of the year. However, WPP's results seem to dispel this.

The results will also point to the success WPP has had in integrating Grey Global into its business. Last week it was finally confirmed that Jim Heekin had been appointed as chief executive of its advertising network Grey Worldwide and as successor to Grey Global's CEO and chairman, Ed Meyer, who is due to retire next year.

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