WPP strengthens No. 1 ad position with strong 2015 start

Wednesday, 11 March 2015 00:00 - - {{hitsCtrl.values.hits}}

LONDON, (Reuters): WPP strengthened its position at the top of the advertising industry last year as its geographical reach and strong digital sales gave it the edge over its two closest rivals, who were distracted by a failed merger. The British company, run by the high-profile businessman Martin Sorrell, said on Monday that 2015 started strongly with an increase in January trading, helped by standout performances in the United States and China.

WPP’s reassuring outlook and the January performance marked a slight improvement in sentiment from an October update, when Sorrell said trading in the fourth quarter was set to be tough. “After coming across less upbeat in the last two quarters, shareholders should be pleased with the performance over the full year,” said Lewis Sturdy, a trader at London Capital Group. WPP, which counts the likes of Ford, Unilever and Microsoft among its clients, reported a 3.3 percent rise in 2014 like-for-like net sales and that measure rose by 3.9 percent in January. The measurement more commonly used by its rivals, like-for-like revenue, was up 8.2 percent in 2014, comfortably ahead of the 5.7 percent growth recorded by Omnicom, the No. 1 U.S. advertising company, and a 2 percent rise at France’s Publicis. Omnicom and Publicis tried to merge in 2014 to leapfrog WPP as the world’s biggest advertising group, prompting many clients to reconsider their contracts. While Omnicom stabilised relatively quickly, Publicis has taken longer to recover. WPP, owner of the JWT and Ogilvy & Mather agencies, said it had topped the industry’s new business table for the third year running in 2014 and expected solid growth in 2015 following a number of recent big contract wins. WPP had revenue of $18.96 billion in 2014, outpacing Omnicom with $15.3 billion and Publicis on $7.9 billion. With big brands moving large chunks of advertising spend online to reach the millions of people on social networks and traditional sites, WPP has historically been well placed as it had the greatest exposure to digital advertising. That may be challenged, however, after Publicis moved to buy digital specialist Sapient. WPP also noted that trading in its home market could be affected by the May 7 parliamentary election, which is shaping up to be the most unpredictable in a generation and will likely result in another coalition government. On a geographical basis, North American net sales rose 3 percent on a like-for-like basis in 2014, with Britain up 4.8 percent. Western continental Europe increased 1.1 percent and its division of Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe climbed 4.6 percent. Analysts welcomed the results, and WPP shares opened 1.2 percent higher to add to the 14 percent rise since the start of the year, although they noted that the full-year results did mark a slowdown in the fourth quarter. WPP, which has more than 179,000 staff in 111 countries, said the strongest growth had come in the travel, airlines and entertainment sectors while packaged goods firms remained under pressure as shoppers looked for cheaper deals for their brands. “The growth has been across the board,” Sorrell said. “I was pleased with the recovery in western continental Europe. But the two areas that make the big difference are the U.S. and China.” The company will aim to buy back 2-3 percent of its outstanding share capital. “WPP remains a true global barometer, extracting gains from the economic pockets which are faring well, whilst also being mindful of the macro and geopolitical concerns which are yet to be resolved,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.