23rd Apr 2015 08:22
LONDON (Alliance News) - Media-buying giant WPP PLC Thursday maintained its guidance for the full year as the stronger dollar helped boost revenues in its first quarter, although growth slowed after January, and it highlighted continued caution amongst its clients.
WPP said its revenue rose 8.3% in sterling in the quarter, boosted by the weakness of sterling against the US dollar although this was partly offset by the strength of sterling against the euro, and at constant currency revenue growth was 7.4%.
On a like-for-like basis, meaning at constant exchange rates and excluding acquisitions and disposals, revenue was up 5.2%.
Net sales were up 6.0% in sterling, and on a like-for-like basis were up 2.5%. WPP said its pattern of net sales growth for 2015 had started similarly to the final quarter of 2014.
At the time of its 2014 results in March WPP had said that its like-for-like revenue in January was up 6.7%, and like-for-like net sales were up 3.9%.
WPP said Thursday that, on a like-for-like basis, advertising and media investment management and branding, identity, healthcare and specialist communications were the strongest sectors, with data investment management showing significant improvement compared to the final quarter of 2014. Public Relations and Public Affairs were slower than in the final quarter of 2014.
WPP saw a strong performance in the UK, where like-for-like net sales were up 3.6%, and in Asia Pacific, Latin America, Africa & The Middle East and Cental & Eastern Europe, where like-for-like growth was 4.0%. In particular, China, India and Russia performed well, although this was somewhat offset by a slowdown in Brazil.
In North America like-for-like net sales were up 2.1% as advertising, media investment management, direct, digital, interactive and healthcare performed well.
Over the first quarter WPP completed seven acquisitions, including buys in Latin America and the US.
The company continues to expect net sales growth of over 3% for the full year, and a headline net sales margin target of 0.3 margin point improvement on a constant currency basis.
WPP said, "2015 looks to be another demanding year, although a weaker UK pound against a stronger US dollar may continue to provide some modest currency tailwind, partly offset by a stronger pound against the euro, although a modest impact on profits, unlike the fierce currency headwind in 2014."
Its long-term targets remain revenue and net sales growth greater than the industry average, and annual headline diluted earnings per share growth of 10% to 15% per year.
The company expects continued caution from its clients, and there is "no evidence" to suggest any change in behaviour so far in 2015. WPP highlighted a number of geopolitical concerns, and two particular causes for concern: the impact of US Federal Reserve tightening on bond and equity markets, and the upcoming general election in the UK.
In terms of the election, WPP predicts a "Morton's Fork", whereby either of the two most likely outcomes will prompt uncertainty. WPP cites the most likely outcome as either a Labour-led coalition which "does not favour business and causes jitters in sterling exchange rates and stock markets", or a Conservative-led coalition which "will result in an uncertainty-stimulation European Union referendum".
The reference is to John Morton, the Archbishop of Canterbury in the late 15th century, and the notion that two contradictory arguments can lead to the same negative conclusion.
Either way, any coalition will need to re-address the UK's remaining, substantial budget deficit, WPP said.
Shares in WPP are trading down 2.3% at 1,560.00 pence Thursday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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