31st Oct 2014 09:07
LONDON (Alliance News) - WPP PLC was among the few fallers on early trade on the FTSE 100 on Friday after the company provided more evidence of the impact of the strong pound on earnings for multinational companies, posting a rise in revenue in the third quarter which was held back by the impact of currency translation.
Reported third quarter revenue for the FTSE 100 advertising group in the quarter to the end of September was up 3.1% to GBP2.76 billion, with revenue in dollar terms rising 10.8% to USD4.6 billion and gaining 10.9% euro terms to EUR3.5 billion.
The impact of the strength of sterling was illustrated by the rise in its constant currency revenue of 10.6%, with like-for-like revenue rising 7.6%. Third quarter constant currency net sales were up 6.1%, with like-for-like sales rising 3% in the period.
The strength of sterling bit hardest in its Western Europe and North America businesses. In Western Europe, third quarter revenue was down 2.5% on a reported basis but up 5.3% on a constant currency basis. In North America, revenue fell 0.3% on a reported basis, but rose 7.5% on a constant currency basis.
The group said its Western Europe business, though still struggling amid difficult market conditions, improved its performance against the second quarter. Its French, German and Turkish businesses performed well, but it saw a weak showing from its Austrian, Belgian, Norwegian and Swiss units.
Its Asia Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe business also was hit by the strength of the pound, with reported revenue still rising 6.2% but up 16.4% on a constant currency basis. For Asia Pacific, WPP said all markets except for Japan showed net sales growth, with double digit growth in its India, Indonesia, Malaysia, Philippines and Vietnam divisions.
Nine month reported revenue was up 2.8% to GBP8.2 billion, but rose 11% on a constant currency basis. Nine month constant currency net sales were up 6.3%, with like-for-like sales increasing 3.8%.
WPP's nine-month operating margin was up 0.4 point on a constant currency basis and the company said it is in line to meet its target for the margin to be up 0.3 point for the year. Its operating margin is ahead of the year before.
The group said it has won net new business of GBP3.6 billion in the first nine months.
WPP maintained its long-term targets, though it said third quarter like-for-like revenue and net sales growth was slightly slower against the first and second quarters of the year, primarily due to tough comparatives. It expects annual headline diluted earnings per share growth of 10% to 15%.
It said that though 2014 would be considered a strong year if all of its financial targets are met, it looks likely to prove a demanding year on a reported basis given the strong pound and weak currencies in its most promising growth markets.
Investec Securities analyst Steve Liechti said in a note that WPP's "3Q looks as expected with some positives". Liechti said WPP's US growth was a bit disappointing versus peers, but Europe was better. Emerging Markets was "ok but not stunning".
Investec is leaving WPP at Buy with a 1,420 pence price target.
WPP shares were slightly lower in early trade on Friday, falling 0.2% to 1,210.00. In a mostly positive market, the fall is enough to make it one of the worst performers in the FTSE 100 on Friday morning.
By Sam Unsted; [email protected]; @SamUAtAlliance
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