WPP remains an ‘unbashed bull’ in China despite market volatility
WPP’s chief executive Sir Martin Sorrell has said the fears sparked by China’s financial crash will not deter its expansion plans for the country despite the slowdown weighing heavily on advertisers’ minds.
The advertising veteran reiterated his optimism for WPP’s third biggest market in spite of the crash, confirming his recent concerns that the “Chinese bubble” was set to burst. In an interview with Sky this morning (26 August) ahead of his company’s interim results, Sir Martin said the end of an “unrealistic boom” in Chinese shares is worrying for global growth which could stunt the amount business executives pay his ad agencies.
It could also accelerate the rise of quantitative marketing he has previously bemoaned, with business leaders increasingly cautious about geopolitical issues such as the impact of sanctions on Russia, the potential that Britain could exit the European Union and Greece’s withdrawal from the Eurozone.
Speaking about WPP’s interim results, Sir Martin said despite the turbulence in the business market the agency network would remain “positive”, adding “concerns about China, aggravated by the recent RMB devaluation and stock market decline, and Brazil remain, although we remain unbashed bulls of both”.
WPP earnings that beat analysts’ forecasts for the first half of the year buoyed his confidence. Pre-tax profit for the world’s biggest advertising group in the period climbed 12.1 per cent, while like-for-like net sales rose 2.3 per cent to just over £5bn in the period, down on the 2.5 per cent growth rate it posted in the first quarter. The emerging markets collectively known as the Brics – Brazil, Russia, India and China – are struggling to grow fast enough, which slowed the performance.
Billings were up 5 per cent in the first half of the year to £23.2bn. An estimated £1.3bn of that came from new business billings gained in the period. WPP is contesting rival advertising networks for more than $26bn in media spend that is being reviewed by more than 20 big brands including Procter & Gamble and Volkswagen.
“To survive in the advertising and marketing services sector, you have to remain positive, indeed optimistic, seeing the glass half-full and industry and company reports generally continue, understandably, to reflect that attitude,” said Sir Martin.
“However, general client behaviour does not reflect that state of mind as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth.”
The group expects little change over the remainder of “another demanding year” though voiced some optimism for advertising spend in a 2016 that will be boosted by the Rio Olympics, the Uefa Euro 2016 Football Championships and the US Presidential Election.