Monday 31 October 2016 7:48 am

Advertising giant WPP’s revenue spikes 23 per cent on the back of weak pound

Revenue jumped at advertising giant WPP for the third quarter, up 23.4 per cent as it beat expectations.

But business in the UK slowed, "perhaps the first signs of Brexit anxiety", while WPP reported a slowdown in organic net sales at 2.8 per cent.

The figures

Revenue for the third quarter was up 23.4 per cent at £3.61bn, with constant currency growth of 7.6 per cent, 4.4 per cent growth from acquisitions and 15.8 per cent from currency. The latter reflected the ongoing struggle of sterling against most currencies, especially during the third quarter, after the Brexit vote.

WPP's new business inched up at £3.4bn worth of fresh work (compared to £3.2bn in the same period last year).

Like-for-like revenue in the third quarter rose 3.2 per cent, marking a slowdown from the 4.3 per cent reported for WPP's first half.

The UK recorded like-for-like net sales growth of 2.1 per cent in the third quarter, compared with the previous quarter's like-for-like growth of 3.5 per cent.

Debt was up £434bn from share buybacks and acquisitions to £4.2bn.

Shares rose 3.6 per cent on WPP's announcement.

Why it's interesting

The advertising conglomerate's updates are always keenly watched, as they tend to give insight into economic trends on the horizon. And it's interesting to see how things are shaping up after the Brexit vote and with the Presidential election drawing closer.

Following the EU referendum vote in the UK, WPP said accelerated implementation of growth strategy continues, with revenue ratios for fast growth markets and new media bumped up from 35-40 per cent to 40-45 per cent over the next four to five years.

There is – and will continue to be – increased emphasis on expansion in the four EU markets in the group's top 10 markets: Germany, France, Italy and Spain, along with Brussels.

What the company said

WPP was slightly more hesitant than it had been in August on its like-for-like revenue and net sales of growth "of over three per cent"; earlier in the year it was predicting "well over three per cent".

In any event, worldwide growth looks likely to remain tepid for the rest of 2016 and for 2017. There seems little likelihood of either an upside breakout or, indeed, a downside one, that is a recession.

On a constant currency basis, operating profit is well above budget and ahead of last year. We see little reason, if any, for this pattern of behaviour to change in 2017, with continued caution being the watchword.