WPP Issues Warning on China -- Update

By Nick Kostov 

PARIS-- WPP PLC, the world's largest advertising holding company, said Wednesday that an uptick in its North American business helped it post a sharp rise in net profit, but warned that highly volatile markets in China were a concern.

"We do well but it's in a restricted, tepid environment," Chief Executive Martin Sorrell said in an interview. Companies are cutting costs as they look to improve margins in a low-growth environment, he said.

Mr. Sorrell is known for his colorful economic predictions and WPP, which counts Ford Motor Co. and HSBC PLC among its clients, is often seen as a bellwether for economic trends due to its reach and sheer size.

Mr. Sorrell cautioned that although the company's performance has been strong in 2015, the jittery markets in China are a concern for the second half of the year.

China is WPP's third-largest market after the U.S. and the U.K. and the group is the most exposed to emerging markets among the big holding companies.

"Overall it's a worry, but it's a short term not a long-term worry; we remain unabashed bulls," Mr. Sorrell said.

Mr. Sorrell said that his biggest concern is that a difficult geopolitical climate would deter clients from investing for the long term. "It's the lack of animal spirits and lack of willingness to invest which worries me most," he said.

However, there are also brighter spots on the global economic horizon, Mr. Sorrell said. Some key markets, such as North America, which grew strongly in the first quarter, improved again in the second quarter. Mr. Sorrell also said the U.K., Germany and Italy provided cause for optimism as WPP's like-for-like sales in Western continental Europe grew 4.6%.

Overall, net profit rose more than 50% to GBP566.2 million ($888.2 million) in the first six months of the year, while revenue rose 6.8% to GBP5.84 billion.

WPP said like-for-like revenue--a metric that excludes acquisitions and disposals--rose 4.5% in the second quarter. The rise was a slight reduction from the first three months.

The advertising company's latest earnings come as the industry grapples with a record number of big advertisers reviewing the agencies they use in an effort to cut costs. Mr. Sorrell said the reviews had been "good so far" for the company.

WPP, the owner of agencies including Grey and Ogilvy & Mather, reaffirmed its full-year targets, saying it expects full-year like-for-like net sales to grow more than 3%.

Write to Nick Kostov at [e-mail]

(END) Dow Jones Newswires

August 26, 2015 06:49 ET (10:49 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.