Despite Gains, WPP Stays Cautious


WPP Group, the largest global agency holding company, today reported upbeat first-half and second-quarter numbers in-line with its peers, but tempered news of its gains with a notably cautious forecast and saw its shares drop 3 percent in London trading.

For the first half of 2010, WPP boosted its net income nearly 40 percent to about $232 million on a 3.5 percent revenue rise to $6.85 billion, compared to the same period a year ago.

On a like-for-like basis, factoring out the impact of acquisitions and currency fluctuations, revenue rose 2.5 percent in the first six months.

Progress accelerated in Q2, with global revenue up 5 percent after a flat performance in Q1, WPP said.

The company attributed the encouraging numbers to ad-spending increases across most geographic regions -- though Q2 '09, coming at the height of the recession, made gains relatively easy to attain.

WPP's first-half profit actually missed average analyst predictions of $252 million, per Bloomberg, though the revenue figure was on target.

While acknowledging that the global ad environment has improved, WPP was extremely cautious, noting, "Clients are pretty unanimously uncertain about future prospects."

The company went on at some length about its concerns. These include "volatile fears of Eurozone fiscal contagion" from Greece, Spain and other key markets; the new austerity programs of the British, French and Italian governments; and, "most important of all, fears for U.S. growth later this year."

Overall, WPP foresees a "slow-growth slog" ahead, particularly in terms of traditional media, and added "in some senses, the recovery will not be over for a long time."

Even so, the company expects its full-year revenue gain to exceed market-consensus forecasts of 2.5 percent.

Last year, of course, was especially rough for the big ad firms, and with the current market recovery, WPP and its brethren have enjoyed gains as 2010 has progressed:

 • Onnicom Group beat analysts' predictions and reported a 6 percent rise in Q2 revenue and 4.2 percent gain in profit.

 • Interpublic Group saw significant quarterly and first-half improvements, including a fourfold Q2 net-income boost.

 • Publicis Groupe enjoyed a first-half net-income surge of 28 percent on a 15 percent revenue spike.

WPP's GroupM unit said global ad spending would rise about 3.5 percent this year to $451 billion. That bodes well for the holding companies moving ahead. But late-year quarterly financial comparisons will become more challenging, as the ad market had already begun to improve in the waning months of 2009.