Global advertising group lowers growth expectations
WPP HAS blamed tighter customer budgets and heightened economic uncertainty for a cut in its full-year revenue growth expectations, as the global advertising group announced it is to move its headquarters back to Britain after a change in the UK’s tax laws.
The FTSE 100 advertising and marketing group warned that measures by clients in continental Europe and North America to curb spending had prompted the cut in forecast 2012 sales growth, down from 4 per cent to 3.5 per cent.
“The pattern of 2012 looks similar to 2010 and 2011, albeit at lower overall like-for-like growth rates,” WPP said yesterday.
“Advertising as a proportion of gross domestic product should at least remain constant, although it is still at relatively depressed historical levels.”
The warning pushed down WPP shares 4.5 per cent to 794p in early London trading.
The news came as WPP, one of the world’s largest advertising companies by revenues, said it would switch its domicile back to the UK having moved to Ireland in 2008 to avoid a higher British corporation tax bill.
WPP, led by Sir Martin Sorrell, yesterday said it would return to the UK after the governments decision earlier this year to make profits of foreign subsidiaries no longer potentially subject to tax.
“This will mean that, at least for the life of this government, there will be no tax cost to the group by returning its headquarters to the UK from Ireland,” WPP said.
The decision to return to the UK has been approved by the board but must be ratified by shareholders at an emergency meeting planned for December.
WPP’s caution on outlook follows a similar warning last week from Carat, the media agency of WPP rival Aegis, which lowered its growth expectations for the global ad market.
Last month, GroupM, part of WPP, cut its predictions for global ad spending growth in 2012 in light of the vulnerable global economy, particularly in the euro zone, as well as political and fiscal uncertainties in the US.
In the six months to June 30th, WPP reported like-for-like revenues up 3.6 per cent year on year to £4.9 billion, with total billings up 1.2 per cent at £21.6 billion.
Steve Liechti at Investec said that the figures missed his expectations, having pencilled in revenues of £5 billion and like-for-like growth of 4 per cent.
“Slower second quarter like-for-like sales growth and reduced expectations for full-year growth are disappointing, so expect some share price pressure and possible consensus downgrades,” Mr Liechti said.
Pre-tax profit rose from £334.3 million to £357.7 million and diluted earnings per share rose from 18.1p to 21.6p. A first-half dividend of 8.88p was proposed, up 18 per cent. – Copyright The Financial Times Limited 2012