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WPP PLC shaves 0.5 percent off annual revenue forecast

The biggest adver­tis­ing com­pa­ny in the world, WPP PLC, has just announced a 0.5 per­cent cut in its 2012 rev­enue fore­cast, even though its first-half prof­it rose.

The Wall Street Jour­nal reports that the adver­tis­ing leviathan believes its annu­al rev­enue will now be less than the 4 per­cent growth pre­vi­ous­ly pre­dict­ed and will come in at 3.5 per­cent instead.

What a dif­fer­ence a quar­ter makes

The news may send a chill wind down the spines of the job­bing art direc­tor or copy­writer strug­gling to attract new busi­ness to his or her ad firm, and it’ll hard­ly bring cheer to any online adver­tis­ing agen­cies either.  Only a few months ago, WPP PLC had announced a rev­enue fore­cast of over 4 per­cent after first-quar­ter results were boost­ed by strong per­for­mances in Asia and Latin America.

But the Eurozone’s stub­born debt cri­sis has tak­en its toll on last quarter’s opti­mism – as indeed has the firm’s sur­pris­ing­ly dis­ap­point­ing U.S per­for­mance.  Key cus­tomers in health­care, pub­lic-affairs and call cen­ter busi­ness­es slowed their spend­ing to such an extent that the first quarter’s growth of 1.4 per­cent shriv­eled to just 0.6 per­cent in Q2.

A bit of caution

In a typ­i­cal­ly sto­ical per­for­mance, WPP PLC Chief Exec­u­tive Offi­cer William Sor­rel said in an inter­view on Bloomberg Television’s “Count­down”, “We’re see­ing pret­ty much the same as we saw in 2011, but the growth rate is slight­ly less.  2013 we are a bit cau­tious about with no qua­dren­ni­al events but 2014 should be better.”

This is hard­ly the stuff of adver­tis­ing agency melt­downs, even though it does send a brac­ing shot across the bows.  Tak­ing into account the effects of amor­ti­za­tion, tax­a­tion and depre­ci­a­tion, WPP PLC’s earn­ings still grew by ten per­cent in the first half of 2012 to hit an impres­sive 682 mil­lion GBP (1082 mil­lion USD).

Times are tough, there’s no doubt­ing that, and the U.S bud­get deficit is still heart-grip­ping­ly high; but WPP’s lat­est inter­im div­i­dend announce­ment is 18 per­cent up on the val­ue seen this time last year and stock val­ue has soared by 35 per­cent over the last twelve months.  The company’s earn­ings record remains strong, and cur­rent “wob­bles” ought not to unleash a tidal wave of panic.

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