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.