UPDATE:WPP CEO Says Ad Markets Improve But Some Clouds Remain

24th Jun 2010 11:27

(Adds details, background) By Ruth Bender Of DOW JONES NEWSWIRES CANNES, France (Dow Jones)--WPP PLC (WPP.LN) is running ahead of its budget both in terms of organic revenue and profit margins as advertising markets are improving across regions, Chief Executive Martin Sorrell told Dow Jones Newswires Thursday. Organic revenue growth continued to accelerate in the second quarter, with April revenue up around 4% on year and May revenue up over 5% organically, Sorrell said in an interview at the Cannes Lions Advertising Festival. Sorrell said that the group's current organic revenue growth target of 2% for 2010 is "probably on the conservative side" and he is confident the group can improve its profit margin by more than one margin point to 12.7% this year. Still, the executive warned that the improvement in organic growth, a closely-watched measure in the advertising industry that strips out acquisitions, disposals and currency effects, must be seen in the context of weak comparatives. "It is amazing how people congratulate themselves and others about growth on weak comparatives," he said. "The fact is, clients are still very cost-conscious, procurement is more powerful." WPP's clients include Unilever N.V.(UN), Johnson & Johnson (JNJ), and Ford Motor Co.(F). Markets have improved across regions though, with the biggest turnaround in the U.S., where organic revenue growth has accelerated, Sorrell said. The recovery in Western Europe is still slower though and is likely to remain slow for a while, he added. Sorrell, who is also the founder of WPP, the world's largest advertising and marketing company by revenue and market cap, also sounded a cautious note with regards to renewed economic and financial trouble, such as European sovereign debt worries. "There are some clouds on the horizon... people are starting to be nervous again," he said, adding however that there are no signs yet that such new fears are impacting WPP's business. "The caution is a good thing though because when there's caution, people do something about it." The Dublin-based group, which owns agencies including Ogilvy & Mather and JWT, continues to focus on small and medium-sized acquisitions, Sorrell also said. He said there are significant buying opportunities, especially in markets such as Brazil, Russia, India and China. "We have a lot in the pipeline." Last month, WPP acquired the entire issued share capital of Midia Digital and I-Cherry, two digital agencies in Brazil, specializing in digital marketing and search marketing respectively. "We'll continue to do such things," he said. Sorrell said he disagrees with some of his competitors' viewpoint that there is not much left to buy given the strong growth seen in faster growing markets such as China or India. "The map is continuously shifting so there must be opportunities." "New markets, new media and consumer insight remain our focuses," Sorrell said. In digital, Sorrell wants to grow revenue both organically and through acquisitions. "We'd like to do more but the prices in America are still high," he said. -By Ruth Bender, Dow Jones Newswires; +331 4017 1740, [email protected] (END) Dow Jones Newswires June 24, 2010 06:27 ET (10:27 GMT)