--WPP blames revenue guidance cut on slowing growth in the U.S,
parts of Europe
--WPP shares slide, making it a top faller on London's FTSE 100
index
--WPP to move headquarters back to U.K.
(Adds CEO comments)
By Lilly Vitorovich
LONDON--WPP PLC (WPP.LN), the world's biggest advertising
company, Thursday cut its revenue forecast for 2012 complaining of
slowing revenue growth in the U.S. and parts of Europe, despite
posting a rise in first-half profit.
WPP, which owns the Young & Rubicam and Ogilvy & Mather
advertising agencies among others and operates in 108 countries,
said it now expects annual like-for-like revenue, which strips out
currency exchange-rate movements and acquisitions, to grow by close
to 3.5% this year, down from over 4% previously.
The company, which moved its headquarters to Dublin four years
ago for tax purposes, also confirmed it will return to the U.K.
following new tax rules, subject to shareholder approval.
WPP's move to trim its full-year outlook is a U-turn from a rise
in the guidance just four months ago after a strong performance in
Asia and Latin America boosted first-quarter results. At that time,
the company forecast like-for-like revenue growth of "over 4%" for
2012 up from 4%.
WPP generates more than two-thirds of its sales in Western
economies, which are continuing to feel the effects of the European
debt crisis. More surprising is the company's disappointing
performance in the U.S., with the group blaming a 0.6% fall in the
country's second-quarter like-for-like revenue on slow spending by
its customers in healthcare and call center businesses and by
regional governments. The U.S. slide compares with 1.4% growth in
the first quarter.
Chief Executive Sir Martin Sorrell said trading conditions in
the U.S. got "just a little bit softer," blaming strained
relationships between governments and healthcare companies over
healthcare reform and public affairs businesses in Washington
holding back on spending ahead of the U.S. general election. Other
sectors remained robust, he said.
Sir Martin expects continued economic uncertainty in the U.S.
ahead of the election, and declined to provide any specific
forecasts for 2013, noting that companies haven't set their budgets
yet.
Carat, a media agency owned by WPP rival Aegis PLC (AGS.LN),
also cut its global advertising spending forecast for 2012 last
week, blaming lackluster growth in the U.S. and Western Europe. It
predicts 5% growth in global advertising spending this year, down
from 6%.
WPP's revised revenue forecast triggered a share sell-off, with
the stock down 20 pence, or 2.4%, at 812 pence at 1408 GMT. Prior
to Thursday's warning, WPP shares had risen 35% over the past 12
months, underpinned by its strong earnings track record.
For the six months to June 30, WPP booked like-for-like revenue
growth of 3.6%, missing analysts' forecasts for 3.9% growth.
Still, first-half net profit rose 20% to GBP277.8 million,
boosted by strong performances in Asia Pacific, Latin America,
Africa & the Middle East, Central and Eastern Europe. U.K.
operations also picked up, with 3.5% like-for like revenue growth
in the quarter.
WPP's net new business more than doubled to GBP2.48 billion in
the first six months of the year, bolstered by contracts wins with
Bank of America Corp. (BAC), Procter & Gamble Co. (PG), L'Oreal
SA (OR.FR), Levi Strauss & Co., Dell Inc. (DELL) and the U.K.
government, according to the CEO.
Like rivals Publicis Groupe SA (PUB.FR) and Omnicom Group Inc.
(OMC), WPP has made a string of acquisitions in digital media and
emerging markets to help drive growth in recent years. In June, the
company bought one of the biggest independent digital advertising
firms in the U.S., AKQA Holdings Inc. for around $540 million, amid
rising demand for digital advertising as more consumers spend time
online. AKQA, which expects to book revenue of around $230 million
this year, boasts clients such as Google Inc. (GOOG), Nike Inc
(NKE), and Diageo PLC (DEO).
France's Publicis last month reported a 19% increase in
first-half net profit, bolstered by growth in emerging markets and
acquisitions, but also noted sluggishness in the U.S. healthcare
sector, while U.S.-based Omnicom booked a 2.2% rise in first-half
net profit, thanks largely to strong domestic operations and the
acquisition of several firms involved in public relations,
licensing or market research.
WPP has already flagged that it expects to benefit from this
summer's Olympic Games in London and the upcoming U.S. presidential
election. Business from both events will be booked in the second
half of the year. Next year will be "challenging," the company
warned, with no major events on the radar and concerns about the
growing U.S. budget deficit.
WPP declared an interim dividend of 8.80 pence a share, up 18%
from a year earlier.
Write to Lilly Vitorovich at lilly.vitorovich@dowjones.com;
Twitter: @LillyVitorovich
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