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RBS analyst pours cold water on WPP shares

Royal Bank of Scotland analyst Paul Gooden won’t be the most popular man at WPP’s Farm Street HQ today as his view that WPP shares, flying high after record revenue increases in the second half of 2010, should be downgraded lopped 2.2 per cent off their value even as the FTSE London share index rose through the 6,000 barrier.

Gooden says that such dramatic increases can’t be maintained even as the recovery in advertising continues and that WPP will have to pay a price in increased costs as it replaces all the people who lost their jobs in 2009.

Jobs are a big issue at WPP, it employs about !41,000 people, more than twice the number at nearest rival Omnicom. But Omnicom’s business is built around ad agencies, low on staff these days, whereas WPP’s is increasingly (and deliberately) reliant on data which seems to require more people.

Gooden may well have received a terse email or three from WPP boss Sir Martin Sorrell’s hyperactive BlackBerry yesterday but his observations should be greeted more warmly by those who toil for the various marcoms groups.

As service business marcoms companies ultimately need more people if they want to expand and it’s likely that this year there’ll be increased competition for talent, forcing up earnings in the upper levels of agencies and the other multifarious businesses they own.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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