He’s not the only CEO either. Sir Martin Sorrell has just reported robust figures from WPP, with profits up 36 per cent to £244m, and says sales growth is quickening even in hitherto benighted US and Europe.
But WPP’s shares were marked down on disappointment that margins in advertising, media and research were still stuck at around ten per cent (they must be much higher somewhere else if WPP’s claim that they’re at 13 per cent overall is to be believed) against a backdrop of investor gloom about the global economy.
Sorrell, in his sage of Farm Street guise, has madeEvfen rather a rod for his own back with his various ‘out of recession’ forecasts, last time he predicted a ‘bath-shaped’ recovery, steep decline followed by a period of bumping along the bottom followed by a steep rise, and this time he’s revised his ‘LUV’ recovery (stagnation in Europe, eventual recovery in the US and steep recovery in the Far East to a ‘LuVVy’model which apparently reflects sharper recovery in North America. So what about Europe then Martin?
Anyway his more optimistic note is similar to that of many other CEOs in the world’s biggest companies who have been backing their judgement that recovery is well on the way with an avalanche of bids for their rivals whose share prices they think are undervalued.
The markets, comprising traders, investors, analysts and economists, think different.
Wall Street is decidedly nervous, waiting on Fed governor Ben Bernanke’s pronouncement on Friday about the US economy and what, if anything, he proposes to do about it and sentiment in London was hardly helped by Martin Weale, the newest member of the Bank of England’s monetary policy committee speculating about a double dip recession yesterday.
Even right wing economists in the UK are getting nervous about the potential impact of coalition chancellor George Osborne’s cuts to public expenditure due to be announced in October. The UK economy is currently ticking along quite nicely (in the circumstances) with growth up and the budget deficit lower than expected (although still in record-breaking territory).
As to WPP’s own likely activities Sorrell says he expects a series of small to medium-sized acquisitions although he noted that the pricing of Us digital agencies in particular was “very aggressive.” He can say that again (and probably will). Any agency in the US at the moment can put a sign saying digital on the door and expect the big boys to come around with their chequebooks.