WPP has just announced its first quarter numbers and the black swan in chief (‘black swans’ in Sorrell speak meaning unforseeable events) was the good old pound sterling, the strength of which savaged margins as reported earnings from outside the UK (most of them) took a nasty hit.
So reported revenues were up just 1.5 per cent in sterling at £2.57bn (up 8.7 per cent in dollalrs and 4.5 per cent in euros). Which suggests that someone wasn’t hedging currencies as busily or effectively as they should have been.
And this takes the gloss off pretty good underlying numbers with WPP claiming seven per cent organic growth which puts it slightly ahead of IPG at 6.6 per cent and comfortably in front of Omnicom at 4.3 per cent and Publicis Groupe at 3.8 per cent.
By discipline (and as usual) good old advertising and media planning and buying performed best with JWT, Grey and Y&R stand-out performers. The UK (not affected by currency swings, of course) was the strongest region with 8.7 per cent growth). Emerging markets (or whatever WPP is calling them these days) didn’t do so well as most such countries’ currencies have taken a pasting recently as hot money has returned to more mature and supposedly stable currencies like the US dollar.
Sorrell has a bit of a problem here. He’s spent a fortune buying companies in places like China and India which, when you look at their actual turnover, are tiny in comparison to their US or European equivalents. The idea, presumably, is that growth in these markets will see these numbers go up. But when nearly ten per cent is wiped off by currency movements that task becomes a lot harder.