WPP “ravaged” by currency strength says Sorrell – will he now turn his attention to Chime?

WPP boss Sir Martin Sorrell (left)Sir Martin Sorrell came out fighting today after admitting that the marcoms giant’s first half earnings had been “ravaged” by the effect of the strong GBP, as we anticipated.

Billings were down three per cent (up 5.7 per cent on a constant currency basis according to WPP) with income up 2.7 per cent to £5.47bn. Pre-tax profit rose 1.5 per cent to £532m (up 15.6 per cent at constant currency rates according to the company).

Best performing regions were the UK (up 17.2 per cent), North America and Asia Pacific.

What are we to make of all this? Many UK exporters (which is what WPP is with 90 per cent of its business outside the UK) have bemoaned the strength of the GBP recently. But that’s life for such companies and WPP needs to find a way of coping with it.

Operating everywhere, often via small companies earning their money in fragile currencies, is a risky business but all the big marcoms companies do it.

In many ways they’re just the same as the old agency networks. McCann-Erickson would have an office everywhere that the likes of Coca-Cola and Exxon traded, even if the duties of the peole on the ground consisted of little more than meeting the client off the boat/plane and taking them to lunch/dinner/Pedro’s Oompah Bar.

Ultimately it became untenable with the cost of servicing the business outweighing the profit made in the bigger markets. But this is exactly what WPP and Publicis Groupe, in particular, are doing with their headlong rush into markets like China, the Middle East and Africa. The problem is compounded when the businesses in many of these regions are based around digital, which is less profitable than advertising.

Will these numbers, which have to be deemed disappointing even if you buy the currency story, affect WPP’s desire to do do deals?

The sensible thing to do would appear to be – expand in the UK. WPP owns 25 per cent or so of Chime Communications which, now that Lord Bell has departed with his Bell Pottinger PR business, consists of highly successful ad agency VCCP and a gaggle of sports marketing businesses headed by Lord Coe. WPP is relatively weak in sports marketing.

Chime looks a more likely bet for WPP at this stage than the very much larger, oft-mooted takeover target Interpublic.

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About Stephen Foster

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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.

4 comments

  1. Avatar

    If Sir “Odious Little Shit” is on the left, who is the wanker on the right?

    More importantly:

    MESSAGE TO VCCP FROM AN OLD FART WHO KNOWS:

    If you wish to preserve your integrity, sanity and your “10 Principles” DO NOT SELL TO WPP.

    DO NOT SELL, PERIOD but if you need the dosh, sell to Omnicom and keep the majority.

    I’ll shut up now.

    Cheers,

    RJ.

  2. Avatar

    @Robert…
    Dead right. Goodby sold only 49% of themselves to Omnicom. That’s why they continue to do excellent work, unlike most of the shops in the Poisoned Dwarf’s rancid empire.
    Cheers/George “AdScam” Parker

  3. Avatar

    Far be it from me to disagree with The Sage of Boise but I do believe that WPP was named “Holding Company of the Year” and one of its core agencies, Ogilvy, was dubbed “Agency Network of the Year” at that glittering wankfest known as Cannes Lions.

  4. Avatar

    @Der Senator…
    Holding Company of the Year is a somewhat dubious honor when you consider it has been achieved by the Poisoned Dwarf buying more than six hundred companies over the years… Then closing most of them down. And, don’t get me going on “Enfatico!” As for Cannes, a wankfest indeed. As I once described the 4 A’s annual meeting…
    http://www.aaaa.org/events/video/Pages/transformer_parker.aspx
    Cheers/George