PR and public affairs named as WPP's strongest performing division in Q3

WPP has reported a 4.5 per cent rise in like-for-like net sales in its public relations and public affairs arm in Q3 2015, making it the company's strongest performing division in the quarter on a like-for-like basis.

CEO Martin Sorrell: Overseeing like-for-like net sales growth of 3.3 per cent across WPP in Q3
CEO Martin Sorrell: Overseeing like-for-like net sales growth of 3.3 per cent across WPP in Q3

The group said all regions showed positive net sales growth in the division, with "particularly strong growth" in the UK, Asia Pacific and Latin America.

"Quarter three and the first nine months both saw especially strong growth at Cohn & Wolfe and in social media content development in the US at SJR, with financial public relations in the United Kingdom up strongly in the quarter," said WPP, whose PR agencies also include Finsbury, Hill+Knowlton Strategies, Burson-Marsteller and Ogilvy PR.

Third quarter net sales in the public relations and public affairs arm reached £225m ($344.8m). Total net sales, which include acquisitions, rose 5.2 per in the division.

Revenue in the division grew 5.4 per cent to £229m ($351m) in Q3, with growth of 4.1 per cent on a like-for-like basis.

Across all divisions, like-for-like net sales rose 3.3 per cent to £2.518bn ($3.86bn) in Q3, with net sales up 6.1 per cent overall. Third quarter revenue was £2.927bn ($4.49bn), a rise of 4.6 per cent on a like-for-like basis, or 7.9 per cent overall.

In its trading statement this morning, WPP described clients as "risk averse", highlighting factors such as "sub trend" long-term GDP growth, "geopolitical uncertainty" and low inflation, combined with "short-term focused activist investors and strengthened corporate governance scrutiny".

There is a "focus on costs, rather than revenue growth", the group stated.

"If you are trying to run a legacy business, at one end of the spectrum you have the disrupters like Uber and Airbnb and at the other end you have the cost-focused models like 3G in fast-moving consumer goods, and Valeant and Endo in pharmaceuticals, while in the middle, hovering above you, you have the activists led by such as Nelson Peltz, Bill Ackman and Dan Loeb, emphasising short-term performance. Not surprising then that corporate leaders tend to be risk averse. 

"Procurement and finance take the lead over marketing and investment and suppliers are encouraged to play the additional roles of banks and/or insurance companies.

"At best, clients focus on a strategy of adding capacity and brand building in both fast growth geographic markets and functional markets, like digital, and containing or reducing capacity, perhaps with brand building to maintain or increase market share, in the mature, slow growth markets. This approach also has the apparent virtue of limiting fixed-cost increases and increasing variable costs, although we naturally believe that marketing is an investment, not a cost.

"We see little reason, if any, for this pattern of behaviour to change in the last quarter of 2015 or 2016, with continued caution being the watchword."

WPP retained its target of three per cent like-for-like net sales growth following today's trading update.

The group said its prime focus in the final months of 2015 remained on growing revenue and net sales faster than the industry average, while meeting targets for operating margin by managing "absolute levels of costs and increasing our flexibility".

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