Revenue grows 5.4 per cent in WPP's PR and public affairs arm but net sales margin dips

WPP saw revenue in its PR and public affairs arm grow around 5.4 per cent to £458.7m ($719.9m) in the first half of 2015, although net sales margin in the division dipped over the period.

WPP CEO Sir Martin Sorrell: Overseeing growth
WPP CEO Sir Martin Sorrell: Overseeing growth

WPP sounded a note of caution for the wider industry in its interim results this morning, saying the "apparent" optimism in the sector "seems misplaced".

Headline profit before interest and tax in the PR and public affairs arm increased from £64.7m ($101.5m) to £66m ($103.6m), the group announced. Net sales margin in the segment fell from 15 to 14.7 per cent.

Net sales grew from £430.3m ($675.3m) to £450.3m ($706.7m) in the division, which includes PR agencies Finsbury, Hill+Knowlton Strategies, Cohn & Wolfe, Burson-Marsteller and Ogilvy PR.

Like-for-like net sales growth in the division accelerated from 1.2 per cent in the first quarter to 1.9 per cent in the second. All regions except the UK showed growth, WPP said.

"Burson-Marsteller, Cohn & Wolfe and parts of the specialist public relations and public affairs businesses in the United States and Germany performed particularly well," WPP said. "Reportable net sales margins fell 0.3 margin points, (down 0.2 margin points in constant currency), although Cohn & Wolfe showed improved margins in the first half."

Sales at Cohn & Wolfe were up 12 per cent in the first half.

Across its business, WPP said trading in the first half of 2015 was "characterised by particularly strong growth geographically in North America, the United Kingdom and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe". The company highlighted specialist communications among the strongest growth segments.

Headline profit before interest and tax was up 7.6 per cent to £669m ($1.05bn) on revenue up 6.8 per cent to £5.839bn ($9.16bn) and net sales up 5.2 per cent to £5.041bn ($7.91bn). The value of reported billings rose five per cent to £23.156bn ($36.34bn).

Net sales margin increased by 0.3 percentage points to 13.3 per cent, "well ahead of the group’s full year target". Like-for-like net sales growth was 2.3%, slightly below that of the first quarter.

The company revised up its like-for-like revenue growth forecast slightly for 2015 from the forecast in the first quarter, pointing to an increase in digital media purchases and predictions of a stronger second half against easier comparatives.

Meanwhile, like-for-like revenue growth in July was five per cent, with like-for-like net sales up 3.7 per cent, "indicating a likely stronger third quarter".

WPP said PR and public affairs, along with its specialist communications division, were among the segments "up strongly" in July. All regions and sectors were positive, the group said.

WPP stated: "Despite this strong performance, the apparent general industry optimism seems misplaced.

"To survive in the advertising and marketing services sector, you have to remain positive, indeed optimistic, seeing the glass half-full and industry and company reports generally continue, understandably, to reflect that attitude. However, general client behaviour does not reflect that state of mind as tepid GDP growth, low or no inflation and consequent lack of pricing power encourage a focus on cutting costs to reach profit targets, rather than revenue growth."

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