WPP Plc, the world’s biggest advertising company, will more than double the amount it sets aside this year for acquisitions to expand in faster-growing emerging markets, Chief Executive Officer Martin Sorrell said.
WPP will allocate more than 200 million pounds ($325 million) this year on acquisitions, compared with a typical annual budget of 100 million pounds in previous years, Sorrell said in an interview with Bloomberg Television at the World Economic Forum in Jakarta today. The company is seeking to expand in “new media” such as the Internet, and in emerging markets, he said.
Advertising companies are benefitting as companies increase marketing spending following the economic slowdown. Dublin-based WPP, the owner of ad agencies including Young & Rubicam, Ogilvy & Mather and the Grey Group, this month boosted its full-year sales forecast, helped by growth in Asia, Latin America and Africa. Sorrell said today he is “bullish” about growth prospects in the advertising industry in 2011 and 2012.
“They’re really just targeting markets where the growth is more attractive, where the demographics are younger, where there should be some upside,” said Panmure Gordon & Co. analyst Alex De Groote. “The presence is already well established, it’s not embryonic. What they’re doing is fleshing out that presence.” De Groote has a “hold” rating on the stock.
WPP rose 0.3 percent to 730 pence as of 9:47 a.m. in London trading. The stock has dropped 7.5 percent this year, giving the company a market value of 9.2 billion pounds.
WPP is expected to post $2.5 billion in earnings before interest, tax, depreciation and amortization this year, and is seeking to expand in emerging markets including Brazil, Russia, China and India, he said.
In the first four months, WPP made a number of small and medium-sized acquisitions or increased stakes in companies based in countries including the U.S., Netherlands, China and Korea. WPP said this month it bought a 70 percent stake in F.biz, the biggest independent digital advertising agency in Brazil.
Full-year like-for-like revenue will increase more than 6 percent in 2011, faster than budgeted, WPP said on June 2. Sales in the first four months rose 6.2 percent, WPP said at the time.
“We feel pretty good” about WPP’s growth rate this year, Sorrell said. Operations in Asia are helping to “pick up the slack” from “less growth” in the U.S., he said.
WPP will aim to increase dividend payments as a proportion of profit “over time,” and will also repurchase shares, Sorrell said.
In 2012, the ad industry may get a boost from the London Olympic and Paralympic Games as well as the UEFA Euro Football Championships, while the U.S. presidential election may add as much as $4 billion to the year’s media spending.