WPP's Martin Sorrell often expounds on the precarious state of the global economy, bemoaning everything from Brexit to the frugality of big corporations. He's listened to not just because he runs the world's biggest ad company, but because he speaks to a wide network of fellow CEOs.
Given his relentlessly downbeat tone, it may come as a surprise that WPP is in fact in almost insolent good health. The shares are at all-time highs, outperforming peers this year. He's delivered better shareholder returns in the past five years than rivals Omnicom and Publicis. Only the smaller Interpublic has kept up.
WPP revenue growth is chugging along despite price pressure from big advertisers such as Verizon and P&G, who are trying to save money on marketing. It's doing this even as Facebook and Google have become major advertising powers in their own right.
Sorrell, who founded WPP in 1985, isn't the type to sit back and relax. Sterling's depreciation after the Brexit vote boosted WPP's overseas earnings and British ad spending has picked up a bit after weakness ahead of the referendum. Yet, as Sorrell often tells us, Brexit will hurt WPP and the other agencies if the economy slows and companies stop investing.
It is indeed too early to get a true sense of the lasting impact of Brexit, given we don't know what it will look like. WPP's U.K. sales did slow in the second quarter, growing 3.5 percent to 475 million pounds, compared to a 4.7 percent rise in Q1. The company is more exposed than others to its home market.
All that said, Britain still accounts for just 14 per cent of WPP sales. And, who knows, Theresa May's government might not make a complete pig's ear of the exit negotiations (well, maybe). Consumer spending over the summer has been pretty resilient so far. So while it's right to be cautious, Sorrell might want to crack a rare smile.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
(WPP's founding year corrected in fourth paragraph.)
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