Ad Giant WPP Benefits From Brexit as Weak Pound Lifts Profitby
Earnings increase 15% on contract wins, currency effect
Shares surge as company sees U.K. rebound after uncertainty
WPP Plc, the world’s largest advertising company, benefited from the U.K.’s vote to leave the European Union in the first half of the year as a favorable currency translation more than offset Brexit’s drag on the British economy. The stock jumped.
London-based WPP, which owns ad agencies Ogilvy & Mather, JWT, Y&R and Grey, said Wednesday profit before interest and taxes rose 15 percent to 769 million pounds ($1 billion) in the six months ended June 30. Revenue rose 12 percent to 6.5 billion pounds.
In constant currency terms, profit before interest and taxes was up 10 percent, showing the effect of the weak pound, which plunged after the June 23 vote to leave the EU. WPP’s profit beat the average analyst estimate of 754 million pounds.
The shares rose as much as 5.7 percent, the biggest intraday gain in almost three years, and were up 5.6 percent at 1,845 pence as of 8:45 a.m. in London.
While some U.K. clients exercised caution in advance of the June 23 Brexit referendum, the plunge in the pound that followed boosted WPP’s overseas earnings when converted into the U.K. currency. WPP said spending in the U.K., which accounts for about 14 percent of its revenue, rebounded in July after a weak April through June.
“We saw an impact before the vote because of the uncertainty but we haven’t seen that since the referendum,” WPP Chief Executive Officer Martin Sorrell said on a call.
Despite the currency benefit, WPP said the Brexit vote was one of a range of factors contributing to uncertainty among consumers and corporate leaders globally, including political turmoil and sluggish economies. With global economic growth stuck in a range of 3 percent to 3.5 percent and little inflation, the company said, advertising clients have little pricing power and face pressure to keep down costs to meet profit targets.
WPP’s results were lifted by account wins from clients such as Sony Corp., Jet.com Inc., Verizon Communications Inc. and SABMiller Plc, with new ad billings of 1.9 billion pounds in the first half, up from 1.3 billion pounds a year earlier. Revenue gains were led by western continental Europe, with the U.K. more sluggish.