WPP to fuel advertising anguish

Jon Rees12 April 2012

SIR Martin Sorrell's WPP marketing services group is set to report a sharp fall in profits when it unveils its first-half results this week.

This will add to the gloom over advertising that triggered big falls in the shares of ITV companies Carlton and Granada.

Analysts expect WPP to say that pre-tax profits for the six months to the end of June fell by 15% to £215 million, compared with £252 million for the same period last year. Revenue is likely to be down by about two% to £1.96 billion.

Sorrell is also expected to give a gloomy assessment of the state of the whole advertising market, and is likely to repeat his forecast that it will not pick up substantially before 2004.

Fears of such a prediction were partly blamed for fresh falls in Carlton and Granada shares last week.

Carlton's fell 9p to 129p on Friday and over the week they were down 24%. Granada's shares sagged 6 1/4p to 74 3/4p on Friday, down 17% over the five days.

A banker said: 'The market has simply become more bearish about the business. The ITV firms, especially Carlton, are the most exposed of the UK media stocks, and there have been some grim results from the big advertising groups. As more bad news comes in, one becomes more sceptical about a swift recovery.'

More bad news from French media conglomerate Vivendi has also dented confidence in media stocks. It could run out of cash by the end of next month unless it can negotiate a new £1.5 billion credit line with its banks.

A media analyst said: 'Carlton and Granada have halved in value over the past three months. The past week has seen more advertising statistics showing that the industry is still in difficulty, and now people are also afraid of what WPP will say.'

Second-quarter and six-month figures from all the big advertising agencies, including Omnicom, Publicis, Interpublic and Havas, give a gloomy view of the advertising market.

Deutsche Bank last week forecast a drop of between 1.5% and two% in global advertising revenue this year. The US market has shown signs of strength, but Germany and the UK remain depressed.

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