WPP Predicts Full-Year Revenue Growth to Slow on Europe Woes

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October 28, 2011, 4:57 AM EDT By Jonathan Browning and Amy Thomson

(Updates with CEO comment in third paragraph.)

Oct. 28 (Bloomberg) -- WPP Plc, the biggest advertising company, said fourth-quarter sales growth will slow as an economic slowdown in the U.S. and Europe hurts marketing budgets.

Full-year revenue on a like-for-like basis will grow 5 percent compared with a previous forecast of about 5.9 percent, the Dublin, Ireland-based company said today in a statement.

“I feel pretty much OK” about 2012, Chief Executive Officer Martin Sorrell told Bloomberg Television’s “On the Move” with Francine Lacqua, adding that he predicts the industry will grow by 4 percent next year. Politicians are “not likely to do anything unpleasant before elections,” he said. “The biggest concern is the U.S. deficit, that’s the elephant in the room.”

Some companies are cutting marketing budgets as the sovereign debt crisis in Europe and the U.S. hampers growth. Sorrell has said he intends to double spending on deals in 2011 to tap into faster-growing markets in Latin America and Asia to shield the company from a slowdown in more developed markets.

WPP has announced its intentions to buy at least two dozen companies this year, up from at least 17 in 2010, according to Bloomberg data.

In the U.S., new media advertising companies remain expensive, Sorrel said in an interview. “People haven’t adjusted their price expectations to what’s been happening to the stock markets,” he said.

Dividend

WPP, which said in June it will increase the dividend payout ratio, held talks with investor Capital Research following the share price drop this year, Sorrel said. “They are very much of the view that continuous increase in the dividend is better than share buyback.”

The company now predicts the full-year gross margin will be 5.7 percent, down from a previous forecast for 6.6 percent. At the same time, WPP said its operating margin “should improve” beyond the 70 basis points growth achieved in the first half.

WPP rose 1.3 percent to 686 pence at 9:33 a.m. in London trading. The stock has fallen 13 percent this year.

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporters on this story: Jonathan Browning at jbrowning9@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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