WPP is most famous for its services within the advertising industry, but the groups reach stretches some way beyond explicit efforts to help its corporate clients relieve consumers of their hard earned cash. The firm, since its inception in 1985, has accumulated a vast portfolio of global and regional brands; I lost count at 140, which offer business solutions in branding, consultancy, public relations, specialist communications and of course advertising. The firm has survived US, UK and global recessions previously and is well equipped to grow again as the current recession eases, though 2009 is likely to be an enormously challenging year. To assist those unfamiliar with WPP and to reinforce the value, breadth and depth of its corporate relationships, the firm can count as clients almost 70% of Fortune Global 500 companies, 50% of Nasdaq 100 companies and an amazing 90% plus of the Dow 30. The list does imply an emphasis on the struggling US economy so to reassure readers with a global disposition, WPP has more than 2,000 offices globally in 107 countries with high exposure to the Asian market.
2008 financial data captured the beginning of the global down-turn and were therefore impressive relative to a strong 2007. Key highlights included a 20.9% rise in revenues and a similar growth rate in the headline diluted earnings per share. Management attached an excellent and frank statement to the 2008 financials and addressed the volatile share price which many commentators take as a leveraged proxy on the health of the global economy and corporations. Sir Martin Sorrell, Group Chief Executive, suggested shareholders should lower their sights for 2009 as the industry tackled the “vicious recession”, but offered hope for 2010 and beyond citing structural growth in Asia, Africa, Latin America and the Middle East relative to the mature western markets. Sorrell also suggested near-term weakness in advertising and branding would be partly compensated by strength in public relations and consultancy income.
The share price has already recovered well from its 52 week low of 299.00p implying the easy money has been made and the sector as a whole is probably one to avoid for the risk-averse until the recessionary dust clears. But if you like a finger in every pie or are particularly bullish on the long-term prospects for the sector, the global reach and proven track record of WPP pushes the stock very close to the top of the media/advertising sector buy list.
Note: Stock ticker WPP London, WPPGY Nasdaq. The writer does not hold any financial instrument that provides direct or indirect exposure to companies mentioned in this article.
WPP Group Chart 26th June 2009
