SIR Martin Sorrell’s advertising empire WPP yesterday predicted a “LuVVy” shaped global economic recovery as it said America was bouncing back stronger than expected.
The group, which owns names such as Ogilvy & Mather and J Walter Thompson, said global economies were likely to avoid a much-feared double-dip recession.
Its previous forecast for a LUV-shaped recovery – referring to an L-shaped recovery in western Europe, a U shape in North America and V in the emerging markets – was now more a “LuVVy” rebound as the US performs better than expected, according to WPP.
WPP’s US like-for-like revenues have improved markedly from a drop of 6% in the fourth quarter of 2009 to growth of almost 4% in the first quarter of 2010 and 8% in the second, with July seeing similar levels.
“In our 25 years of existence, we cannot remember a more speedy recovery or turnaround of a region,” said WPP.
Half-year figures showed a 36% leap in pre-tax profits to £243.9m and WPP said full-year revenue growth was on course to beat market expectations.
Like-for-like revenues in the first seven months of the year stood at 3.1%, while the City had pencilled in 2.5% for the full year.
But WPP added a cautionary tone as it comes up against tougher comparatives in the second half and amid concerns that the US cannot maintain its speedy recovery.
On the wider global picture, it added: “The most likely scenario is a slow growth ’slog’, particularly in the mature geographical markets and traditional media markets, perhaps with inflation and higher interest rates in the long term.
“In some senses, the recovery will not be over for a long time.”
WPP hopes 2010 operating profit margins will return to the levels seen before the recession struck, thanks to better-than-expected revenue growth.
However the firm is taking on more staff again after a major jobs cull in 2009, which it said would lead to higher costs.
WPP’s headcount has increased by 1.7%, or 1,658 staff, since the end of December.
This year’s performance has also been boosted by major events, such as the World Cup, which gave a fillip to WPP’s African business, helping revenues leap up by 6% in the three months to the end of June.
