Holding Cos. Slow, Europe 'Difficult'
Feeling the effects of the sputtering global economy, holding company organic growth is slowing down in 2012 compared to the previous year.
WPP Thursday reported a less than 2% gain in revenues for the third quarter to more than $4 billion. Revenue for the first nine months was up slightly more than 4%, to more than $12 billion.
WPP’s organic revenue growth (ORG)-- considered a key performance indicator for the ad industry, and which excludes the impact of currency fluctuations, acquisitions and dispositions -- was up less than 2% for the third quarter and 3% for the first nine months of the year. WPP said that for the full year, the company’s ORG is expected to be in the 2.5% to 3% range -- somewhat lower than the 5.3% ORG it reported for 2011.
By comparison, Omnicom, which reported Q3 earnings earlier this month, reported third-quarter ORG of 3.5% and nine-month ORG of 4.5%. Company officials said at the time that full-year ORG is expected to be around 4%, less than the 6.1% ORG it reported for full-year 2011.
WPP said it expected “continued softness” in the fourth quarter, “particularly in North America,” where the company delivered an organic revenue decline of 0.4% in the third quarter to £885 million. Weaker-performing disciplines included PR, research and health care and other specialist communications business, while advertising and media shops delivered “strong growth” for the period.
The holding company described Western Europe as its “most difficult” region, delivering a 2.1% organic revenue decline in Q3. WPP said that the strongest revenue growth for the quarter was delivered by Asia-Pacific, Africa, the Middle East and Central and Eastern Europe, which combined posted ORG of 6.8%.
Globally, WPP stated that its advertising sector (including creative and media agencies) was the strongest-performing operating unit with ORG of 2.9%. Net new billings in the space totaled $1.4 billion during Q3 which was down from the nearly $2.3 billion in net new billings that the group secured in the same period last year. For the first nine months of 2012, net new billings totaled nearly $5.4 billion, up from $4.2 billion in the same period a year ago.
The company said it had also found a “prospective buyer” for its Y&R New York headquarters building located at 285 Madison Avenue in New York, site of the tragic elevator accident late last year that resulted in the death of Y&R employee Suzanne Hart. The sale of that building, expected to close “shortly,” along with the recent sale of the company’s stake in Buddy Media, should yield “an exceptional cash gain of well over $100 million,” the company stated.
WPP said slowing growth is expected due to client concern about the ongoing turmoil in the Eurozone; instability in the Mideast; concerns about a softening of the Chinese economy and the so-called “fiscal-cliff” confronting the U.S. at the beginning of 2013.
Next year will also be devoid of big advertising events, like the Olympics and political campaigns, WPP noted. “2014 looks a better prospect, however, wih the World Cup in Brazil, the Winter Olympics in Sochi [Russia] and the mid-term Congressional elections” in the U.S.