WPP, the highly acquisitive advertising firm led by Sir Martin Sorrell, said that revenue growth accelerated in the third quarter as strong growth in the emerging markets outweighed slowing growth in North America.As such, the group said that its full-year operating margin should improve beyond the 70 basis points achieved in the first half.Third quarter reported revenues rose by 9% to £2.46bn, compared with the £2.25bn seen in the three months ended 30 September 2010, as the rate of growth quickened from the 6% rise seen the group's first half. If reporting in US dollars, a 13.1% rise would have been seen in the third quarter, reflecting the weakness in the pound sterling, the group noted.North America, which accounts for over a third of group sales, saw revenues rise by just 2.2% (in fact, the firm has had to trim its full year growth forecast to 5%) , while the next largest division, Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe, achieved 14.5% growth. The group noted it has increased its dependency on this division (to group revenues) by one percentage point in the third quarter. Meanwhile, UK revenues rose 8.9%.For the first nine months of the year, reported revenues were up 7.1% at £7.17bn"Advertising as a proportion of gross domestic product remains at depressed levels in mature markets post-Lehman and the faster growth markets remain under-branded and under-advertised," the statement said.However, the group said it has seen little, if any, impact from global risks - including feared euro contagion, rising commodity prices and the Japanese earthquake - on client spending."Nervous, risk averse clients, not only continue to invest in brand rather than in additional capacity in slow growth, predominantly Western markets, but also invest in brand behind new capacity in faster growth markets - a positive double whammy for our industry, even if some clients mistakenly believe, in our subjective view, that advertising should be a variable cost and not a fixed investment."Commenting on the company´s update analysts at Citi have this afternoon written the following to their clients: "Our View: Steady As She Goes - By and large, consensus has been pretty proactive with regard to downgrading forecasts for WPP and the agencies more broadly. As such, while revenue guidance is down, we don't anticipate any meaningful move in consensus EPS. Indeed, with comfort on margins and support from FX, there could even be small upgrades. Operationally, we expect focus on the poor performance in research, but risk here is already captured in the below-average-multiple (10x 2012E P/E). We rate WPP Buy and think, on balance, these results should be well-received."BC
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