The sterling weakness engendered by the Brexit vote provides a currency tailwind to advertising giant WPP’s (WPP) third quarter earnings.
Revenue is up by a better than expected 23% yet there is also a warning about a slowdown in its UK business.
The globally diversified company gains 3.4% to £17.66 on the numbers.
The result continue to demonstrate its ability to grow ahead of the economy with revenue up a still impressive 7.6% once the impact of currency movements is stripped out. On a like-for-like basis sales are up 2.8% versus consensus at 2.7%.
BREXIT BELLWETHER
WPP, and advertising companies more widely, are bellwethers for the wider economy. Firms will bolster marketing budgets when they are feeling confident about the future.
In this context, the slowing like-for-like growth in the UK of 2.1% (against 3.5% in the previous quarter) looks telling. The company speculates this could be ‘the first impact of Brexit anxiety’.
Liberum analyst Ian Whittaker who rates the stock a ‘hold’ with a £18 price target comments on the outlook: ‘In terms of 2017, the company suggested that it could be a similar sort of year to 2016 with no reason why net sales should not be up over 3% again.
'While there is not a huge amount of visibility at the moment, these comments are likely to be reassuring,’ he adds.
The company is set to hold a capital markets day on 1 December which may reveal if the outcome of the tightening US presidential race has any impact on guidance.
