WPP disappoints with Q3 performance as growth slowdown continues

WPP shares took a hit on Thursday when the media and advertising giant after it admitted its third quarter growth was slower than that seen in the second quarter, which also came in short of expectations, with fourth quarter growth set to slow further.

For the three months ended September 30th, revenue growth came in at 1.6%, with like-for-like growth of 1.9%, 2.9% growth from acquisitions and -3.2% from currency. This compared with growth of 3.6% in the second quarter.

The decline was the result of particularly slow growth in September and, in regional terms, in North America and Continental Europe.

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However, constant currency growth was achieved in all regions and business sectors, maintaining strong growth geographically in Asia Pacific, Latin America and the Middle East and Africa.

Functionally, both consumer insight and public relations and public affairs experienced slower growth than in the first half, particularly in September. Advertising and media investment management and branding & identity, healthcare and specialist communications (including direct, digital and interactive), were, as in 2011 and the first half of 2012, the strongest sectors.

During the period net new business totalled $1.415bn, down from the $2.289bn achieved in the same period the previous year.

Operating profits over the nine months ended September 30th were on budget and ahead of the previous year, the firm said.

Looking ahead, the company is forecasting continued softness in the fourth quarter, with overall like-for-like full year revenue growth set to be between 2.5% - 3.0%.

In a statement the company said: "In the balance of 2012, our prime focus remains on growing revenues and gross margin faster than the industry average, driven by our leading position in the new markets, in new media, in consumer insight, including data analytics and the application of technology, creativity and "horizontality".

"At the same time, we will place an increased emphasis on meeting our operating margin objectives by managing absolute levels of costs and increasing our flexibility in order to adapt our cost structure to significant market changes."

Average net debt at the period end increased by £329m (-12%) to £3.105bn compared to last year.

In early trading the shares fell 2.85% to 785p.

NR