WPP share price down on FTSE 100 as "market malaise" offsets strong profit rise

Shares in WPP were down on the FTSE 100 in morning trading despite the company reporting a rise in pre-tax profit of 36 per cent in the first half of the year.

Revenue was reported as rising three per cent to £4.4 billion, while like for like revenue was up 2.5 per cent. Billings rose in the period by 8.5 per cent to £20.3 billion.

Pre-tax profit increased by 36 per cent in the period to £244 million. The group said that it would be raising its first interim ordinary dividend by 15 per cent to 5.97 pence per share.

In a statement WPP said, "Whilst the underlying current environment is better than anticipated, clients are pretty unanimously uncertain about future prospects. As indicated by us at the Allen & Company Sun Valley Media Conference some months ago, "the poison in the system is the uncertainty".

"As the world stabilises and probably avoids a "double-dip" at least, the Group continues to concentrate on its long-term targets and strategic objectives of improving operating profits by 10-15%; improving operating margins by half to one margin point per annum or more depending on revenue growth; improving staff cost to revenue or gross margin ratios by 0.6 margin points per annum or more depending on revenue growth; converting 25-33% of incremental revenue to profit; growing revenue faster than industry averages and encouraging co-operation among Group companies.

"As clients face an increasingly undifferentiated market place, particularly in mature markets, the Group is competitively well positioned to offer them the creativity they desire, along with the ability to deliver the most effective co-ordinated communications in the most efficient manner. The Group's performance this year at the Cannes Advertising Festival was particularly pleasing - second as a Group, as the previous year, but with the gap to first place narrowing to a very small margin."

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented "Despite an upbeat outlook, the shares have fallen foul of a general market malaise in early trade.

"The company's guidance is realistic but unusually positive - particularly, and somewhat against the grain, in the US - with the Asian units continuing to contribute as the company's major metrics were generally in line with estimates. Of late, advertising has shown some signs of recovery, and WPP is positioned to benefit both from the traditional form as well as the growing digital business. Further confidence in its prospects was demonstrated by a 15% rise in the interim dividend, with a capital base in the background which could yet be used for further acquisitions or even a share buyback programme.

"In all, the company's well regarded management has produced a statement very much with the macro picture in mind. Its ability to have largely withstood some of the pressures which other companies has faced is reflected by a 33% rise in the share price over the last year, during which time the wider FTSE100 has gained 7%. The general market view that the shares are a buy is unlikely to change following on from these numbers."

By 09:05 shares in WPP were down 3.28 per cent on the FTSE 100 to 649.00 pence per share.