WPP's share price jumps as company leads FTSE after results - but Sir Martin Sorrell is still worried about Brexit

 
James Nickerson
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WPP said there are a variety of economic challenges ahead (Source: Getty)

The chief executive of the world's largest advertising group is still worried about Brexit despite the company reporting strong results for the first half.

The company is leading the FTSE 100 this morning, up more than five per cent to 1,839p per share in early morning trading.

WPP reported better-than-expected first half results. The company revised up its forecast for full-year revenue growth to “well over” three per cent, from "over three per cent".

Read more: Global economy bellwether WPP set to report soaring sales and profits

Currently, the company said: "The United Kingdom was stronger than the previous quarter, perhaps reflecting a post-Brexit vote recovery, driven by a weaker pound sterling."

For the first half WPP's revenue jumped 11.9 per cent to £6.5bn, but reported pre-tax profit was down to £425m after £122m of writedowns. Dividends per share jumped 22.9 per cent to 19.55p.

WPP WPP | mobile image

Chief executive Sir Martin Sorrell accepted that the results were "very strong", but said WPP had to "grind them out in a difficult environment".

The industry is now cautious, WPP said, as it thinks companies are sitting on cash and want to give out dividends rather than in invest.

The company said: "Multi-nationals are sitting on over $7 trillion of net cash and relatively unleveraged balance sheets. Caution, understandably, prevails and as a result, companies, in a sense, may be shrinking. Take for example the S&P 500. If you think of them as one company, share buy-backs and dividends are starting to exceed retained earnings and have done so in five out of the last six quarters."

Meanwhile, it thinks there will be challenges from firms such as Uber and Airbnb for many of its clients which it terms "legacy" businesses.

And the company still thinks the Brexit vote could result in at least short-term or mid-term GDP weakness, as well as possible Scottish independence claims and further disintegration of the EU.

Sorrell told BBC it's early days yet and the exit process will be long and uncertain with the business and political world's clashing.

Read more: Financial markets rattled by Bank's Brexit Bazooka

"It’s very early days. What we did see from April to June was caution in front of the vote. What we saw after the vote in July was the UK perking up a bit. But that begs the question as to what the UK would have done in the absence of a Brexit vote or if the vote had gone the other way," Sorrell told BBC Radio 4's Today programme.

"We still worry. Business wants certainty. The government wants the best negotiating position with the EU and the two are actually in conflict.

"We would like a quick clean solution from a business point of view but the government needs a little bit of scope and time for negotiation. So there is going to be a considerable degree of uncertainty in the future."

Sorrell was a pro-Remain campaigner ahead of the referendum result, which resulted in a 52-48 per cent split in favour of leaving the 28-member bloc.

He added that building trade agreements will take a long time and will take longer than people actually think, while growth will be slow and difficult.

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