WPP Misses Targets, Worries About 2009 Slowdown

Minor but potentially significant weakness in Q3 at WPP Group (WPPGY).  From AP:

Internal revenue growth, a closely watched industry gauge that strips out the effects of acquisitions, disposals and currency, was 4.8 per cent, compared with just over 4 per cent for the same quarter in 2006. Analysts’ average expectations had been 5.2 per cent to 5.4 per cent. WPP shares fell 2 per cent to 680.5 pence ($13.90) in London.

On a constant-currency basis, WPP saw a minor slowdown in North American revenue, from 8.2% growth in the first half, to 8.0% in Q3.  The company acknowledges that there may be some impact on ad spending from the “liquidity crisis.”:

Despite concerns about the impact of the recent liquidity crisis on levels of client spending, there has, as yet, been little or any effect on spending levels across the board, both functionally and geographically [translation: There has probably been some impact.  Is this why they missed?]. .  .

Any possible impact is unlikely to be reflected anyway, until the Group’s budgets for 2008 are finalised, at the beginning of next year.

Company concerned about 2009.  This seems a bit distant to worry about, so we wonder if what they’re really concerned about is nearer term.

In any event, we continue to believe that 2008 will be a good year for the industry, better than 2007, reflecting the positive combined impact of the maxi-quadrennial events of the US presidential election, the 2008 Olympics in Beijing and, on a relatively more modest basis, of the European football championships.  We also continue to believe that a more important concern should be the impact that any new US administration will have on 2009 – when they have seen the government’s books and will be tempted to dispense any politically unpleasant medicine to the electorate, early in the potential eight year political cycle.


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