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WPP On Course to Double Its Business in Emerging Markets Every Five Years

By Amy Thomson
June 24, 2011 6:51 AM EDT
WPP Plc Chief Executive Officer Martin Sorrell
WPP Plc Chief Executive Officer Martin Sorrell

WPP Plc (WPP) Chief Executive Officer Martin Sorrell said the world’s largest advertising company is on course to double the size of its business in high-growth economies every five or six years.

Countries such as China, where WPP will surpass $1 billion in sales for the first time this year, and India are adding employees and offices as the advertising market in those countries grows, Sorrell said in an interview at the Cannes Lions advertising conference today.

“If the GNP continues to grow at 7-to-8 percent, which is where India and China are at the moment, you would expect the business to grow certainly in the double digits,” or about 10 percent to 15 percent, Sorrell said. “Which means you’re going to double every five or six years.”

Advertising companies are pushing into China and other emerging economies to make up for slower growth in some established markets such as Western Europe. WPP already has more than 28,000 employees in the BRIC countries of Brazil, Russia, India and China, making the group larger than the U.S. or U.K., Sorrell said.

WPP rose as much as 2 percent to 749.5 pence in London trading and was up 1.5 percent as of 11:44 a.m. Before today, the stock had declined 7 percent.

Expansion Strategy

While the company will spend as much as 300 million pounds ($481 million) on acquisitions this year, focused on emerging markets and assets for digital advertising, it doesn’t make sense to buy companies in some countries, Sorrell said.

Existing companies in India and China are small in comparison to the revenue that WPP is generating in those countries, Sorrell said. However, Brazil and Russia have some larger agencies that would make more compelling targets, he said.

Beyond acquisitions, the Dublin-based company will have cash to increase its dividend this year if it meets analysts’ earnings forecasts, Sorrell said. Analysts expect earnings to rise 10 percent to 15 percent this year, according to Sorrell. In that case, the company would be able to raise its dividend by 20 percent.

WPP paid dividends per share of 17.79 pence for last year compared with earnings per share of 45.9 pence.

To contact the reporter on this story: Amy Thomson in Cannes, France via Athomson6@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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