Martin Sorrell warns of “misplaced industry optimism” as WPP reports annual results

WPP chief executive Sir Martin Sorrell has warned of “misplaced always-on, Don Draperish general industry optimism” as the group reported its 2015 annual results.

The group, which operates design, branding and digital consultancies including AKQA, The Partners, Fitch and Landor, reported a revenue growth of 6.1%, to stand at £12.235 billion.

UK consultancies perform well

It says that its UK branding and identity and direct, digital and interactive businesses performed “particularly well”. The UK saw a reported revenue rise of 8.4%.

However, Sorrell says that despite “another record year” there are threats from “tepid GDP growth, low or no inflation and consequent lack of pricing power encouraging a focus on cutting costs to reach profit targets, rather than revenue growth.”

He warned of geopolitical issues affecting the global economy and the performance of marketing networks, inlcluding the crisis in Ukraine, tensions in the Middle East and the risk of Britain leaving the European Union.

Three “grey swans”…

Sorrell also identified three “grey swans” – the US Federal Reserve’s pre-Christmas tightening, the reduction in investment from oil-producing countries and the “somewhat surprising” Conservative victory in the 2015 UK General Election, which has led to the impending EU referendum.

He says that the climate is creating a “focus on costs, rather than revenue growth”, which is affecting the desire and ability of companies to invest in their brands.

Sorrell adds: “The average ‘life expectancy’ of CEOs is around 6 to 7 years, CFOs around 4 to 5 years and CMOs 2 years. No wonder conservatism rules.”

“Maxi-quadrennial event” boosts

On a more optimistic note, Sorrell says that a glut of “maxi-quadrennial events” in 2016 – the Rio Olympics, Euro Football Championships and US Presidential Election – would boost marketing investments.

He adds: “Although consumers and corporates both seem to be increasingly cautious and risk-averse, the latter should continue to purchase or invest in brands in both fast and slow growth markets to stimulate top-line sales growth.”