Shrinking pound value drives huge revenue gains at WPP
But the multinational ad and public relations company warns that its UK business “softened” in Q3, ‘perhaps, the first signs of Brexit anxiety’
When the value of your currency tumbles, but you earn income from another country, that income then gets translated into your own currency and, voila, instant gains! That is what ad agency giant WPP is reporting today with its Q3 earnings.
WPP’s results are pretty good without the shrinking pound sterling, with revenue up 7.6 percent on a constant currency basis. But taking into account acquisitions (4.4%) and currency fluctuations (15.8%), it could report overall revenue growth of 23.4 percent.
But while a sinking pound has some advantages, it also has its disadvantages. First, costs rise when your currency sinks. Also, the debt you hold in pound stirling costs more when you have to pay it back in another currency. WPP reported its debt up £434 million to £4.206 billion compared to last year, due to both currency changes and its acquisitions.
Another consequence of Brexit in the UK is that WPP has “increased emphasis on expansion in the four EU markets in the Group’s top 10 markets – Germany, France, Italy and Spain, along with Brussels.” Look for other companies to do the same.
About its UK results, WPP’s earnings statement says that while results were good, there are worrying signs.
“All parts of the Group’s businesses, except data investment management and public relations and public affairs softened, with net sales growth showing a similar pattern, up 2.7% like-for-like, compared with 3.4% in the second quarter. Perhaps, the first signs of Brexit anxiety,” the company said.