The company's stock fell sharply in late February when it revealed that its pretax profit rose 20% in 2013, but its operating margin had been held back by the strength of sterling. In April, it retained its forecasts for 2014 after reporting higher first-quarter revenue, but again warned that the pound's strength was weighing on margins.
"With currency having been the explanation for a margin miss in 2013, and management’s guidance for 30bp of improvement in 2014, but on a pre-currency basis, risks must be growing that this is becoming a harder target to achieve now that the pound has strengthened further," Berenberg said in a recent note to clients.
When the company updated shareholders on its performance in the first five months of the year at the annual general meeting in June, it said its revenue had risen 1.2% to
Richards noted that
"All in all, 2014 looks likely to be another demanding year, as a strong pound and weak faster growth market currencies continue to take their toll on our reported results, but if budgets and quarter one revised forecasts are met, 2014 will be another strong year," Chairman
Berenberg maintained its Sell rating on
Berenberg said that whilst it expects some improvement in
It noted that whilst the FIFA World Cup would be helpful in June and July, it faces tougher comparitives in the second half, and said it is had to see how it can beat consensus.
"Given that WPP’s definition of like-for-like growth is pro-forma, rather than organic (the figures are compared with what they would have been last year, had acquisitions during the period been consolidated at that time) and as we do not know the phasing of acquisitions, or their relative size, it is hard to take a firm view that there has been a material “organic” improvement," Berenberg said.
"It would be possible to report accelerating pro-forma growth were acquisitions more sizeable in April and May, and of faster growing assets," the investment bank added.
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