Transcript: Martin Sorrell interview
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LONDON, England (CNN) -- WPP Group, the world's second-biggest advertising and marketing company, said on Friday its first-half pretax profit climbed almost 30 percent to £287 million ($544.1 million.) And the company says it is meeting targets and remains optimistic about the trading outlook for the rest of the year despite a sharp advertising downturn in the company's home market in the UK. Martin Sorrell, Chief Executive of WPP, spoke to CNN's Charles Hodson. The following is a transcript of their conversation:
Q. Now, your organic growth of course which is the key thing, that's the, for the light growth is actually rosily modest at 5 Percent. Are you happy with that number?
A. Yes, good morning Charles. I think we are actually. We saw growth of about 4-and-a-half percent in the first five months. June was a very strong month, about 7 percent. It continued into the second half of the year in July with light growth going up almost 5 percent. So I think we are pretty pleased with that and I'd say we're very pleased with the results as a whole in terms of the growth that you've seen. Most of the lines whether they'd be revenue or profit were up 20, 25 percent. Earnings per share up 20 percent. Dividends up 20 percent. So it's strong growth across the board.
Q. Looking beyond the financials, do you feel that you've done as well as you might have expected out of major sporting events such as the World Cup?
A. Sorrel: Well I think the World Cup was a good event. And I think, came in for some criticism, but we saw a search in Germany, we saw a little bit better operations in terms of France, Italy. Maybe Italy could have been even stronger given Italy's success in the World Cup. Spain, not that fairly early, but we saw for example "La Sexta," the channel they launched, on the back of the World Cup. So all in all I think the World Cup was a pretty good event and we saw a significant interest in Asia, particularly in China. The World Cup packages there sold out very very quickly. So all in all I think good. And what we will see in South Africa in 2010, indeed in Africa, that will be a major event. Not of Beijing proportions or Chinese proportions in 2008, but a very strong event for the African subcontinent.
Q. So let's look at the more immediate future because that is looking a little bit tougher, certainly in terms of the position in the European economies. Germany is okay, but some of them are looking as if they may be heading for a hard landing. We see a little bit of weakening in the United States economy as well. Are you worried about the economic situation, do you see a bit of a headwind there for you?
A. No, no obviously the U.S. is critical, but as I've said previously, we've not seen any signs of deterioration in the U.S. If anything we saw a sort of a strengthening in June, and July was a reasonable month. So we haven't seen signs of that. Obviously the U.S. is critical ... and 2007 will be a good year in our view as long as the U.S. remains in reasonable shape. You mentioned Europe, you can't put Europe into one sort of pot. It's really two halves. The Western part of Europe is relatively slower growth, the Eastern, central and Eastern part of Europe, Russia for example, is probably our fastest growing country in the world, growth rates of 35 percent compound light for light. So we see very strong growth in the Eastern part of Europe and we saw that very heavily in June for example. It's the Western part of Europe that gives us, I guess, the greatest areas of concern and unless there are structural changes and political changes in terms of policy over the coming years I think life will continue to be tough for Western Europe particularly competitively against Asia and Latin America.
Q. Let's look at the areas of your business, overseas beyond advertising there's public relations and public affairs. If you look at that area of your business, you can hear about 40 percent profit return there, that seems like quite strong. Is that an area in which you're going to expand further?
A. Yes. We think public relations, public affairs have been particularly strong. One of the interesting thing is that the new technologies, the blogs, the development of Web sites, the development of social networking sites, is really I think probably giving a new driver to public relations and public affairs. Paid-for publicity, it is known from research, is probably less effective than editorial publicity ... When you've seen what happened with Myspace, you've seen what's happened after Rupert Murdoch acquired Myspace. With Google, these are the sort of good examples. You've seen what we've done for example with Life World a few weeks ago where we've taken, developed a joint venture with Life World and taken more and some of their stocks. These are developing networking opportunities which are very interesting and I think are giving a new lease of life to the public relations, to the public affairs industry.
Q. Martin Sorrel, thank you very much.
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