By Paul Sandle
LONDON (Reuters) - WPP (L:WPP), the world's largest advertising company, reported stronger than expected profit growth on Tuesday and its founder said clients were growing more confident about their business prospects.
Martin Sorrell said business was very strong in Russia in the first half of 2014, but he expected it to weaken in the second half as Western sanctions against Moscow over the conflict in Ukraine start to bite.
He said the situation in Ukraine and the impact of the West's stand-off with Russia had replaced the health of the euro zone as the major geopolitical worry.
"Anxiety is heightened so it will make clients more cautious," he said in an interview on Tuesday. "It's very difficult to see a way through these current problems between Russia and the rest of the world over Ukraine."
But those concerns were outweighed by a small improvement in the global economy, which was encouraging companies to spend more of their ample cash reserves.
WPP reaffirmed its sales growth and profitability targets for the year.
Its shares were trading up 1.6 percent at 1,247 pence at 08:35 AM BST after earlier hitting a seven-week high of 1,269 pence.
Sorrell has built WPP into the world number one by acquiring companies in the fast-growing digital advertising sector, and was a step ahead of rivals in moving aggressively into faster growing markets in the Asia-Pacific region and elsewhere.
It has also benefited from a failed merger attempt by rivals Omnicom (N:OMC) and Publicis (PA:PUBP) - Sorrell says his agencies picked up clients and staff from the two companies while they were wrapped up in the details of the alliance.
WPP posted adjusted pretax profit of 532 million pounds, up 1.5 percent on a constant-currency basis. Analysts had expected pretax profit of 521 million pounds. Organic revenue grew 4.1 percent.
Sorrell said like-for-like revenue grew in all markets, with the United States, Britain and Asia Pacific strong, helped by growing demand for digital advertising.
Organic net sales in the second quarter rose 4.4 percent, an improvement on 3.8 percent in the first quarter. Sorrell said growth for the year would be "well over" 3 percent. The group had previously guided for growth of at least 3 percent.
Analysts at Numis, who have an "add" recommendation on WPP, said the results were slightly ahead of their expectations, but left their full-year profit forecast unchanged at 1.49 billion pounds due to the impact of currency swings on profit margins.
WPP, which employs nearly 180,000 people, said its net sales margin for the first half was 13.0 percent. That was in line with its full-year target of a 0.3 percentage point improvement.
(Editing by Tom Pfeiffer)