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WPP CEO: Russia sanctions will start to have an impact

U.K.-based advertising giant WPP reported strong sales at its Russian operations despite the geopolitical tensions playing out in the region but warned that Western sanctions will start to eat into profits in the second half of the year.

"As we go into the rest of the year obviously the sanctions will have an impact," Martin Sorrell, the CEO of WPP, told CNBC Tuesday. "The euro zone worries of last year have been replaced by geopolitical worries."

Martin Sorrell, chief executive officer of WPP, pauses during a session on the opening day of the World Economic Forum in Davos, Jan. 22, 2014.
Chris Ratcliffe | Bloomberg | Getty Images
Martin Sorrell, chief executive officer of WPP, pauses during a session on the opening day of the World Economic Forum in Davos, Jan. 22, 2014.

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Moscow has come under close scrutiny by Western nations in 2014 following the regime change in Ukraine and the annexation of Crimea by Russia back in March. Pro-Russian rebels continue to fight in fierce battles against Ukrainian forces in the east of Ukraine and Russia has been accused of aiding those separatists. Economic and trade penalties have been announced by the U.S. and the European Union while Moscow has countered with sanctions of its own.

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Sorrell was bullish on Russia at the beginning of the year, telling CNBC in January that it had a very healthy future with the Winter Olympics in Sochi and the World Cup in 2018 ahead. He added that his company was making significant investments in Russia and was looking to invest more in the country. Around 3 percent of the company's revenues come from Russia, according to Sorrell, who decided to issue the warning despite the region delivering strong results for the first six months of the year.

WPP, the world's biggest advertising firm by revenue, reported first-half sales of £5.469 billion ($9.07 billion) on Tuesday morning, an increase of 2.7 percent in sterling from the same period last year. Pretax profit came in at £532 million for the first half.

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Sorrell added that the U.K. market was also performing strongly despite currency headwinds and he also saw promising growth in central eastern markets like Poland and the Czech Republic.

Shares of the company were trading higher by 2 percent at the session open on Tuesday with analysts at Citi describing the results as "decent" and reiterated its "neutral" position on the stock.

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