WPP slashes guidance as tech sector tightens its belt

The business said that revenue would grow slower than previously expected this year, sending shares plummeting.

WPP said that it had suffered in the US and China (John Walton/PA) (PA Archive)

Advertising giant WPP slashed its revenue guidance for the year on Thursday as it warned that clients, especially in the technology sector, were being more cautious in their spending.

The business said that it expected revenue to grow just 0.5-1% on a like-for-like basis once pass through costs had been removed.

It had previously expected the measure to grow 1.5-3%.

It came after the company’s third quarter showed the measure of revenue down by 0.6%.

It grew in the UK, western continental Europe and the rest of the world business areas, but fell in North America and China.

The US drop was in no small part due to what WPP called “continued weakness” from clients in the technology sector.

“Our top-line performance in the third quarter was below our expectations and continued to be impacted by the cautious spending trends we saw in the second quarter, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half,” said chief executive Mark Read.

The outlook for margins was also slashed from 15% to 14.8-15% on Thursday, WPP told shareholders.

Shares dropped 4.8% after markets opened on Thursday morning.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: “Communications and advertising giant WPP’s engines have stalled again.

“Usually high-spending technology clients in North America have applied the brakes amid an uncertain economic backdrop.

“China’s also dragging performance down as the macro environment doesn’t lend itself to loose corporate spending.

“This has culminated in another reduction in full-year expectations.

“While seeing growth go into reverse isn’t ideal, it’s not wholly unexpected given that advertising activity is a clear-cut barometer of the economy.”