WPP shares crash 10% as world’s biggest advertising company issues growth warning

Advertising companies are being hit as their biggest clients — who face low global economic growth and technological disruption — increasingly focus on cost-cutting

Joe Mayes
Wednesday 23 August 2017 18:04 BST
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'For the short-term, we have to weather the storm,' chief executive Martin Sorrell said in a statement
'For the short-term, we have to weather the storm,' chief executive Martin Sorrell said in a statement (Getty)

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WPP shares saw their biggest drop in 17 years after the world’s largest advertising company cut its full-year revenue forecast amid lower spending by customers, in particular consumer-goods manufacturers.

The stock fell 10 per cent on Wednesday after WPP said like-for-like revenue growth is expected to be between zero and 1 per cent in 2017. That’s down from an earlier 2 per cent forecast.

Advertising companies worldwide are being hit as their biggest clients – who face low global economic growth and technological disruption – increasingly focus on cost-cutting to preserve margins. London-based WPP singled out ad spending on consumer goods – items such as laundry detergent and toothpaste, which make up about one-third of its revenue – as coming under particular pressure.

Consumer goods giant Unilever, one of WPP’s biggest customers, said earlier this year it was reducing the number of ads it makes by 30 per cent and that it would halve the number of creative agencies it works with to 1,500 from 3,000.

“In the last year or so, growth has become even more difficult to find,” chief executive Martin Sorrell said in a statement. “For the short-term, we have to weather the storm.”

The stock fell as low as 1,396p and was down 10 per cent to 1,434p when trading closed in London. Rival Publicis declined 3.1 per cent in Paris.

WPP, which also works for brands such as Ford and Marks and Spencer, had already seen its shares fall 12 per cent this year through Tuesday amid the difficult economic climate and pressure on its businesses in North America. In March, the stock had its biggest drop since the financial crisis when the company projected its initial 2 per cent growth forecast, the slowest pace since 2009.

In the second quarter, WPP’s like-for-like net sales fell 0.5 per cent with July declining 2.6 per cent, and North America and Western Continental Europe were the poorest performing regions.

“Some of the weakness was expected, however this is still an incremental disappointment,” Tamsin Garrity, an analyst at Jefferies Group, said in a research note.

WPP said that it didn’t experience any significant loss in revenue from clients or of data from a cyberattack it suffered in June. The attack took down WPP’s website and caused disruptions across businesses including the creative agency Ogilvy and Mather, a person familiar with the matter said at the time.

Bloomberg

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