Media

Ad group WPP cuts sales forecast on weak client demand

Shares dive 12% as world’s largest advertising group misses half-year targets

Led by the high profile businessman Martin Sorrell, WPP said it had been hit in June and July as the likes of Unilever, Nestle and others cut their spending, while demand in the United States deteriorated further, in line with peers. Photograph: Jonathan Brady/PA Wire
Led by the high profile businessman Martin Sorrell, WPP said it had been hit in June and July as the likes of Unilever, Nestle and others cut their spending, while demand in the United States deteriorated further, in line with peers. Photograph: Jonathan Brady/PA Wire
Wed Aug 23 2017 - 09:32

WPP, the world's largest advertising group, cut its full-year sales target on Wednesday after consumer goods giants slashed their spending, forcing it to miss half-year targets and sending its shares tumbling.

Led by the high profile businessman Martin Sorrell, WPP said it had been hit in June and July as the likes of Unilever, Nestle and others cut their spending, while demand in the United States deteriorated further, in line with peers.

As a result, the London-based group reported first-half like-for-like net sales down 0.5 per cent, below a consensus of 0.7 per cent growth. It cut its full-year underlying net sales target to between 0 and 1 per cent growth, from a previous forecast of 2 per cent growth. Its shares fell 12 per cent in early trading.

“July was weak, June was tough,” Sorrell said. “The weakest part was the US. [And in terms of categories], we have activist investors in consumer goods groups putting pressure on companies to perform.”

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Despite the slowdown in the top line, tight cost controls helped the group to reiterate its target for a 0.3 point improvement in its operating margin. “All regions, except the United Kingdom, Latin America and Central and eastern Europe showed lower revenue than the prior year and all sectors were down,” it said.

Rattled

WPP rattled investors in March when it cut its 2017 sales forecast, citing an ultra competitive environment in which rivals were having to scrap for every dollar of ad spend.

From 3.1 per cent net sales growth in 2016, WPP had set a 2017 target of 2 per cent to reflect “tepid” economic growth and weaker net new business trends, before it cut it again on Wednesday. The group has seen a particular slowdown in the US, in line with the other major ad groups, where underlying net sales fell by 2.2 per cent in the first half of the year.

Consumer goods group have also been on a quest to cut costs as growth has slowed, with activist investors and a failed takeover attempt at client Unilever shaking up the industry and forcing companies to rethink how they spend.

WPP said a cyber attack in June had not affected revenue or its data and could not be blamed for the slowdown.

Reuters