WPP cuts revenue forecasts amid pressure on client spending
23 August 2017
WPP has cut its full-year revenue forecasts after slowing demand from consumer goods firms in the second quarter dented its interim performance.
The advertising giant posted a 1.9% rise in revenue to £7.4 billion in the first six months of the year, but like-for-like net sales fell 0.5%.
The company, headed up by Sir Martin Sorrell, said it saw pressure on client spending in the second quarter, particularly in the fast-moving consumer goods sector.
As a result, WPP forecasts that full-year like-for-like revenue and net sales will come in between zero and 1% growth.
It had previously pencilled in 2% growth.
Current trading is also challenging, WPP added, with all regions – except the United Kingdom, Latin America and Central & Eastern Europe – showing lower revenue in July compared with the same month in 2016.
The company said “all sectors were down”, with advertising and media investment management and data investment management the most affected.
WPP said: “Competition is fierce and as image in trade magazines, in particular, is crucial to many, account wins at any cost are paramount.
“There have been several examples recently of major groups being prepared to offer clients up-front discounts as an inducement to renew contracts.”
Pre-tax profit rose more than 52% to £779 million in the period.
Shares in WPP tumbled 10% in early morning trading to 1,438p as investors digested the news.
Tamsin Garrity, equity analyst at Jefferies, said the trading update was “disappointing”, adding: “With the shares minus 15% over the past six months, some of the weakness was expected; however, this is still an incremental disappointment and we would expect to see weakness today.”