Thursday 22 August 2019

Advertising giant WPP cuts forecast as global sales stall

WPP boss Martin Sorrell. Photo: Bloomberg
WPP boss Martin Sorrell. Photo: Bloomberg

Joe Mayes

WPP has cut its sales forecast for a second time in three months as clients further reduced marketing spending, adding to evidence of the advertising industry's distress.

The world's largest ad company said that sales growth excluding currency swings and takeovers is expected to be "broadly flat" in 2017. London-based WPP had previously lowered its growth forecast to between zero and 1pc.

WPP is having its worst year since the financial crisis, hit by some of its largest clients such as Procter & Gamble and Unilever scaling back advertising budgets.

Pressure from activist investors and companies struggling with disruption in their industries are the biggest contributors to reduced marketing spending, CEO Martin Sorrell said.

"There is an increasing focus on cost reduction," he said in a statement. "These conditions will probably continue, maybe at less stressful and lower levels after one-time reductions this year." The shares advanced less than 1pc to 1,305 pence at 9:31am in London, after falling as much as 2.7pc.

In August, the stock had its biggest slump in 17 years after WPP slashed its full-year net sales growth forecast from 2pc. The shares had already declined 29pc this year .

"It's tough, but we're not talking meltdown," said Sarah Simon, an analyst at Berenberg. "It's continuing the trend."

Troubles for WPP, which also works for brands such as Ford and Marks & Spencer, have been replicated across the advertising industry. Competitors Publicis Groupe, Interpublic Group and Omnicom all reported falling third-quarter revenue this month, leaving their stocks down sharply on the year.

In addition to cost-cutting by clients, rising competition from consulting firms and the trend of advertisers increasingly working directly with the likes of Facebook and Google on their digital marketing is putting agencies under pressure, said Paul Sweeney, an analyst at Bloomberg Intelligence.

Agencies have seen particular pressure in their high-margin ad-space buying businesses, amid calls for greater transparency over fees charged and a trend of more advertisers doing media-buying in-house.

Sky is reviewing its £400m annual ad-placement budget, most of which is managed by WPP's Mediacom, and McDonald's is reviewing the $2bn it spends on media with Omnicom, according to a report by the Wall Street Journal. (Bloomberg)

Irish Independent

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