WPP boss admits 2017 ‘not a pretty year’ and sees further woes in 2018
Shares tumbled after it posted its first fall in net sales since 2009 and forecast revenues to remain under pressure in 2018.
WPP boss Sir Martin Sorrell has admitted 2017 was “not a pretty year” after the group revealed its worst result since the financial crisis and gave a gloomy outlook for the year ahead.
Shares tumbled 14% after it posted its first fall in net sales since 2009 – down 0.9% for 2017 – and forecast revenues to remain under pressure in 2018 after a “slow start” to the year.
The world’s biggest advertising agency is now ramping up plans to overhaul the business in a bid to simplify its structure and create a “unified WPP”.
Sir Martin said: “2017 for us was not a pretty year, with flat like-for-like, top-line growth, and operating margins and operating profits also flat, or up marginally.”
He added: “As our industry continues to undergo fundamental change, we are upping the pace of WPP’s development from a group of individual companies to a cohesive global team dedicated to the core purpose of driving growth for clients.”
The group reported a 5.4% rise in underlying pre-tax profits to £2.1 billion for 2017 – but this was a rise of just 1.9% with currency movements stripped out.
WPP said underlying like-for-like revenues had fallen 1.2% in January albeit ahead of budget, but forecast no growth in its top line for the year ahead.
Sir Martin blamed the “short-term focus of zero-based budgeters, activist investors and private equity” for encouraging a cut back in advertising spend, rather than any disruption from technology giants such as Google and Facebook.
This has increased the need for WPP’s structural overhaul, he said.
The slowdown in advertising spend has affected the wider marketing sector, with rivals such as Omnicom and France’s Publicis Groupe also posting lacklustre sales growth.
Richard Hunter, head of markets at Interactive Investor, said: “WPP’s reputation as a market darling has been tarnished of late, although the company is clearly working hard to restore some of the sheen.”
He added: “Even before today’s harsh mauling, the shares had fallen 27% over the last year, as compared to a 2% dip for the wider FTSE 100, and for the moment clouds on the horizon prevail.”
WPP’s results showed that despite a worse-than-expected fourth quarter, net sales rose 9.1% in the UK.
Elsewhere, net sales were down 3.4% in North America, 2.6% in Western Continental Europe and 3% in Asia Pacific over the quarter.