WPP rows back revenue expectations as advertisers curtail budgets

The world’s largest advertising company has been forced to dial down its revenue expectations amidst a dawning new reality that full-year organic net sales and profit margins will once again fall short of predictions – just two months after the last downgrade.

WPP win at Cannes

The latest WPP declines have been attributed by CEO Martin Sorrell to the damaging loss of both the VW and AT&T accounts in the US as well as an erosion in spending power among consumer goods giants such as Unilever and Procter & Gamble.

The cumulative effect of these blows has been to pummel WPP’s underlying revenue growth which is now at its most anemic since 2009; amidst the depths of the financial crisis, with like-for-like sales growth now predicted to stagnate, reversing prior expectations of an increase of up to 1%.

To compound the misery the operating margin of WPP’s headline net sales figure is also now expected to flatline, a slip from the 0.3 point improvement predicted just weeks ago.

It wasn’t all bad news for the firm however as like-for-like net sales fell by a lower than anticipated 1.1% in the third quarter, a marked uptick on the 1.7% fall registered in the second quarter and ahead of market expectations of a 1.4% decline.

The United Kingdom also proven to be a bright spot with the country proving to be WPP’s strongest performing region over the accounting period with like-for-like growth of 1.8%.

Chris Daly, chief executive for the Chartered Institute of Marketing, commented on the results, by focusing on the potential of Brexit to the industry: “Brexit is the greatest challenge that business faces, and the greatest opportunity for the marketing community to showcase its business value.

"Despite the turbulent economic climate, our members are telling us that they aren’t cutting back on marketing budgets.

"This is also in line with the latest IPA Bellwether report, which highlights that marketing spend is on the rise, despite falling confidence in company prospects.

"Our own research shows that marketing delivers a 19% return on investment and that 50% of UK marketers see Brexit as an opportunity rather than a threat. This is important because it is encouraging to see the marketing industry recognised as being a key element to unlocking business growth.”

WPP’s rapidly shrinking fortunes is the latest warning shot to advertising sector as companies adjust to an environment in which clients are seeking to row back on spending, with Publicisseparately reporting their its own woes in the form of weaker results than hoped.

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John Glenday

John Glenday is responsible for compiling The Drum's daily morning bulletin and ensuring that overnight breaking news is covered while you're still brushing your teeth. Can also make a mean cup of tea.

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