‘It’s tough’ says Sorrell as WPP slashes forecasts for third time
WPP disappointed investors again today, cutting forecasts for the third time this year and admitting sales are still falling.
The advertising giant said revenue was down 2% in the third quarter as big brand giants again cut spending. That 2% fall was worse than the 0.8% in the second quarter. It now expects zero sales growth for the full year, down from a range of 0% to 1%.
“It was a tough quarter,” admitted chief executive Sir Martin Sorrell.
A warning on sales in August alarmed the City, which has marked the shares down 30% this year. Today the stock fell another 19p to 1276p.
Berenberg analyst Sarah Simon, noted the poor performance in the US, where sales were down 4.9%. She said that “usually the company would buy its way out of trouble”, but the balance sheet is now too squeezed.
Sir Martin says Google and Facebook have “disrupted our industry” but are no longer “eating our lunch” since they are WPP’s largest destination for ads.
“The agency business is consolidating further,” he said. “Fragmentation is not there.”
Sir Martin complained once more about the “zero-based budgeting” that has seen relentless downward pressure on costs. He says 2018 will be better as big brands spend heavily for the Winter Olympics and the FIFA World Cup. Mid-term elections in the US will also be good for the ad market.
