WPP value crashes £2.2bn as Sorrell warns of worst year for advertising in a decade

SHARES in ad giant WPP tumbled by 11pc, wiping £2.2bn from the firm’s market value yesterday, as it warned 2017 would be the worst year for advertising in a decade.

Sir Martin Sorrell, the chief executive officer, was forced to cut full-year growth forecasts for the second time, blaming a fall in advertising spend by consumer goods companies and “digital disruption”.

But he said the ad sector as a whole was suffering. “If you look at the results – five of the top six have reported – all of the groups have seen a slowdown in top line growth,” he said.

“Look at packaged (consumer) goods. Any growth they’re getting is from price, very little is from volume. Very few clients are increasing spend and that’s a problem.”

Sir Martin’s comments are likely to raise concerns about the health of the global economy, with discretionary ad spending seen as a key barometer. But he predicted the slowdown would be short-lived: “I think it will turn. Companies are saying they’ll start picking up spending soon.”

Poor trading in the US and western Europe spoiled better sales in emerging markets and digital.

Sir Martin, one of the UK’S best-paid businessmen, who made £48m last year, said the “volatile” political situation in the US was a headwind. He told investors: “Whilst Trumponomics may well have resulted in an increase in the United States GDP growth rate... the limitations of the new administration seem to be jeopardising the anti-regulatory, infrastructure and tax reduction programme that was promised.”

The UK was “ironically” WPP’S best region, Sir Martin said, commenting that Brexit uncertainty may even have played into his business’s hands.

Net sales in WPP’S home market grew 4pc in the second quarter to £417m. “Fixed capital is under a bit of pressure, so they may think it is better to invest in brand to stimulate the top line growth,” he said. However, WPP is also upping investment in France, Germany, Italy and Spain in response to Brexit. “They are four of our top 10 markets and we don’t want to lose influence there,” he said.

The company cut its full-year growth forecast for revenues and net sales to between zero and 1pc, down from a March forecast of 2pc, itself revised down from an expectation of 3pc. Net sales in the first half were down 0.5pc to £6.3bn, well down on analysts’ expectations of 0.7pc growth.

WPP said a cyber attack in June had not affected revenue or its data and could not be blamed for the slowdown.

Sir Martin said that while the big Silicon Valley firms had disrupted the advertising space, he saw it “as an opportunity for us”, adding: “We understand our consumers are changing their consumption of media.”

He also said the firm would look to expand its data business and learn to discover ever more information about consumers. “As digital becomes more important, control of data becomes more important,” he said.

He also warned the Government against onerous restrictions on movement across Europe, pointing out 17pc of his workforce, about 15,000 people, come from the EU.

WPP shares closed 11pc down at £14.20. The company’s market value ended the day at £18bn.