WPP trims full-year revenue forecast as consumer goods demand wanes

● But analysts point to group’s strengths including vast international footprint

Advertising giant WPP has cut its full-year revenue forecasts after slowing demand from consumer goods firms in the second quarter dented its interim performance.

The group yesterday posted a 1.9 per cent rise in revenue to £7.4 billion in the first six months of the year, but like-for-like net sales fell 0.5 per cent. WPP, headed up by Sir Martin Sorrell, said it saw pressure on client spending in the second quarter, particularly in the fast-moving consumer goods sector.

As a result, the group forecasts that full-year like-forlike revenue and net sales will come in between zero and 1 per cent growth. It had previously pencilled in 2 per cent growth.

Current trading is also challenging, WPP added, with all regions – except the United Kingdom, Latin America and Central & Eastern Europe – showing lower revenue in July compared with the same month in 2016.

The company said “all sectors were down”, with advertising and media investment management and data investment management the most affected. WPP, which saw its shares take a tumble, told investors: “Competition is fierce and as image in trade magazines, in particular, is crucial to many, account wins at any cost are paramount.

“There have been several examples recently of major groups being prepared to offer clients up-front discounts as an inducement to renew contracts.”

Pre-tax profit rose more than 52 per cent to £779 million in the period.

The firm said that new business wins and increased client spending should aid revenue in the second half of this year as well as into 2018, buoyed by events such as the Russian World Cup and US mid-term Congressional elections.

Steve Clayton, manager of Hargreaves Lansdown’s HL Select UK Growth Shares fund, which holds a 3.2 per cent weighting in WPP, said: “Forecasts will inevitably be trimmed to reflect the new guidance but we don’t expect to see the numbers move by much overall. It is hard going for all players in media-land at the moment; clients are keeping a tight lid on spending and procurementdepartmentsare ruthless in the way they push agencies to lower prices.”

Shore Capital analyst Roddy Davidson noted: “We are positive on many of WPP’S underlying attractions including the strength and quality of its operations and brands [and] extensive international footprint. However, deteriorating trading conditions are a concern.”