Economy

WPP cut its forecast as advertisers tighten their belts

WPP cut its forecast as advertisers tighten their belts”

WPP PLC (WPP.LN) reported Tuesday a 1.1% rise in turnover for the third quarter of the year, and said it expects like-for-like revenue and net sales growth to be broadly flat for the year as a whole.

WPP blamed the "new normal of a low growth, low inflation, limited pricing power world" that has prompted firms to reduce costs.

He told the BBC the low growth environment was leading clients to keep a tight control on spending: "Consultants are going to clients and suggesting they're spending too much money across the board".

Dominated by the big four groups of WPP, Omnicom, Publicis and IPG, the global advertising industry has been facing fierce competition and rapid change on a number of fronts. The vast majority of WPP's revenues are from outside the UK.

"Any further marketing investment reduction may well be countered by the mini-quadrennial events of 2018 - the Winter Olympics in South Korea; the FIFA World Cup in Russian Federation; and the mid-term Congressional elections in the United States".

Net sales fell by 4.9% in North America.

Net sales for the third quarter grew 2.4 percent from the prior-year period to 3.19 billion pounds.

Rival groups reported have disappointed growth in the third quarter earlier this month, sending shares in all the big ad groups sliding.

Shares fell 0.69% to 1,288p in morning trading.

However, WPP is still facing its weakest underlying revenue growth since the financial crash in 2009, and its shares were down nearly 30 percent this year before Tuesday's update.

On Tuesday the group said it now expected like-for-like net sales growth to come in flat.

Paul Richards, an analyst at Numis Securities, said: "After soft Q3 results from its peers, we believe the market was braced for a challenging quarter for WPP and we expect there will be some relief on revenue trends".



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