Global ad giant WPP has seen sees sales fall as “increasing social, political and economic volatility” lead to big consumer brands cut marketing spending.
Shares in advertising giant WPP have tumbled 12% in morning trading as it cut its annual revenue forecast for the second time this year after consumer goods giants cut marketing spending and demand in the US saw a deepening decline.
It also pointed to worries over whether a weakened Donald Trump could enact tax reform and infrastructure plans, as well as highlighting the UK election result as it pointed to “increasing social, political and economic volatility”.
Chief executive Sir Martin Sorrell warned of the “cancer” of uncertainty around Brexit – though the company’s UK arm outperformed the rest of the group in WPP’s interim results, with sales growth accelerating.
Pre-tax profits for the half year, stripping out one-off items, rose 15% to £793m and revenues rose 13% to £7.4bn, though much of the increase was down to the collapse in the pound – increasing the value of foreign currency when translated into sterling – and the impact of acquisitions.
Like-for-like net sales, which had grown 0.8% in the first three months of the year, fell 1.7% in the second quarter leaving them 0.5% lower for the first six months of 2017.
WPP said the decline had worsened in July with a fall of 2.6% compared to the same month last year.
The group cut its full-year sales growth target to between 0% and 1%, down from 2% – having already cut its forecast previously, in March.
It said: “After another record year in 2016, the group’s performance in the first seven months of the new financial year has been much tougher, as worldwide GDP growth… seems to have slowed.
“In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility, for example with the rise of populism typified by surprise election results in the United Kingdom and the United States.
“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.”
Sir Martin said the weakest performing region was the US, while among sectors, consumer goods clients were being squeezed under pressure from activist investors to cut costs.
WPP said a cyberattack in June had not affected revenue or its data and could not be blamed for the slowdown.