WPP, the world's largest advertising group, has cut its full-year sales target after consumer goods giants slashed their spending, forcing it to miss half-year targets and sending its shares tumbling. Ivor Bennett reports.
Products like Marmite have helped WPP to become the largest advertising group in the world. A third of its client base are consumer giants like Marmite owner Unilever but that also means it's the kind of portfolio that can turn sour, should those clients suddenly slash spending. SOUNDBITE (English) SIR MARTIN SORRELL, CEO, WPP, SAYING: "With central bank policy being very focused on lowering interest rates and providing a lower cost of capital, investors, activist investors in particular can take positions in companies and pressurise management to reduce costs in the short term and improve performance." Confectionary king Nestle has also cut back on ad spending. While demand in the US melted away further, prompting WPP's first-half sales to drop 0.5 percent. SOUNDBITE (English) CRAIG ERLAM, SENIOR MARKET ANALYST, OANDA, SAYING: "Companies are looking at better ways to spend their money and to wind down their spending. So these results don't come as a huge surprise to me. I think people are a little bit concerned about how long the company's taking to find other ways to plug the gap." A little concern soon became a lot, with WPP's shares falling as much as 12 percent in early trading. But for CEO Sorrell, the bigger concern is Brexit. SOUNDBITE (English) SIR MARTIN SORRELL, CEO, WPP, SAYING: "The uncertainty is the killer. That's the sort of cancer, the problem that we have to deal with." For now, Sorrell says UK business is strong But clearly not strong enough to offset the weakness elsewhere. The results saw WPP more than halve its 2017 growth target, to between 0 and 1 percent.