Advertising giant WPP (WPP) is down 1.5% to £16.96 as a first quarter update reveals slowing sales following the loss of major accounts with telecoms giant AT&T and car manufacturer Volkswagen.
The share price is now down more than 10% since the company announced a lukewarm set of full year results on 3 March.
Like-for-like net sales growth for the first three months of 2017 is 0.8% against a consensus forecast for 1%. North America was comfortably the worst performing region, down 1.1% thanks to the account losses. Elsewhere business is robust with Western Continental Europe up 4.3%, the UK up 3.7% and the Rest of the World flat.
The company is sticking with its full year guidance for group sales growth of 2% as it expects conditions to recover in the US. Liberum analyst Ian Whittaker notes the US CEO Business Roundtable survey, which has proven a good three to six month lead indicator for agencies' organic revenue growth, is pointing to a stronger second half.
KNOCKING THE COMPETITION
Chief executive Martin Sorrell’s accompanying comments, always worth a read, are interesting in light of the account losses.
‘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, heavily reduced creative and media fees, extended payment terms, unlimited indirect liability for intellectual property liability and cash or pricing guarantees for media purchasing commitments, even though the latter are difficult for procurement departments to measure and monitor.
‘As some say, you are only as strong as your weakest competitor.’
We plan to take an in-depth look at WPP in our Under the Bonnet section in the near future.
