Published On: Thu, Aug 24th, 2017

WPP shares plunge as boss slashes growth forecast

Corporate belt-tightening and Donald Trump’s faltering relations with US business leaders are clouding the business outlook, with the emergence of activist investors increasing the pressure on companies to cut marketing budgets.

This has hit sales at WPP, which has also accused rivals of unsustainable “win at any cost” contract inducements.

Its CEO, Sir Martin Sorrell, warned: “Our industry may be in danger of losing the plot.”

Shares in the FTSE 100 group, whose clients include Unilever and Ford, fell 174p to 1420p as it downgraded its growth forecast from two per cent to between zero and one per cent, putting it on course for its worst year since 2009.

Half-year pre-tax profit rose by 15 per cent to £793million on 13.3 per cent higher revenue of £7.4billion, but like-for-like net sales were down by 0.5 per cent and the pace of decline accelerated in July to minus 2.6 per cent.

The UK was its best performing market in the second quarter, with revenue up 5.8 per cent, but North American revenue fell 3 per cent.

Unilever has reduced its ad spending after fighting off a takeover bid from Kraft Heinz in February, while Procter & Gamble is also cutting back as it comes under pressure from billionaire activist investor Nelson Peltz.

Sir Martin said: “With limited pricing power there is considerable focus on cost by client financial and procurement functions. These trends have been increasingly reinforced by technological disruption, cheap money, activist investors and zero-based budgeting motels, which focus on short-term profitability and cost control.”

President Trump’s credentials have come under scrutiny after he disbanded two White House business advisory councils last week following his controversial remarks about violence in Charlottesville.

Sir Martin said: “While Trumponomics may well have resulted in an increase in the US GDP growth rate, the administration’s limitations seem to be jeopardising the anti-regulatory, infrastructure and tax reduction programme that was promised.

“Political uncertainties in Europe and the Middle East probably mean that stronger growth will be harder to find outside the US.”

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