Shares in ad giant WPP tumbled by 10pc, wiping £2bn from the firm’s market value, as it warned 2017 will be the worst year for advertising in a decade.
Sir Martin Sorrell was forced to cut full-year growth forecasts for the second time, blaming a fall in advertising spend by consumer goods companies and “digital disruption”.
But he cautioned the ad sector as a whole was suffering.
“If you look at the results - five of the top six have reported - all of the groups have seen a slowdown in top line growth,” he said.
“Look at packaged (consumer) goods. Any growth they’re getting is from price, very little is from volume. Very few clients are increasing spend and that’s a problem.”
Whilst Trumponomics may well have resulted in an increase in the United States GDP growth rate… the limitations seem to be jeopardising what was promised
Sir Martin Sorrell
Sir Martin’s comments are likely to raise concerns about the health of the global economy, with discretionary ad spending seen as a key barometer.
But he predicted the slowdown would be shortlived: “I think it will turn. Companies are saying they’ll start picking up spending soon.”
Poor trading in the US and Western Europe spoiled better sales in emerging markets and digital.
Sir Martin - one of the UK’s best paid businessmen, who made £48m last year - said the “volatile” political situation in the US was a headwind.
He told investors: “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.”
WPP 1-year share price
The UK was “ironically” WPP’s best region, Sir Martin said, commenting that Brexit uncertainty may even have played into his business’ hands.
Net sales in WPP's home market grew 4pc in the second quarter to £417m
“Fixed capital is under a bit of pressure, so they may think it is better to invest in brand to stimulate the top line growth,” he said.
However WPP is also upping investment in France, Germany, Italy and Spain on mainland Europe in response to Brexit.
“They are four of our top ten markets and we don’t want to lose influence there,” he said.
The company cut its full-year growth forecast for revenues and net sales to between zero and 1pc, down from a March forecast of 2pc, itself revised down from an earlier expectation of 3pc.
Net sales in the first half were down 0.5pc to £6.3bn, well down on analysts’ expectations of 0.7pc growth.
WPP said a cyber attack in June had not affected revenue or its data and could not be blamed for the slowdown.