WPP WPP PLC

By Nick Kostov 

WPP PLC Chief Executive Martin Sorrell is struggling to sustain revenue growth after losing two big-name accounts last year -- blaming belt tightening by advertisers and forecasting a sluggish 2017.

The world's largest advertising firm by sales, whose agencies include JWT and Ogilvy & Mather, on Friday reported its slowest quarter of revenue growth since 2012. It expects growth of only 2% this year.

Shares closed down almost 8% in London trading.

WPP said it hadn't lined up new business fast enough to make up for losing accounts with AT&T Inc. and Volkswagen AG, which together made up about 1% of the firm's overall revenue. Mr. Sorrell said advertisers are struggling with a low-growth, low-inflation environment, and some are contending with activist investors and industry-changing technological disruptions.

"Clients are generally grinding it out in a highly competitive ground game, rarely resorting to a passing game or Hail Marys," WPP said Friday, as it reported its full-year results.

WPP said profit for the year climbed 21% to GBP1.4 billion ($1.72 billion), while revenue rose 18% to GBP14.39 billion. The company raised its 2016 dividend to 56.6 pence from 44.69 pence.

Investors focused on the lower revenue-growth outlook.

For years, the advertising world has wrestled with the seismic shift from traditional advertising platforms, such as print and TV, to digital. More recently, the ad agencies have contended with major slowdowns in industries that they have long relied upon for growth.

Consumer-goods giants like Procter & Gamble Co., Nestle SA, Unilever PLC and Anheuser-Busch InBev NV have all struggled to boost growth amid a tepid global economy, cutthroat competition and fast-shifting consumer tastes.

"It's a tough space, and two of WPP's three biggest clients are having a tough time," said Paul Richards, an analyst at Numis, referring to P&G and Unilever. "If some of your biggest customers are having a tough time, then it's very hard to buck that trend."

At many big advertisers, all that has forced aggressive cost-cutting, driving down bids for advertising agencies, Mr. Sorrell said Friday.

"There is fierce agency competition giving rise to excessive discounting, " he said.

Global ad expenditure is poised to grow 3.6% in 2017, compared with 5.7% growth in 2016, according to a forecast from Magna Global, the ad-buying agency owned by Interpublic Group of Cos.

WPP's slowdown comes as its closest competitors face their own headwinds. Publicis Groupe SA is navigating a rare leadership transition in the wake of a failed merger with U.S. rival Omnicom Group Inc. Amid those distractions, the French firm has been stung by a series of lost accounts in North America.

Havas SA, meanwhile, is struggling with a slowdown in emerging markets.

Omnicom, which snatched AT&T and Volkswagen from WPP and entered 2017 with other new business, is suffering from the strong dollar and reported lower-than-expected revenue for its most recent quarter.

WPP said its like-for-like net sales -- a measure used to judge the company's underlying performance -- rose 1.2% in January compared with a year earlier. For the fourth quarter, like-for-like net sales expanded 2.1%, the slowest rate since the third quarter of 2012. All of WPP's regions slowed in the final three months of last year with the exception of emerging markets. Growth in those markets, accounting for a third of WPP's business, accelerated slightly.

In North America, like-for-like revenue dropped 2.8% in the final quarter of the year. Results for the U.K. were buoyed by the fall in the value of the pound since the country's vote to leave the European Union. WPP warned that prospects there were "mixed" as the post-Brexit vote scenarios play out over the next two years.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

March 04, 2017 02:47 ET (07:47 GMT)

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