WPP must “weather the storm”

The downgraded guidance cast a shadow over WPP’s results. That said, statutory revenues and pre-tax profits both grew significantly in the first half, and the operating margin rose by 131 basis points to 9.8 per cent. But, in July, all regions except the UK, Latin America and central and eastern Europe saw reduced revenue, while all sectors were down. Data investment management, and advertising and media investment management suffered the most. The UK fared best in terms of sales growth at constant currencies in the first half, up 5.6 per cent. North America, meanwhile, delivered the worst performance, with flat constant-currency revenues despite a boost from acquisitions. Overall, group like-for-like revenues were down 0.3 per cent.

Net debt grew by 10 per cent to £4.67bn, partly driven by the weak pound and the debt acquired through the merger of most of WPP’s Australian and New Zealand assets with STW Communications Group, not to mention the period's buybacks, dividends payouts and acquisitions. In total, the group undertook 23 transactions, with eight further acquisitions and investments made after the period end.

Chief executive Sir Martin Sorrell delivered his usual macroeconomic outlook, citing negligible inflation in a slower growth world as a driver of reduced client spending. The fee-cutting practices of some competitors “cannot last”, Mr Sorrell said, warning that media agencies risk becoming "a cost... rather than an investment”. On the potential threat of digital marketing growth, Mr Sorrell notes that digital now constitutes 41 per cent of the group’s revenues; its top customers include tech giants Google and Facebook. For now, WPP must “weather the storm” of client spending pressures, he said.

Analysts at Numis forecast pre-tax profits of £2.10bn and EPS of 120p for 2017, up from £1.99bn and 113p in 2016.