WPP Plc, the world’s biggest advertising agency, cut its full-year sales growth forecast as clients in North America and continental Europe reduced spending. The stock dropped the most since October 2011.
Sales excluding the impact of acquisitions and currency fluctuations will grow “close to 3.5 percent” this year versus an earlier forecast of 4 percent, the owner of the Ogilvy & Mather and Grey Group ad agencies said in a statement today.
Chief Executive Officer Martin Sorrell has been acquiring digital advertising assets and companies in developing markets such as China and Brazil to make up for effects of the European debt crisis. Revenue in Western Europe dropped 3 percent in the second quarter. The Dublin-based company said 2013 would be “more challenging” in the absence of a major event such as the Olympics or U.S. Presidential election to boost spending.
“We’re in a difficult client spending environment,” Will Smith, an analyst at Jefferies in London, said in an interview. “They’ve turned many acquisitions but it shows the industry is having a difficult time finding growth.”
WPP declined as much as 5.1 percent to 789.5 pence and was down 4.6 percent as of 8:19 a.m. Before today, the stock had risen 23 percent this year, while Britain’s FTSE 100 benchmark index gained 3.1 percent.
Organic sales rose 3.6 percent in the first half while Smith had forecast 4 percent. Total sales increased 5.5 percent to 4.97 billion pounds ($7.9 billion), compared with an analyst forecast for 5 billion pounds in a Bloomberg survey.
“We’re seeing pretty much the same as we saw in 2011, but the growth rate is slightly less,” Sorrell said in an interview with Bloomberg Television today. “2013 we are a bit cautious about with no quadrennial events but 2014 should be better.”
Earnings before interest, taxes, depreciation and amortization rose 10 percent to 682 million pounds in the first half. WPP said billings in the period totalled 21.7 billion pounds, an increase of 1.2 percent. The company increased its first-half dividend by 18 percent to 8.80 pence a share.
Sorrell said in March he planned to spent 300 million to 400 million pounds on acquisitions this year. WPP last year bought almost three dozen companies or units and in the first half of this year made 40 acquisitions, the company said today.
WPP advertising researcher GroupM last month cut its forecast for worldwide ad growth in 2012 to 5.1 percent from 6.3 percent, citing a decline in ad investment of 8.8 percent in Greece, Ireland, Italy, Portugal and Spain. Ad spending in the U.S. is predicted to grow 3.6 percent, from a 4 percent forecast late last year, the researcher said at the time.
WPP’s French rival Publicis Groupe SA said in July its organic revenue rose 2.8 percent.