WPP Quarterly Sales Growth Curbed by Slower U.K. Ad Spending

  • Company says North America drove organic sales growth of 3.3%
  • Shares declined as much as 3.2 percent in London trading

WPP Plc, the world’s largest ad agency, posted a 3.3 percent increase in third-quarter sales excluding the impact of acquisitions and currency fluctuations as growth from clients in North America was offset by slower expansion in the U.K.

Organic sales growth was lower than the 3.5 percent analysts had estimated, Numis said in a note to clients.

Customers were unwilling to take risks and focused on cost cutting amid geopolitical uncertainty and low inflation, WPP said in a statement Monday. The U.K. in particular is being affected by fears of a referendum on its European Union membership and uncertainty about how the country will address a budget deficit going into 2020 elections, WPP said.

Media spending is the “biggest line item,” for many clients, Chief Executive Officer Martin Sorrell said in an interview. “Very significant changes in the media landscape in terms of new media, fragmented media, have increased the complexity of the media investment decision. They’re examining how much they should spend and where they should spend it.”

WPP shares fell 1.4 percent to 1,459 pence in London trading at 9:35 a.m. after earlier dropping as much as 3.2 percent.

Organic sales growth in the U.K. was 2.2 percent in the quarter, the weakest regional performance, and 2.6 percent in the first nine months of the year. North America, the company’s largest business accounting for more than a third of sales, gained 3.7 percent in the quarter. Western continental Europe reported the highest growth on that measure, gaining 4.6 percent.

U.S. peers Omnicom Group Inc. and Interpublic Group of Companies Inc. posted organic sales growth of 6.1 percent and 7.1 percent respectively for last quarter.

Sorrell had warned in August that a “tsunami” of clients were reviewing accounts. The company said Monday that the results of those evaluations have been “highly satisfactory” with major retentions and wins and limited losses. French rival Publicis Groupe SA said last week that it had no growth last month as clients canceled and postponed campaigns.

WPP’s net new business in the first nine months of the year totaled 3.21 billion pounds ($4.9 billion). A year ago, the company reported 3.59 billion pounds in new business. Revenue rose to 2.93 billion pounds from 2.76 billion pounds, London-based WPP said.

The advertising industry came under increased scrutiny this month when the U.S. Association of National Advertisers announced it hired two consulting firms to investigate the way media-buying agencies bid for business and ad placement and spend clients’ money. The emergence of digital advertising has spawned “non-transparent” practices among media buyers as they shift away from traditional print and TV ad placements, according to the ANA.

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