Business

WPP warns on ‘tepid’ economic growth as profits jump

WPP warns on ‘tepid’ economic growth as profits jump

WPP, the advertising giant, warned that “tepid” economic growth could hit revenues.

The firm, which owns agencies including Ogilvy & Mather and Hill & Knowlton forecast 2% growth for 2017, compared with about 3% last year.

Pre-tax profit for 2016 was 13% higher, excluding swings in currency markets, at £1.89bn.

The gloomier outlook sent WPP shares down more than 6% to £17.98 in morning trading in London.

Chief executive Sir Martin Sorrell called on investors to have patience, saying in the earnings statement: “At a time when all external pressures seem to call for instant, short-term responses, an understanding of the value of confidence, consistency and continuity has never itself been more valuable.”

Clients trying to cut costs has made advertising very competitive, slimming margins, the company said.

Neil Wilson at ETX Capital said Brexit was a factor in WPP’s cautious outlook, along with political uncertainty in Europe.

“Currency tailwinds have delivered a big helping hand to revenues. These should fade by the second half of this year, which may in part be a reason for the caution,” he said.

The world’s four biggest advertising groups – WPP, Omnicom, Publicis and IPG – tend to track wider economic trends and WPP’s 2% growth forecast was below analysts’ expectations.

WPP’s rivals had already reported full-year results showing a mixed performance, with some citing pressures in North America.

The company, which employs more than 200,000 people in 113 countries, raised its final dividend by 28.7% and the total payout to investors by 26.7%.

courtesy:bbc.com

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