WPP shares dropped 3% this morning, after the advertising group lowered its forecast for full-year revenue growth due to a slowdown in June and July.
The world's largest marketing and advertising services group posted a 3.6% increase in like-for-like revenue in the first half to £4.97bn. That means business slowed in the second quarter, after growth of 4% in the first. As a result, WPP said slightly lowered its full-year forecast from 4% to 3.5%.
Crucially, WPP's North American business – which is its biggest market, accounting for almost 38% of total revenues – went into reverse in the second quarter with like-for-like revenues down 0.6% to £884m.
Growth in western continental Europe also slowed in the second quarter to just 0.8%, dragged down by lagging markets including Spain, Portugal, Greece and Ireland. But the UK business – which accounts for almost 12% of total revenues – improved performance across the first half. Like-for-like revenue growth was 3.5% in the second quarter, thanks to its media planning and buying operation, Hogarth and Ogilvy.
The rest of the world – which covers Latin America, India, China, and Africa and accounts for 29% of WPP's total revenues – was a powerhouse of growth with like-for-like revenues up 9.8% to £765m in the second quarter.
Ian Whittaker at Liberum Capital, who maintained a buy recommendation on the shares, said:
The slowdown in [second quarter] revenues is due to softness in North America and the weakness in some European markets. Although, faster growing markets are still growing at double digit pace. Consequently the guidance for revenues for the full year has been reduced slightly from 4% to 3.5% and margin guidance of +50bps for the year reiterated which we feel is conservative.
The shares, which fell 24p to 807.5p, dragged on the blue-chip index, which was down 10 points, or 0.2% in early trade at 5733 points.
