WPP shares took a tumble this morning after the advertising group unveiled a dip in like-for-like sales and a gloomy outlook in its first half results.
The stock dropped by more than 11 per cent at one point this morning after the firm revealed a further cut to its full year growth forecasts, blaming pressure on clients.
The company said: "In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility. In this world, it is, perhaps, not surprising that clients have reduced spending."
This is what City analysts are saying:
Down but not out
"Life is getting tougher in the media world, with WPP experiencing a slowdown in trading in June and July, spread across much of the world and in many different media sectors," said Hargreaves Lansdown's Steve Clayton.
He added that there is still reason to be cheerful at WPP: "The group has had a very strong new business winning performance in the first half. This gives the group some momentum going into what would otherwise be a difficult near term outlook. As it is, comparatives for the second half and beyond should get easier from here.
"Forecasts will inevitably be trimmed to reflect the new guidance but we don’t expect to see the numbers move by much overall. It is hard going for all players in media-land at the moment; clients are keeping a tight lid on spending and procurement departments are ruthless in the way they push agencies to lower prices."
Trading conditions are a concern
Roddy Davidson at Shore Capital took a similar view.
"We are positive on many of WPP’s underlying attractions including: the strength and quality of its operations and brands, its extensive international footprint, record of innovation and new business wins, its cost focus, and its overweight exposure versus its peers to digital and less well-developed regions," he said.
"However deteriorating trading conditions are a concern and on a first past basis we are minded to trim our full year profit before tax forecasts by four to five per cent to reflect the weaker outlook."