Arun Sudhaman 23 Aug 2017 // 8:50AM GMT
LONDON — Despite a significant slowdown, WPP's PR and public affairs firms which include H+K Strategies, Burson-Marsteller and Cohn & Wolfe, again outperformed the holding group's other units during Q2 of 2017, growing revenue by 0.6% on a like-for-like basis to £293m.
The results saw WPP cut its full-year revenue forecast amid a slowdown in client advertising spending. WPP shares slumped after it said like-for-like revenue growth is expected to be between zero and 1% in 2017, down from an earlier 2% forecast.
The company's largest unit, advertising and media investment, declined 0.6% on a like-for-like basis in Q2 to £1.8bn. Data investment management was down 4.6% while branding, healthcare and specialist communications grew by 0.1%.
For the first half of the year, PR & PA grew 2.4% on a like-for-like basis to £584m, representing a Q2 slowdown after expansion of 4.4% in Q1. WPP CEO Sir Martin Sorrell noted that "North America, Western Continental Europe and Asia Pacific" were slower, "but
the United Kingdom continued the strong growth seen in the first quarter with growth over 7%, with the Middle East also improving."
"Cohn & Wolfe and parts of the specialist public relations and public affairs businesses in the US and Germany performed particularly well," added Sorrell. "Reportable net sales margins fell slightly, down 0.1 margin points, although Ogilvy Public Relations, Cohn & Wolfe, and the specialist public relations companies, Glover Park and Ogilvy Government Relations, showed improved margins in the first half."
Donna Imperato, CEO, Cohn & Wolfe said the firm anticipates celebrating its fourth year of double digit growth in 2017. "Cohn & Wolfe achieved double digit growth for the first half of the year with offices around the world contributing to our performance. The growth is being driven by demand for our data-driven, digitally-minded creative approach to client needs," she said.
Sorrell admitted that "growth has become even more difficult to find", amid continued volatility. "The most significant pressures on client spending seems to be the impact of low growth and cheap money driving asset purchases, consolidation and zero-based budgeting," he said.
In particular, Sorrell pointed to pressure on consumer goods ad spending, after Unilever — one of WPP's biggest clients — announced 30% decrease in its advertising earlier this year. This is not the first time that Sorrell has suggested clients are more focused on cost-cutting that brand building, thanks to the pressures of tech disruption, zero-based budgeting and activist investors.
Sorrell added the digital inroads being made by consultants such as Accenture and Deloitte had produced "little evidence so far of significant competitive penetration." However, he again bemoaned his competitors' focus on "wins at any cost," noting that "image in trade magazines, in particular, is crucial to many."
After earlier extolling the business potential of the Trump administration, Sorrell sounded a more cautionary note in his latest comments. "Whilst Trumponomics may well have resulted in an increase in the United States GDP growth rate with the United States the biggest ($18 trillion) GDP engine out of a total of $74 trillion worldwide, the limitations of the new administration seem to be jeopardising the anti-regulatory, infrastructure and tax reduction programme that was promised."