Market report: WPP tumbles on fears of advertising spend squeeze

wpp
WPP chief executive Martin Sorrell

The world’s biggest ad firm WPP tumbled yesterday as concerns grew that top ad spenders Sky and Unilever will slash their marketing budgets and that struggling French peer Publicis’ soft results were indicative of a sinking sector.

With disappointing corporate releases from big marketing customers Unilever and Nestle yesterday coming hot on the heels of peer Reckitt Benckiser’s warning of flat sales growth, investors dumped WPP, which depends on consumer goods giants spending big on advertising.

Unilever cutting its marketing spend as the Paul Polman-led firm looks to boost margins to ward off advances from lurking predators is a “potentially big challenge for the major ad agencies”, according to AJ Bell analyst Tom Selby.

WPP’s woes were worsened yesterday after one of its biggest customers, broadcasting mammoth Sky, launched a review of its approximately £400m ad pot.

Sir Martin Sorrell-led WPP, which plunged 11pc in August after warning that 2017 will be the worst year for advertising in a decade, retreated 42p to £13.66 as fellow ad giant Publicis endured its worst day of trading in two years after revealing weaker-than-expected sales, highlighting the challenges faced across the sector.

A slew of missed expectations on yesterday’s corporate calendar and the Spanish government beginning the process of stripping Catalonia of its autonomy knocked investor sentiment on stock markets across Europe.

Unilever and WPP’s tumbles created an uphill battle for the FTSE 100, which reversed Wednesday’s gain to close 19.83 points lower at 7523.04.

After soaring 8.6pc on Wednesday on hopes that NHS e-referrals may not have weakened as severely as first thought, rumours continued to swirl around the City that Spire Healthcare was vulnerable to a bid. Takeover rumours have long followed the firm but its recent weakness has heightened bid talk with top shareholder Mediclinic constitently linked with a move to snap up the rest of the firm. Shares spiked as high as 3pc in early trading before sinking back into the red, the firm closing 3.5p lower at 247p.

GoCompare chairman Sir Peter Wood cashed in on the comparison site’s success by selling 21.3m share at 100p per share, pulling down it down 3p to 101.5p. The firm’s shares have rallyed 47pc this year as consumers feeling the squeeze from rising inflation shop around for better deals and the placing, which Sir Wood said will allow him to “diversify” his portfolio, leaves him with a 26pc stake.

Games Workshop, the firm behind fantasy figurine brand Warhammer, climbed 243p to £22.50 as it keeps up its strong sales performance with Peel Hunt analyst Charles Hall saying that investors should expect to see the firm soon step-up investment to help support growth.

Finally, N Brown, the company behind plus size brands Simply Be and Jacamo, jumped 16.4p to 325.7p after HSBC upgraded it to “buy”, arguing that it is starting to deliver on its transformation plan, while mid-cap oil and gas services firm Wood Group slipped 22.5p to 692.5p after Barclays warned clients that its recent merger with Amec Foster Wheeler is a “complex restructuring”.

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