Global advertising giant WPP PLC (LON:WPP) saw its shares drop today after it revealed it has set conservative budgets for 2017 given “continued tepid economic growth” and a relatively slow start to the current year having seen its 2016 results hit new records.
The world's largest advertising group, run by the high-profile businessman Martin Sorrell, reported 2016 like-for-like net sales growth of 3.1%.
But it said January net sales were only up 1.2%, against stronger comparatives last year, albeit above budget.
In its statement, the FTSE 100-listed said: "Given continued tepid economic growth and recent weaker comparative net new business trends, the budgets for 2017, on a like-for-like basis, have been set conservatively at around 2% for both revenue and net sales, but with a headline operating margin target improvement on net sales of 0.3 margin points, in constant currency.”
In early trading, WPP shares were down almost 6%, or 113p at 1,798p.
In a note to clients, analysts at Liberum Capital said: “FY16 results were broadly in line with expectations on the top and bottom line.”
They added: “Margins if one excludes the STW adjustment might slightly disappoint though.
“However, the main disappointment is likely to be on the company guiding to FY17E 2% organic net sales growth (vs expectations of c. 3%), although most of that weaker performance can be attributed to WPP-specific factors in terms of the VW and AT&T account losses.”
Liberum retailed its ‘buy’ rating and 2,100p price target on WPP shares.
2016 records ...
In 2016, WPP saw its headline pre-tax profit increase by 21.8% to £2.16bn, breaching £2bn for the first time, up 8.5% in constant currency.
It added that 2016 reported billings rose 16.0% to £55.245bn, up 5.5% in constant currency and 3.3% on a like-for-like basis.
WPP said it saw like-for-like revenue growth in all regions in 2016, led by strong growth in Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, and in all sectors, except data investment management.
The group is paying dividends of 56.60p per share for 2016, up 26.7% on the 44.69p paid in 2015, and reaching its recently targeted pay-out ratio of 50% of earnings one year ahead of schedule and up from 47.7% last year.
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