WPP in biggest fall in 19 years as Trump enthusiasm wanes

Announcing another record year for WPP, boss Sir Martin Sorrell used the 2016 results in March to praise the pro-business credentials of Donald Trump.

The short to medium-term prospects for the United States were strengthening, he said, buoyed by Trumponomics and, in particular, the President's plans for pro-growth tax, infrastructure investment, spending and regulatory reform.

That was five months ago, when the WPP net sales forecast for 2017 stood at a stellar, albeit slightly reduced, 2%. On Wednesday, that forecast was cut again, this time more dramatically to a figure of between 0% and 1%.

Clearly, Sir Martin is no longer a big Trump fan. He expressed his frustration at the limitations of the administration, which he said was jeopardising the promised reform programme.

The City was also shaken by other downbeat comments reflecting a tough first half for the marketing and advertising giant. WPP shares slid by more than 10%. The last time the company suffered a slump of this magnitude was in November 2008, with today's fall the biggest since WPP lost 15% of its value in 1998.

The performance makes sobering reading for investors, who have grown used to the steady uptick in the WPP share price as the global economy continues to make progress. In fact, the blue-chip stock has doubled since 2012.

Broker Investec said half-year underlying sales figures showing a fall of 0.5% were poor, with the second quarter below forecasts and July also much weaker after a 4.1% decline in like-for-like sales.

WPP said all regions except the UK, Latin America and central and eastern Europe showed lower revenues than the prior year in July and all sectors were down.

Based on full-year sales growth of 0.5% and a 0.2pps margin increase, analyst Steve Liechti is predicting a 2% fall in earnings per share (EPS) to about 122p.

He added: "A further risk is the ability to raise margin in a slowing growth environment despite maintained WPP guidance for FY at +0.3pps."

Investec has a 'hold' rating on the stock, while its target price is under review.

Over at Liberum, analyst Ciarán Donnelly has retained the broker's buy rating, noting that 2018 should see an uptick from net new business wins.

WPP declared an interim dividend of 22.7p per share, which represents an increase of 16.1%, in line with the rise in reported diluted earnings per share, and a pay-out ratio of 50% for the first half.

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