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Ad giant WPP lowers full-year expectations again

  • Led by the high-profile British businessman Martin Sorrell, WPP said it now expected like-for-like net sales growth to come in flat, compared with a previous forecast range of 0 to 1 percent
  • It said the headline net sales operating margin was now expected to be flat, compared with a previous forecast of a 0.3 margin point improvement

WPP, the world's biggest advertising company battling a slowdown in client spending, lowered expectations for full-year organic net sales and profit margin on Tuesday, two months after an earlier downgrade sent shockwaves through the industry.

Led by the high-profile British businessman Martin Sorrell, WPP said it now expected like-for-like net sales growth to come in flat, compared with a previous forecast range of 0 to 1 percent.

It said the headline net sales operating margin was now expected to be flat, compared with a previous forecast of a 0.3 margin point improvement.

Sorrell said there was "obviously pressure in the system" as WPP's consultants were found to be more focused on costs in 2017.

"I think it is in this low growth world, or relatively low growth world, where there is very little inflation, where there is very little pricing power and there is a great focus on cost," he explained to CNBC.

The British group, like its peers Publicis and Interpublic, has been hit by a fall in spending from consumer packaged goods groups, and from fierce competition in the market for online advertising.

WPP said its main trading measurement, like-for-like net sales, fell by 1.1 percent in the third quarter, an improvement on the 1.7 percent drop recorded in the second-quarter and a market expectation of a 1.4 percent fall.

Net sales fell by 4.9 percent in North America.

Google, Facebook have 'responded to advertising challenges'

Sorrell said WPP would keep Google as its top media investment in 2017. Meantime, the firm's client portfolio is poised to see Facebook move ahead of Rupert Murdoch's News Corporation into second place this year.

While Sorrell has previously argued that Facebook and Alphabet-owned Google need to accept that they are media — and not technology — companies, he did say that both firms have since responded to advertising challenges.

In recent months, several brands have pulled ads from Google-owned YouTube because they were being placed next to extremist content. Matt Brittin, Google's EMEA president of business operations, apologized in March for this issue. The company announced plans to expand its safeguards for advertisers including plans to take down inappropriate content faster.

WPP's shares were around 0.6 percent higher during early morning deals on Tuesday.