WPP WPP PLC

By Nick Kostov 

WPP PLC Chief Executive Martin Sorrell is struggling to sustain revenue growth after losing two big-name accounts last year--blaming belt tightening by advertisers and forecasting a sluggish 2017.

The world's largest advertising firm by sales, whose agencies include JWT and Ogilvy & Mather, reported its slowest quarter of revenue growth since 2012. It forecast growth for this year at a subdued 2%.

Shares closed down almost 8% in London trading.

WPP said it hadn't lined up new business fast enough to make up for losing accounts with AT&T Inc. and Volkswagen AG, which together accounted for about 1% of WPP's overall revenue. Mr. Sorrell said advertisers are struggling with a low-growth, low-inflation environment, while some are being distracted by activist investors and industry-changing technological disruptions.

"Clients are generally grinding it out in a highly competitive ground game, rarely resorting to a passing game or Hail Marys," WPP said Friday, as it reported full-year earnings.

WPP said net profit for the year rose 21% to GBP1.4 billion ($1.72 billion.) Revenue rose 18% to GBP14.39 billion. WPP raised its 2016 dividend to 56.6 pence from 44.69 pence.

Investors focused on the lower revenue-growth outlook.

For years, big advertisers have struggled with the seismic shift from traditional advertising platforms, like print and TV, to digital. More recently, they have contended with major slowdowns in industries that they have long relied upon for growth.

Consumer-goods giants like Procter & Gamble Co., Nestle SA, Unilever PLC and Anheuser-Busch InBev NV have all struggled to boost growth amid a so-far tepid global economy, cutthroat competition and fast-shifting consumer tastes.

"It's a tough space, and two of WPP's three biggest clients are having a tough time," said Paul Richards, an analyst at Numis, referring to P&G and Unilever. "If some of your biggest customers are having a tough time, then it's very hard to buck that trend."

At many big advertisers, all that has forced aggressive cost-cutting, driving down bids for advertising agencies, Mr. Sorrell said Friday.

"There is fierce agency competition giving rise to excessive discounting, " he said.

Global ad expenditure is poised to grow 3.6% in 2017, down from a rise of 5.7% in 2016, according to a forecast from Magna Global, the ad-buying agency owned by Interpublic Group of Cos.

WPP's slowdown comes as its closest competitors face a host of their own, specific headwinds. Publicis Groupe SA is in the midst of a rare leadership transition, in the wake of a failed merger with U.S. rival Omnicom Group Inc. Amid those distractions, the French firm has been stung by a series of lost accounts in North America.

Havas SA, meanwhile, is struggling with a slowdown in emerging markets.

Omnicom, which stole AT&T and Volkswagen from WPP and entered 2017 with other new business, is suffering from the strong dollar and reported lower-than-expected revenue in its most recent quarter.

WPP reported January like-for-like net sales--a measure used to judge the company's underlying performance--up 1.2% from the same period last year. For the fourth quarter, like-for-like net sales expanded 2.1%, its slowest rate since the third quarter of 2012. All WPP's regions slowed in the final three months of last year with the exception of emerging markets. Those markets makes up for a third of WPP's business and accelerated slightly.

In North America, like-for-like revenue dropped 2.8% in the final quarter of last year. The company's headline results in the U.K. were boosted by the fall in the value of the pound since the country's vote to leave the European Union. WPP warned that prospects there were "mixed" as the post-Brexit vote scenarios play out over the next two years.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

March 03, 2017 12:17 ET (17:17 GMT)

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