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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 28, 2020).

By Suzanne Vranica and Adrià Calatayud 

Shares of WPP PLC plunged to their lowest level in almost a decade after the world's largest advertising company said sales would be flat for 2020, adding more pressure on Chief Executive Mark Read.

WPP said organic revenue -- a closely watched measurement of its underlying operating performance -- declined 1.9% in the fourth quarter, compared with the 0.8% decline analysts forecast.

WPP shares were down about 16% Thursday, hitting their lowest level since 2012.

Like much of the advertising sector, WPP is grappling with a raft of challenges including increased competition from tech giants such as Alphabet Inc.'s Google and Facebook Inc., and consulting firms such as Accenture.

The British company, which owns agencies such as Wunderman Thompson and GroupM, is in the midst of a three-year turnaround plan after it was stung by losing business from clients such American Express Co. and Ford Motor Co.

WPP said it is too early to predict the effects of the coronavirus epidemic but many in the ad sector are bracing for fallout, since ad companies have operations across the globe.

"The market is worried about their revenue outlook of flat before the impact of the coronavirus and the lack of any margin improvement in 2020," said Michael Nathanson, an analyst at Moffett Nathanson. "In addition, after showing improving revenue trends, the fourth quarter performance was a step back."

The downbeat outlook adds more pressure on Mr. Read, who took the reins of WPP in September 2018, after the departure of longtime CEO and founder Martin Sorrell.

Mr. Read has sought to slim down the company to make its operations, which span the globe, less unwieldy for marketers to navigate.

"We are pleased with the progress that we've made, but we're not in any way complacent," said Mr. Read during a conference call with analysts. "We know that we've got work to do." He added that the company has "made significant progress simplifying WPP," pointing out that it has gone from having nine networks of creative ad agencies to five.

For 2019 as a whole, the company said organic sales fell 1.6%. The company's 2020 guidance of flat sales excludes any hit from the coronavirus epidemic. Its projection fell short of analysts' expectations and is well below recent forecasts from rivals such as Omnicom Group Inc. and Interpublic Group of Cos. Earlier this month, Omnicom said it expects organic revenue growth of 2% to 3% for 2020.

In response to the coronavirus, WPP began restricting travel at the end of January, and its current policy is for no travel to China, Hong Kong, Singapore, South Korea or Japan. Only essential business travel is allowed within the Asia-Pacific region or to Italy. Earlier this week, Omnicom closed the London office of one of its subsidiaries until Monday as a precautionary measure after a staff member developed flulike symptoms after returning from Australia via Singapore.

WPP's pretax profit fell to GBP928.1 million ($1.20 billion) from GBP1.26 billion with revenue of GBP13.05 billion. Net profit fell to GBP62.7 million.

"The second half of 2019 was stronger than the first, with performance improving globally and in the United States, our largest market," Mr. Read said. However, WPP's North American operations were hit by a 5.7% fall in net sales for last year, dragging the group's performance.

Under its turnaround program, launched in December 2018, WPP aims to return the company to sustainable growth in line with its peers in 2021 and operating profit margin of at least 15%.

Russ Mould, investment director at investment platform AJ Bell, said 2020 was supposed to be the year when WPP started to deliver the benefits of its restructuring, but guidance for zero growth this year and the fourth quarter slump in sales seemed "uninspiring" for investors.

"The targets for 2021 have been maintained but the market's patience appears to have snapped," Mr. Mould said in a note to clients.

Write to Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

February 28, 2020 02:47 ET (07:47 GMT)

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