WPP was the biggest faller on the FTSE 100 on Thursday after reporting a slowdown in business as the advertising giant implements staff travel restrictions to Asia Pacific and Italy and self-quarantine measures in response to the coronavirus threat.
Shares in the marketing services giant fell 15% as investors reacted to a deterioration in trading in the final three months of the year. WPP reported a 1.9% fall in net sales in the fourth quarter, its worst of the year, which analysts at Citi called “flat out disappointing”.
WPP has instituted a ban on travel to China, Hong Kong, Singapore, South Korea and Japan. It has an “essential business travel” only within the rest of the Asia Pacific and, most recently, Italy.
In addition, WPP has introduced a self-quarantine policy, with anyone returning from China, Hong Kong, Singapore, South Korea, Japan, Iran or “specific lockdown areas” in northern Italy told they must work remotely for 14 days from the date of return.
China, the world’s second largest advertising market after the US, accounts for 5% of WPP’s £10.8bn net sales.
Investors were further disappointed by WPP’s forecast of flat growth this year, which the company pointed out did not include factoring in any impact from the coronavirus outbreak. “At this stage, it is too early to predict the full potential impact,” the company said. “We will provide an update at our first quarter trading update.”
Mark Read, WPP’s chief executive, said the company had introduced measures to try to limit the impact on the company’s operations and protect its 106,000 global workforce.
Read said that a “single digit” number of its 5,000 staff in China had contracted the virusand all were “recovering well”.
“It has impacted our staff in China,” he said. “They have been working from home since the Chinese New Year and have started to partially come back to work this week in line with other companies in China,” he said. “If, or when, the coronavirus impacts the global economy it will no doubt impact WPP.”
Despite a growing wave of announcements by businesses updating investors on the impact of the coronavirus, WPP maintained that it was too soon to quantify any impact on its performance.
“It is too early to be in any way definitive on the impact of the coronavirus on the business,” said Read. “We will update earlier than our first quarter results if there is something to say. It is too soon to quantify the impact.”
WPP has forecast zero growth this year but expects to match the growth of its global peers, which include France’s Publicis Groupe and the US’ Omnicom and IPG, in 2021.
“The uninspired guidance given by WPP also doesn’t factor in the impact of the coronavirus,” said Russ Mould, investment director at AJ Bell. “Advertising firms are often a decent proxy for what is happening in the wider economy as firms spend more on ads when they are feeling confident and less when they aren’t. Confidence could be in short supply until there is more certainty about how the outbreak can be contained and the scale of its economic impact.”
On Wednesday, Omnicomclosed the London office of subsidiary OMD UK, a media planning and buying agency, until Monday as a “precautionary measure” after a staff member developed flu-like symptoms after returning from Australia, including a connection in Singapore. The employee is being tested for the virus. Sister agency PHD, which is also based in Fitzrovia, has also told staff to work from home for the rest of the week, shutting its office as a precautionary measure.
