VIVHY Vivendi SE (PK)

By Adria Calatayud and Elena Vardon

Some of the biggest European advertising companies have warned of a slowdown in the industry as marketers tighten their budgets. WPP cut its 2023 net sales growth guidance on Friday, following in the footsteps of last week's warning from S4 Capital. WPP and S4 Capital also joined U.S. peers Omnicom Group and Interpublic Group in reporting weaker growth rates in the second quarter than the first. While Publicis Groupe is bucking the trend for now, executives at the French ad giant said clients are taking longer to decide on projects.

--WPP now expects organic net sales to grow less than it had previously anticipated in 2023. The London-based group--which owns agencies including Ogilvy, Wunderman Thompson and VMLY&R, as well as media-buying business GroupM--has been hurt by lower spend and delayed projects from technology clients so far this year that has hit its U.S. performance. "The reasons differ by clients and actually not all clients are down, but the general trend is one of cost control, focus on margins after a significant slowdown in their own rapid rates of growth, and perhaps a different stage of the innovation cycle" Chief Executive Mark Read said during an earnings call. As a result, WPP cut its guidance for like-for-like net sales--or revenue less pass-through costs--to between 1.5% and 3.0% from its previous expectation of 3.0% to 5.0%. The company reported a 1.3% rise in like-for-like net sales for the second quarter, down from a 2.9% increase in the first, with the U.S. decline offset by growth in other markets.

--Publicis upgraded its expectations for 2023, but executives said they are seeing a slower decision-making process from clients. The Paris-based group--which houses agencies such as Saatchi & Saatchi, Leo Burnett and Zenith--now forecasts organic revenue growth of around 5% for 2023, having previously guided for organic growth at the top half of the 3% to 5% range. For the second quarter, Publicis reported organic revenue growth of 7.1%, in line with its growth rate in the first three months of the year. However, Publicis Chairman and Chief Executive Arthur Sadoun said during an earnings call the whole industry is experiencing a slowdown in the execution of projects.

--S4 Capital cut its 2023 outlook after its second-quarter net revenue came in below its own budget. The company founded by industry veteran Martin Sorrell blamed its guidance downgrade on challenging macroeconomic conditions and caution among its customers, particularly those in the tech sector. The London-based digital ad and marketing-services company now expects like-for-like net revenue growth to be in a range of 2% to 4%, down from 6% to 10% previously. S4 Capital said its like-for-like net revenue growth for the first half was around 5%, slower than the 6.8% rise it reported for the first quarter.

--Vivendi's Havas advertising business reported an acceleration in organic net revenue growth to 6.3% in the second quarter from 1.9% in the first. "We are not sure to be able to deliver such high growth that we delivered during the second quarter all year long," Vivendi Chief Financial Officer Francois Laroze said during an earnings call. While Laroze said he is cautiously optimistic, he noted that the performance of some of Havas's agencies has been weak.

Write to Adria Calatayud at adria.calatayud@dowjones.com and to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

August 04, 2023 10:33 ET (14:33 GMT)

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