The world’s biggest advertising group, WPP, has downgraded its full-year like-for-like growth forecast to 1.5-3 per cent from 3-5 per cent after lower spending from tech clients caused its revenue in North America to decline in the months from May through June.
Reporting its 2Q numbers, the London-based holding company said its first-half profit before tax had halved to £204 million, which it blamed on lower revenues in the US from technology clients.
Highlights of the Q2 numbers included:
- H1 reported revenue +6.9 per cent, LFL revenue +3.5 per cent (Q2 +2.3 per cent)
- H1 revenue less pass-through costs +5.5 per cent, LFL revenue less pass-through costs +2 per cent (Q2 +1.3 per cent)
- In Q2, ex-US growth accelerated to mid-single digits, with China growing albeit less strongly than expected. North America declined in Q2, primarily due to lower revenues from technology clients
- H1 headline operating profit margin 11.5 per cent, down 0.1pt, and on a constant FX basis improved by 0.1pt. Efficiency benefits offset by investment in IT and higher severance costs
- Trade working capital favourable movement of £165m year-on-year. Non-trade working capital adverse movement of £316m
- Adjusted net debt at 30 June 2023 £3.5bn, up £0.3bn year-on-year, £0.4bn lower than Q1 2023. Expect year end net debt to be flat year-on-year
WPP CEO Mark Read commented: “Our performance in the first half has been resilient with Q2 growth accelerating in all regions except the USA, which was impacted in the second quarter by lower spending from technology clients and some delays in technology-related projects. This was felt primarily in our integrated creative agencies. China returned to growth in the second quarter albeit more slowly than expected. In the near term, we expect the pattern of activity in the first half to continue into the second half of the year.
“Our media business, GroupM, grew consistently across the first six months as did our businesses in the UK, Europe, Latin America and Asia-Pacific. Client spending in consumer packaged goods, financial services and healthcare remained good and, despite short-term challenges, our technology clients represent an important driver of long-term growth. Our agencies performed extremely well at the Cannes Lions Festival winning five Grand Prix and 165 Lions with Mindshare recognised as the most-awarded media agency. We won major new business assignments with clients including: Reckitt, Mondelēz, easyJet, Lloyds Banking Group, Pernod Ricard and India’s second largest advertiser, Maruti Suzuki.”
Read added: “We have exciting future plans in AI that build on our acquisition of Satalia in 2021 and our use of AI across WPP. We are leveraging our efforts with partnerships with the leading players including Adobe, Google, IBM, Microsoft, Nvidia and OpenAI. We are delivering work powered by AI for many clients including Nestlé, Nike and Mondelēz. AI will be fundamental to WPP’s future success and we are committed to embracing it to drive long-term growth and value.”
