WPP moved into negative growth territory after announcing its Q3 numbers from London overnight.
The world’s biggest media company’s revenue was down 1.8 per cent with like-for-like revenue less pass through costs down 0.6 per cent.
Comparing it to its rivals recent numbers, Publicis rose 5.3 per cent, Omnicom 3.3 per cent, while IPG was also down 0.4 per cent.
WPP’s worst performing territories were North America (down 4.1 per cent), where it’s getting battered by a decline in tech spends and in China where a GroupM executive is currently in prison on corruption charges.
The holdco has revised down its 2023 full year forecast to half-to-one per cent growth from an initial one-and-half to three per cent growth.
WPP’s share price fell about three per cent to 668p in early trading on the London stock exchange and is at a three-year low – a level last seen during the COVID pandemic.
Highlights of the results included:
◼ Trading highlights: Q3 revenue -1.8 per cent; LFL revenue +2.3 per cent
◼ Q3 LFL revenue less pass-through costs -0.6 per cent with growth in UK, Western Continental Europe and Rest of World, offset by declines in North America, with continued weakness from technology clients and in China
◼ Global Integrated Agencies grew revenue less pass-through costs +0.1% in Q3 (YTD +1.5 per cent) with integrated creative agencies declining -1.1% (YTD -0.9 per cent). GroupM grew +1.6 per cent in Q3 (YTD +4.6 per cent) with low-single digit growth in the US and UK
◼ $US1.4bn net new business won in Q3, including from Estée Lauder, Hyatt, Lenovo, Nestlé, Unilever and Verizon. $US3.4bn net new business won year-to-date
◼ Strengthened offer: Two significant moves to further strengthen our competitive offer, simplify our business and benefit from scaled technology platforms: o Launch of VML, the world’s largest creative agency with world-class creativity and deep expertise in commerce, data and technology o Further integration of GroupM with common products and single technology platform, streamlining of operations and back-office functions supporting client-facing agencies o Together these moves are expected to drive stronger revenue growth and net annualised cost savings of at least £100m in FY25 with a part-year benefit in FY24
◼ Outlook: 2023 guidance updated: LFL revenue less pass-through costs growth now expected to be around 0.5-1.0 per cent (previously 1.5-3.0 per cent); with headline operating margin of 14.8-15.0 per cent (excluding the impact of FX) (previously around 15 per cent)
◼ WPP intends to hold a Capital Markets Day in January 2024 to update investors and analysts on its strategic roadmap to drive growth, further efficiencies and margin expansion over the next three to five years
Commenting on the numbers, WPP CEO Mark Read said: “In a world being rapidly reshaped, we need to continue to evolve our offer to clients and simplify our business. I am excited by the creation of the world’s largest creative agency, VML, and the continued evolution of GroupM. Both these developments will strengthen our offer to clients, simplify the integration of our services and maximise the returns on our ongoing investments in AI and technology.
“Our top-line performance in Q3 was below our expectations and continued to be impacted by the cautious spending trends we saw in Q2, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half.
“We continue to win both creative and media assignments from leading global companies including significant wins in the third quarter with Estée Lauder (media), Hyatt (creative), Lenovo (creative), Nestlé (media) and Verizon (creative). Our net new business performance of $1.4bn in the quarter showed sequential improvement after a tougher first half.
“We will provide more detail on today’s announcements, our strategic roadmap and actions to drive growth, further efficiencies and margin expansion at our Capital Markets Day in January,” Read said.