WPP downgrades full-year outlook as it works to modernize offering

Dive Brief:

WPP’s revenue for the first half of 2024 was relatively flat (up 0.1%) over the first half of 2023, according to information released by the holding company. Like-for-like revenue was up 2.6%.
Less pass-through costs, first-half revenue was down 3.6% and like-for-like revenue was down 1%. Second quarter revenue less pass-through costs was down 0.5%, with gains in North America (2%) and Western Continental Europe (3%), offset by declines in the U.K. (-5.3%) and the rest of the world (-2.2%). A 9% growth in India was offset by a 24.2% decline in China.
In announcing the earnings, the company also moderated its expectations for the full year to flat to down 1% (from flat to up 1%), citing ongoing pressure in China and in the company’s project-related businesses, together with uncertain macroeconomic pressures.

Dive Insight:

The world’s largest agency holding company is still reshaping itself for the modern era. Concurrent with its earnings announcement, WPP said it would sell its majority stake in FGS global, a company it formed only four years ago, to its partner and minority stakeholder KKR for $1.7 billion. Proceeds from the deal will be used to reduce the company’s debt, invest in business growth, pay dividends and return surplus capital to investors over time.

In a statement accompanying the release, WPP CEO Mark Read said that sale, along with the company’s continued investment in artificial intelligence (AI), the development of its VML and Burson agency networks and the “simplification of GroupM” is “strengthening our offer for clients while building a more efficient company.”

“As a team, our priority continues to be improving our competitiveness by delivering a modern, global, creative and integrated offer for our clients,” Read continued in the statement. “The steps we have taken since January to integrate our offer, bring in new talent and invest in AI represent strong progress towards delivering on our medium-term financial targets and to shareholders.”

The company still has some work to do. Global Integrated Agencies’ Q2 like-for-like revenue less pass-through costs fell 0.6%, with GroupM’s 1.4% growth, offset by a 2.4% decline at integrated creative agencies. Top ten client business grew 2.5% in the first half, with strong growth in the telecommunications, media and entertainment and automotive sectors. Technology client business declined 1% like-for-like in Q2, a significant improvement over Q1’s 9% decline.

In a call with investors and analysts, Read noted that the organization’s complexity and fragmented technology platform has hindered its overall growth. WPP has made several changes on those fronts, including bringing former GroupM North America CEO Brian Lesser to become Global CEO, creating an AI content production studio and integrating more AI solutions throughout the network.