The world’s largest advertising group, WPP, has lowered its full-year like-for-like growth forecast to 1.5-3.0% from 3-5% citing lower spending from tech clients which cause revenue in North America to slow in the second quarter.
While growth accelerated in other regions delivering a “resilient” performance, WPP CEO Mark Read said lower spending from the tech sector dampened earnings in the US.
“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,” said Read.
Read added that WPP media business, GroupM, “grew consistently across the first six months as did our businesses in the UK, Europe, Latin America, and Asia-Pacific.”
Regarding AI, the hot topic on everyone’s talking points this year, Read said “We have exciting future plans in AI that build on our acquisition of Satalia in 2021 and our use of AI across WPP.”
Read added that WPP is leveraging our efforts with partnerships with companies 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.”
WPP H1 and Q2 financial highlights
- H1 reported revenue +6.9%, LFL revenue +3.5% (Q2 +2.3%)
- H1 revenue less pass-through costs +5.5%, LFL revenue less pass-through costs +2.0% (Q2 +1.3%)
- 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%, 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