WPP shares dive after sales slump
Shares in advertising giant WPP plummeted by over 13 per cent on Wednesday morning after the company said sales would take a hit in the second quarter after it lost several key accounts.
The FTSE 100 firm said on Wednesday revenue for the first half was expected to decline between 4.2 and 4.5 per cent. For the second quarter, the business expects a 5.5 to six per cent hit, exceeding previous expectations.
This is set to impact half-year headline profit with a margin decline of 280 to 330 basis points year-on-year to between £400m and £425m.
Revenue for the year is projected to fall three to five per cent as the “macro environment weighs more heavily on client spending.”
This comes after shares hit a four-year low in February, following revenue that missed expectations.
WPP also lost its crown as the world’s biggest advertising firm last year amid a slowdown in sales across the UK and the US and a prolonged deterioration in China.
Amid the crunch, WPP has trimmed its headcount and stated that it expects severance actions taken in the second quarter at its media investment arm to generate over £150m in savings. But this is only expected to have a “broadly neutral impact” on full-year outcomes.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “WPP’s start to the year was poor, and its first-half performance fell short of its original underwhelming guidance. Net revenue is now set to fall by between 3 per cent and 5 per cent over the full year due to client losses and a tough macro environment, which has caused continuing clients to spend less.
“To make matters worse, the new business pipeline is drying up, with performance in June being worse than WPP expected. There’s not likely to be much let-up over the second half either, so the group’s going to need new ways to engage clients and protect margins.”
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WPP eyes AI for turnaround
WPP chief Mark Read, who is set to depart at the end of the year after seven years in the role, said the firm has faced a “challenging trading environment with macro pressures intensifying and lower net new business”.
“While we expected the second quarter to be similar to the first quarter, performance in June was worse than anticipated and we expect this pattern of trading in the first half to continue into the second half.”
The advertiser had a tough start to the year, recording a 0.7 per cent slump in revenue, but laid out plans to lean heavily into AI as part of a new transformation strategy.
The group said its acquisition of Infosum – a data collaboration platform – aimed to deepen its AI capabilities within its investment arm.
Read announced his departure in June amid the firm’s bleak performance.
He said: “After seven years in the role, and with the foundations in place for WPP’s continued success, I feel it is the right time to hand over the leadership of this amazing company.”
WPP will post interim results for the half-year in August.