ii view: glimmer of hope at ad giant WPP

First-quarter trading update to 31 March

• Adjusted revenues down 6.7%

Guidance:

• Continues to expect adjusted revenues to decline by mid to high-single digits in 2026, with an improving trajectory in H2 
• Continues to expect operating profit margin of 12-13% this year

Chief executive Cindy Rose OBE said:

"Building a simpler, integrated WPP is resonating with clients and driving strong new business. While it is only a few months since we unveiled our Elevate28 strategy, I am encouraged by this momentum which validates the 'Stabilisation' phase of the plan and our path to growth.”

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ii round-up:

WPP (LSE:WPP) today reported better than expected adjusted sales, with the global advertising company continuing to pursue a recovery plan previously laid out by relatively new CEO Cindy Rose. 

First-quarter adjusted sales to late March fell 6.7%, slightly better than the 6.9% drop in the fourth quarter and City forecasts for a fall of 7.8%. New business wins for The Estee Lauder Companies Inc Class A (NYSE:EL) and The Wendy's Co Class A (NASDAQ:WEN) plus new business with Tesco (LSE:TSCO) compared with an 11.1% drop in Middle East and Africa sales due to the Iran conflict. 

Shares in the FTSE 250 company traded either side of flat having come into this latest news down by close to a quarter so far in 2026. Rival Publicis Groupe SA (EURONEXT:PUB) is down by tenth during that time, with the FTSE 250 index rising by less than 1%. 

WPP’s services include core communication such as media buying and planning, public relations services, as well as specialist agencies focused on industries such as healthcare. 

The group’s transformation plan, known as Elevate28, looks to stabilise the business in 2026, build momentum in 2027, and deliver accelerating, high-quality growth from 2028 onwards. 

Management reiterated its estimate for a decline in adjusted revenues of mid- to high-single digits this year, with an improving trajectory in the second half.  

Revenue declines in North America led the way during the quarter, down 7.8%. The Rest of the World,  including the Middle East, followed with a drop of 6.9%, while the UK and Europe fell 6.6% and 4.7% respectively. 

WPP also reiterated hopes for a full year operating profit margin of between 12% and 13% compared with 13% in 2025. 

Following the group’s AGM on 8 May, first half results are likely to be announced early August.  

ii view:

Began in 1971 as a maker of wire baskets and teapots called Wire and Plastic Products, WPP today employs around 100,000 people. Global integrated agencies generated most sales in 2025 at 88%, followed by specialist agencies at 7% and public relations the balance of 5%. Geographically, North America accounted for most sales last year at 37%, with the UK at 15%, Europe 21%, and the rest of the world the balance of 27%. 

For investors, the advantage of tech companies driving ad services and able to develop their own AI coding such as Google owner Alphabet Inc Class C (NASDAQ:GOOG) and Meta Platforms Inc Class A (NASDAQ:META) warrants high consideration. Uncertainties regarding the outlook for the economy and the impact of AI on media viewing persist. Raised geopolitical tensions that now include war in the Middle East have hindered client demand, while US tariffs offer uncertainty in its core North America region given their possible dampening of trade and impact on client ad budgets.   

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To the upside, a growth plan is now being pursued by relatively new head and former Microsoft Corp (NASDAQ:MSFT) executive Cindy Rose. Investment in AI and data was already being made under former CEO Mark Read. A simplified portfolio could see business sales result in disposal proceeds being returned to shareholders via share buybacks, while increased financial flexibility given the previous cut to the dividend still leaves the shares offering a prospective dividend yield above 5%.   

On balance, and while existing income investors may decide to stay patient, more cautious investors are likely to await evidence of a profits turnaround before taking an interest.

Positives: 

• Diversified product and geographical offering
• Attractive dividend (not guaranteed)

Negatives:

• Advertising demand is historically cyclical
• Currency movements can hinder

The average rating of stock market analysts:

Hold