ii view: life at ad agency WPP under new tech-savvy CEO

Second-quarter results to 30 June

• Q2 adjusted like-for-like (LFL) revenue down 5.8% to £2.54 billion
• First-half operating profit down 48% to £221 million
• Average adjusted net debt of £3.4 billion, down from £3.6 billion a year ago
• Interim dividend halved to 7.5p per share

Guidance:

• Continues to expect full-year adjusted like-for-like revenues to fall between 3% and 5% 
• Continues to expect full-year headline operating profit margins to fall by between 0.5% and 1.75%

Now departed CEO Mark Read said:

"It has been a challenging first half given pressures on client spending and a slower new business environment. We have, however, made significant progress on the repositioning of WPP Media, simplifying its organisational model to increase effectiveness and reduce costs. 

"WPP is a company with enormous strengths in creativity and media, technology and AI, talented people, deep client relationships and unmatched global reach. Throughout my seven years as CEO, technological innovation has been a constant and I believe that thanks to our investment in AI we can look to the future with confidence.”

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ii round-up:

WPP (LSE:WPP) is a major global advertising company. 

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

For a round-up of these latest results announced on 7 August, please click here. 

ii view:

Founded as a maker of wire baskets and teapots called Wire and Plastic Products, WPP today operates in more than 100 countries. Global integrated agencies generated most sales during 2024 at 85%, followed by public relations at 8% and specialist agencies the balance of 7%. Geographically, the US accounted for most sales in 2024 at 35%, with the UK also significant at 15%. A review of group strategy and future capital allocation policy is now expected after new CEO Cindy Rose took over on 1 September. 

For investors, US trade tariffs now create uncertainty around client demand. New business pitch activity declined 60% over the first half, with economic strain in China and curtailed spending for technology clients following investment booms under the pandemic influencing behaviour. The advantage of tech companies pushing ad services and able to develop their own AI coding such as Alphabet and Meta cannot be forgotten, while a halving of the interim dividend could well be followed by a similar size cut to the final payment, although that would still leave the shares yielding around 5%. 

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To the upside, the new CEO was previously chief operating officer at Microsoft, with her technology expertise potentially proving vital in steering WPP forward in the new AI driven world. Investment in AI and data had already been prioritised under former CEO Mark Read as well as driving an ongoing efficiency push. Group average net debt has fallen, aided by a previous business disposal, while the earlier year purchase of InfoSum was made to enhance the group’s technology positioning.  

For now, CEO Cindy Rose has much to do forging a recovery at this globally renowned ad agency, with new investors likely awaiting evidence of a turnaround before taking any interest. 

Positives: 

• Diversified product and geographical offering
• New CEO

Negatives:

• Advertising demand is historically cyclical
• Foreign exchange movements can hinder

The average rating of stock market analysts:

Hold