- Shares fall as much as 17%
- Fourth-quarter sales disappoint
- Company warns of ‘headwinds’
Shares in WPP (WPP) fell over 17% to 637p at one point in early morning trading as the advertising giant shared a gloomy outlook and reported lower full year 2024 revenue of £14.74 billion compared to £14.84 billion last year.
The advertising giant founded by industry legend Sir Martin Sorrell saw a fall in like-for-like fourth quarter revenue in North America, the UK, and worst of all China, down 21%.
WHAT DID THE CEO SAY?
Chief executive Mark Read commented: ‘The top line was lower, with the fourth quarter impacted by weaker client discretionary spend. We did see growth from our top 25 clients of 2% and an improving new business performance in the second half of the year with wins from Amazon (AMZN:NASDAQ), Johnson&Johnson (JNJ:NYSE), Kimberly-Clark (KMB:NYSE) and Unilever (ULVR) reflecting the strength of our integrated offer.
‘Though we remain cautious given the overall macro environment, we are confident in our medium-term targets and believe our focus on innovation, a simpler client-facing offer and operational excellence will support our growth and deliver greater value for our shareholders.’
GLOOMY OUTLOOK
Going forward, the company sees organic revenue less pass-through costs being lower in 2025 with performance improving in the second half, and headline operating profit margin expected to be more or less flat excluding the impact of foreign exchange fluctuations.
Russ Mould, AJ Bell investment director, said: ‘The best adman in the world would have a hard task to sell WPP’s latest results. Not only were the numbers themselves short in some areas of what was expected but the company was gloomy on the outlook for 2025, too.
‘Pinning its hopes on artificial intelligence investment to come to the rescue is not an argument which is carrying much weight with the market. Generative AI is perceived to be more of a threat than an opportunity for the business, and in early trading the shares slumped to their lowest level since the pandemic.
‘Advertising agencies are seen as good bellwethers for the economy because companies will increase spending on ads when they are feeling positive and scale back during tougher times. Despite its recent struggles, WPP still has significant scale, breadth, and geographic reach. For this reason, WPP’s update may be a canary in the coalmine for a downturn in wider economic conditions.
‘Pressure is likely to ramp up on Mark Read, who has led the business since the controversial departure of founder Martin Sorrell in 2018.’
