- Second-quarter growth in mid-single digits excluding US
- Solid new business performance
- Operating profit falls 43.2%
Shares in WPP (WPP) fell over 7% to 788p after the advertising giant cut its annual revenue forecast due to a lack of cash from US tech clients who are struggling with future budget spend.
WPP’s pre-tax profits fell 51% to £204 million for the six months ending 30 June 2023 compared to £419 million in the same period a year ago.
CEO Mark Read admitted that lower spending from the company’s US clients had tipped the advertising giant ‘over the edge’, as had ‘some delays in technology-related projects’.
However, Read said that WPP’s China region had ‘returned to growth albeit more slowly than expected’.
WPP shares have lost 25% since February, slashing £2.8 billion off the firm’s market cap.
RIVAL S4 CAPITAL SUFFERS SAME FATE
Last month, Martin Sorrell’s digital advertising firm S4 Capital (SFOR) suffered the same fate as WPP and other advertising groups Omnicom (OMC:NYSE) and Interpublic (IPG:NYSE).
S4 Capital delivers profit warning after slowdown in tech spending
S4 Capital issued a profit warning reflecting challenging conditions for clients, ‘especially those in the technology sector’, which make up about half of its revenues.
The company’s shares have taken a battering of late and over the past month have fallen nearly 20% to 102p.
EXPERT VIEW
Dan Coatsworth, stock market analyst at AJ Bell: ‘The fact WPP has issued a profit warning is telling. The problems lie with US technology companies, many of whom have spent this year slashing costs across their business, including jobs.
‘Many over-hired as we came out of the pandemic and are now having to right-size operations. Paying close attention to money coming in and money going out will naturally lead to a sharper eye on marketing and advertising expenditure.
‘Rival agency S4 Capital last month issued a similar warning with tech clients being cautious. Interpublic and Omnicom have also disappointed with their latest updates, suggesting the advertising and marketing industry is going through a cyclical downturn.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (James Crux) own shares in AJ Bell.
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