WPP’s profit plummets in Q2 amid cut in tech ad spend
By Felicia Nwosu
Multinational advertising company WPP has released its second quarter report with a shrink in its profit, resulting from a reduction in advertising marketing spend from the US technology companies, which left a negative scar on its revenue result for the quarter.
The company said its operating profit took a hit in the first half-year and dropped to £306 million (A$593 billion), a 43.2% reported decrease. During this period, WPP had £204 million (A$395 million) in profit before tax, a 51.2% decline.
Comparing this post with its first quarter in 2023, where WPP posted £7.22 billion (A$14 billion) in revenue for the first half of 2023, a 6.9% increase on a reported basis and 3.5% like-for-like (LFL) growth.
Giving its regional financial report for the quarter, it revealed that North America declined by 1.2% in revenue, less pass-through, costs due to technology clients spending less, which predominantly impacted WPP’s integrated creative agencies. It also took into account the impact of client losses in the retail sector during 2022.
The group maintained its operating margin guidance of around 15% for the full year, but reduced LFL revenue less pass-through costs growth to 1.5-3.0% (previously 3-5%).
Mark Read, the chief executive of WPP further said this was felt primarily in the company’s integrated creative agencies, adding that China returned to growth in the second quarter albeit more slowly than expected.
“Our media business, GroupM, grew consistently across the first six months as did our businesses in the UK, Europe, Latin America and Asia-Pacific. Client spending in consumer packaged goods, financial services and healthcare remained good and, despite short-term challenges, our technology clients represent an important driver of long-term growth.
“We have exciting future plans in AI that build on our acquisition of Satalia in 2021 and our use of AI across WPP. We are leveraging our efforts with partnerships with the leading players including Adobe, Google, IBM, Microsoft, Nvidia and OpenAI.
“AI will be fundamental to WPP’s future success and we are committed to embracing it to drive long term growth and value,” Read explained.
WPP closed at £818 (A$1,586) on 4 August. It currently has a market cap of £8.79 billion (A$17.05 billion).
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