WPP flags flat revenue growth amid some market struggles

Advertising giant WPP reported a resilient year in its preliminary results on Thursday, as revenue and like-for-like profits rose, although reported profits tumbled.

The FTSE 100 company said total revenue came in at £14.85bn for 2023, marking a 3.2% increase, or 2.9% on a like-for-like basis.

Revenue less pass-through costs amounted to £11.86 billion, reflecting a 0.5% uptick or a like-for-like rise of 0.9%.

Despite facing headwinds, WPP said it maintained its focus on innovation and investment in AI, aiming to enhance growth, margin, and cash flow.

Reported operating profit tumbled 60.9% to £531m, while reported profit before tax saw a decrease of 70.1% to £346m.

Diluted earnings per share declined 83.5% to 10.1p.

Headline operating profit, however, added 0.5% to £1.75bn, with a corresponding margin improvement of 0.2 percentage points, reaching 14.8%.

After a 4.8% decrease in headline profit before tax, headline diluted earnings per share experienced a slight dip of the same percentage.

In terms of quarterly performance, WPP reported a 0.3% growth in like-for-like revenue less pass-through costs in the fourth quarter, driven by strong performance in the UK and India, partially offset by declines in Germany and China.

The board said the decline in the US market, primarily attributed to reduced spending by technology, healthcare, and retail clients, was partially offset by growth in the consumer packaged goods, telecoms, and automotive sectors.

Its ‘Global Integrated Agencies’ saw 1.3% growth in like-for-like revenue less pass-through costs for the full year, with GroupM, its media planning and buying business, experiencing a robust growth of 4.9%.

Looking ahead, WPP said it anticipated 2024 like-for-like revenue less pass-through costs growth of 0% to 1%, with a projected improvement in headline operating profit margin of 20 to 40 basis points excluding the impact of foreign exchange.

“At our recent capital markets day we detailed our strategy to capture the opportunities of AI, data and technology, while harnessing the full power of our offer to clients, building world-class agency brands, and driving strong financial returns through efficient execution,” said chief executive officer Mark Read.

“AI will be fundamental for our business and we are embracing the opportunities that it presents, putting it at the heart of our operations and our work for clients.

“Our AI-powered platform, WPP Open, is now being used by more than 30,000 people across WPP with growing adoption by our clients.”

Read said that while 2023 was more challenging than expected due to cuts in spending by technology clients, the company still delivered a “resilient performance” for the year with 0.9% like-for-like growth and a 0.2 point improvement in our headline operating margin at constant currency.

“This was driven by disciplined cost control, while continuing to invest in AI, data and technology.

“Our net new business of $4.5bn in 2023 included major new assignments with clients such as Allianz, Krispy Kreme, Mondelēz, Nestlé, PayPal and Verizon and reflects a stronger year-on-year performance in the fourth quarter.

“We are optimistic about the strategic opportunities ahead of us and are confident that we can deliver accelerated and increasingly profitable growth over the medium term.”

At 0850 GMT, shares in WPP were down 1.44% at 769.2p.

Reporting by Josh White for Sharecast.com.