WPP expects more negative growth

Chris Pash
By Chris Pash | 26 February 2024
Credit: Kurt Anderson via Unsplash

WPP says it’s too early to call a tech sector recovery and expects more negative growth in the March quarter.

The world’s biggest advertising group closed 2023 with what it termed "resilient" 0.9% like-for-like growth to $US11.86 billion, as ad spend in the US tanked.

And the company forecasts 2024 LFL revenue less pass-through costs growth of flat to 1%.

WPP is trailing most of its global peers in terms of growth. Only dentsu, which reported 2023 growth at -4.9%, has a similar forecast for 2024 at 1%.

WPP’s creative had a tough year in 2023 but GroupM closed at +4.9% with a strong performance in the December quarter (+5.7%).

New business wins in 2023 produced  $US4.5 billion in net new billings.

However, WPP carried additional overheads in its restructuring program and was taken by surprise by technology clients, representing 20% of business, taking an axe to marketing budgets.

Analysts see WPP with another challenging year in 2024. UBS last month downgraded the company to "sell" from "buy". 

“I think it's too early to call a recovery in the tech sector, but certainly it feels like about stabilising,” CFO Joanne Wilson told a briefing of market analysts.

She expects  to see negative like-for-like growth in the current March quarter.

The new business pipeline was higher than it was this time a year ago and more skewed to offensive pitches.

However, the impact of client losses in 2023  will continue throughout 2024, particularly weighing on the first half.

The cuts to advertising spend by the technology sector crept up on WPP.

“We did not expect the cuts in technology spend that happened throughout the year to take place when we started the year,” says CEO Mark Read.

“We expected to see some pressure in retail, because we knew about that, but the biggest delta versus our budget was in technology companies, which you know is 20% of our business. We have the biggest exposure in our industry out there.

“We like our exposure to tech and that will recover at some point. The timing is a bit uncertain.” 

Read says some of the upcoming pitches this year are defensive reviews for WPP.

“The reviews span creative, media and production,” he says.

“We absolutely have the capabilities that they (clients) need in terms of skills, investments in technology, geographic expertise.

“Expect AI to be a big focus of reviews, looking to see who is best positioned to partner with them on that in the future.

“I think in each of those cases, we have a strong case to make. In our industry, as you know, this is competitive and we won't win them all, but we're absolutely focused on winning.”

WPP's plans include an annual cash investment of about £250m in proprietary technology to support its AI and data strategy/

And the company still has about two years of restructure pain to go and with it ongoing costs.  

The company expects cash restructuring costs to be around GBP285 million in 2024, up from GBP196 million in 2023.

Last year the bulk of restructuring costs were associated with the transformation program and the initial costs in the creation of VML and simplification of GroupM. 

A slide from the analyst presentation:

wpp 2023 client mix from analyst presentation

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