WPP’s media unit is in the frame as the global advertising group downgrades its full year revenue outlook in the face of weak sales, client losses, a pull back on spend and a shrinking pitch runway.
The “weaker than expected top line performance” has changed the company’s tone and wording of commentary about WPP Media, formerly GroupM.
The description is now firmly of “restructure” when previously WPP had been careful to say “simplifying”.
In Australia, WPP Media has been reporting growth. The then GroupM topped the RECMA rankings for 2024. Account wins include Lion, Specsavers, Amazon, Nova and Footlocker. Retentions include Queensland Government.
Globally, WPP has downgraded its like-for-like revenue outlook to -3% to -5%, from previous flat to -1%, with weaker than expected client spend and slipping net new business.
In response, WPP, in an unscheduled trading update, indicated continuing jobs cuts globally as it works to lift the group out of a negative growth trough.
CFO Joanne Wilson, briefing market analysts, said she expected total severance costs to be around 100 million pounds, reflecting WPP Media and other parts of the business.
Headcount was expected to be down 3.5% since the start of the year but the full benefit of this would only be realised in the second half.
“The actions we are taking, and have taken, including the restructuring of WPP media, will deliver an improved margin performance in the second half, in the full year,” Wilson said
The deterioration in performance became apparent as the June quarter progressed, she said.
She reported a “greater degree of caution” on client spending than expected.
And “weaker net new business” was exacerbated by one off factors which impacted WPP Media's performance. However, she didn’t expect this to continue in the balance of the year.
“We are seeing an increasing number of clients across different sectors cut budgets and spend in reaction to pressure on their businesses from ongoing macro uncertainty,” she said.
“We have seen the most significant quarter on quarter impact in WPP Media and Ogilvy, reflecting a pullback in client spending.”
She said the original outlook, of flat to -1% growth, anticipated a headwind from net new business in the first half and a tailwind in the second half, leaving the full year impact broadly neutral.
“This reflected known wins and losses at that time and an expectation on the volume of new business and our win rate,” she said.
“We now anticipate a negative impact from net new business for the year as a whole, reflecting increments of client losses and the lower level of new business conversion.”
CEO Mark Read, who is leaving the company to be replaced by Microsoft’s Cindy Rose, said the implementation of a new strategy for WPP Media is going well.
“But we're clearly not yet seeing that translate into better business performance,” he said.
“The restructuring is delivering significant structural cost savings.”
WPP Media had suffered with a “deficit of new business” opportunities.
Read said the latest COMvergence tracker shows that new business opportunities in media, year to date, are running about a third of the level in 2024.
“New business conversion, in terms of win rate, is probably similar to last year, but is falling short at WPP media.
“The lower level of new business opportunity and the pipeline in general has made us more cautious in the second half.”
He said clients are cautious, and that extends into new business activity, because that is driven by the degree of confidence in the future.
Fewer opportunities and these tend to be smaller, he said.
“In WPP media, it's more a factor of sort of annualisation of losses going into this year,” he said.
One big loss for WPP was multinational food producer Mars, an account valued at $US1.7 billion, which went to Publicis Groupe.
“We thought that Mars would impact q1 next year, but actually it would impact us in q4 this year.”
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