WPP’s profit falls in Q2 as US tech clients tighten their belts

Global advertising holding company WPP has seen a slower second quarter in 2023, as the lack of spending from US technology companies made a dent in the group’s revenue.

The company 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.

[click to enlarge]: key figures

The 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.

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. There was 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%).

[click to enlarge]: client sector overview

CEO of WPP, Mark Read, said: “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 longterm growth and value”

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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