WPP’s 2024 preliminary results see shares plunge 16% to a four year low

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The network's shares fell sharply after it posted the steeper-than-expected drop in its top-line figure for the fourth quarter and projected a flat result at best this year.

On Thursday, the London-based advertising group stated that revenue less pass-through costs fell 2.3% on a like-for-like basis in the fourth quarter, hit by declines in North America and China due to account losses and economic pressures.

Mark Read, CEO of WPP says the top line was lower with Q4 impacted by weaker client discretionary spend.

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Tough market out there

He comments that it was a "tough market out there", with pressures in its home British market, the US and China, as the group forecast flat revenues at best this year.

Read is quoted by Reuters as saying that WPP had met expectations for operating profit, which rose 2.0% to 1.71bn pounds ($2.17bn) on a like-for-like basis. Organic revenue fell 1.0%, missing analysts forecasts of a 0.4% drop.

In the same article, he says he had to be cautious about 2025, seeing little respite in China, where WPP has a big presence in the luxury and automotive sectors, and a "choppy" U.S. market.

"Given the newsflow, particularly from the US, there are many reasons that we are cautious about the year," he says

"The new administration wants to get America growing strongly, but there's no doubt that tariffs and subsequent inflation is making people nervous," he adds.

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Performance improvement

However, the company showed strategic progress is driving stronger margins and improved cash conversion with Read saying that the actions the company is taking across WPP will strengthen its existing client relationships and drive its new business results.

“We expect some improvement in the performance of our integrated creative agencies in the year ahead.

“At the same time, we have comprehensive efforts underway to improve our competitive positioning through new leadership at GroupM, with further investment in AI, data and proprietary media,” he says.

He adds, “Though we remain cautious given the overall macro environment, we are confident in our medium-term targets and believe our focus on innovation, a simpler client-facing offer and operational excellence will support our growth and deliver greater value for our shareholders.”

In 2024 WPP restructured creating the VML and Burson agencies and simplifying its media buying agency GroupM. Read says these changes were necessary to get ready for AI, but they had an impact as its people were focused internally.

"After a year of painful restructuring, we are in a good position to focus on our clients," he says.

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Full year and Q4 financial highlights

• FY reported revenue -0.7%, LFL revenue +2.3%. FY revenue less pass-through costs -4.2%, LFL revenue less pass-through costs -1.0%

• Q4 LFL revenue less pass-through costs -2.3% with growth in Western Continental Europe +1.4% offset by declines in North America -1.4%, UK -5.1% and Rest of World -4.8%, including -21.2% in China.

• Global Integrated Agencies FY LFL revenue less pass-through costs -0.8% (Q4: -2.2%): GroupM, our media planning and buying business, +2.7% (Q4: +2.4%), offset by -3.9% in other Global Integrated Agencies (Q4: -6.5%).

• FY headline operating profit £1,707m. Headline operating margin of 15.0% (2023: 14.8%) a 0.4pt LFL improvement reflecting structural cost savings of £85m from Burson, GroupM and VML initiatives; disciplined cost control and continued investment in our AI and data offer; with a 0.2pt FX drag. FY reported operating profit £1,325m up 149.5% primarily reflecting lower amortisation charges and higher gains on disposals.

• Adjusted operating cash flow increased to £1,460m (2023: £1,280m) and adjusted free cash flow rose to £738m (2023: £637m) benefiting from strong working capital management.

• Adjusted net debt at 31 December 2024 £1.7bn down £0.8bn year-on-year.

• Final dividend of 24.4p proposed (2023: 24.4p).

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Strategic priorities

The year has delivered on strategic priorities:

• Simpler client-facing structure: Six agency networks represent 92% of WPP; more integrated offers across creative, production, commerce and media; improving new business performance in the second half of 2024.

  “We achieved significant progress against our strategy in 2024 with the creation of VML, Burson and the simplification of GroupM – some 70% of our business.

  “We sold our stake in FGS Global to create significant value for shareholders,” says Read.

  

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• WPP Open: AI, data and technology: These are increasingly central to the way WPP serves its clients and critical to new business wins including Amazon, J&J, Kimberly-Clark and Unilever, with an increased annual investment to £300m (from £250m).

  “We did see growth from our top 25 clients of 2.0% and improving new business performance in the second half of the year with wins from Amazon, J&J, Kimberly-Clark and Unilever reflecting the strength of our integrated offer.

  “We increased our margin, while stepping up our investment in AI through WPP Open, which is now used by 33,000 people across WPP,” comments Read.

• More efficient operations: Stronger headline operating margin, cash conversion and balance sheet.

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Focus and outlook for 2025

• Lead through AI, data and technology: Increase its investment in WPP Open to keep it at the forefront of AI and further deploy it across the business and our clients.

• Accelerate growth through the power of creative transformation: Drive transformation across its clients with an increasingly integrated offer across creative, production, commerce and media.

• Build world-class, market-leading brands: Improve the competitiveness of its media offer, globally, with a focus on the US.

• Execute efficiently to drive financial returns: Increase its operational efficiency and optimise its investment allocation.

• 2025 guidance: LFL revenue less pass-through costs of flat to -2% with performance improving in the second half, and headline operating profit margin expected to be around flat (excluding the impact of FX).

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