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WPP has been forced to issue its second profit warning this year as clients in the tech sector cut spending further and its key Chinese market faltered.
The London-listed advertising agency more than halved its forecast for net revenue growth in 2023 to 0.5-1 per cent, down from a previous range of 1.5-3 per cent. It also trimmed its forecast for operating margin for the year.
WPP said it would update investors on its strategic plans to drive growth, cut costs and increase profits over the next three to five years in January.
Shares in the group have dropped more than a fifth this year, leading to speculation among analysts that the company could become a takeover target. The shares fell 4 per cent in early trading on Thursday.
Mark Read, chief executive of WPP, said: “Our top-line performance in Q3 was below our expectations and continued to be impacted by the cautious spending trends we saw in Q2, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half.”
The advertising group first warned in August that annual forecasts would be hit by the lingering effects of the post-pandemic slowdown in the tech industry, of which its clients include Meta, Google and Microsoft.
Net revenue in the US dropped 4.2 per cent in the third quarter as a result. The fall was matched in China, WPP’s fourth-largest market, where the group said a slower than expected recovery had hit spending with its creative agencies.
The Financial Times reported on Friday that police had raided the Shanghai offices of WPP-owned media agency GroupM and held a senior executive for questioning over bribery allegations. WPP has since sacked the executive and said it was co-operating with Chinese authorities.
Rivals such as US-based Interpublic have also cut forecasts this year, while former WPP boss Sir Martin Sorrell’s S4 Capital has also been forced into issuing profit warnings given tighter than expected marketing spend.
WPP on Thursday announced a restructuring of its business units, which it said would drive stronger revenue growth and yield cost savings of at least £100mn a year in 2025.
