Advertising giant WPP has lowered its full-year profit guidance following a deterioration in performance during the second quarter, citing challenging economic conditions and weaker client spending.
WPP shares were down 14% at the time of writing.
The company now expects like-for-like revenue less pass-through costs to decline by 3% to 5% for 2025, with headline operating profit margins falling by 50 to 175 basis points year-on-year, excluding foreign exchange effects.
WPP’s revised outlook reflects several pressures on the business. The group anticipates that first-half like-for-like revenue, excluding pass-through costs, will decline by 4.2% to 4.5%, with a steeper drop of 5.5% to 6.0% in the second quarter alone.
Advertisers have been slowing their spending on advertising for some time, and the problems for WPP are being compounded by a shift in advertising trends, driven by the rise of social media influencers and AI.
The reduced revenue, combined with severance costs at WPP Media, is expected to result in first-half headline operating profit of £400m to £425m. Headline operating profit was £646m in H1 2024 and £666m in H1 2023.
“WPP’s start to the year was poor, and its first-half performance fell short of its original underwhelming guidance,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“Net revenue is now set to fall by between 3% and 5% over the full year due to client losses and a tough macro environment, which has caused continuing clients to spend less. To make matters worse, the new business pipeline is drying up, with performance in June being worse than WPP expected. There’s not likely to be much let-up over the second half either, so the group’s going to need new ways to engage clients and protect margins.
“The ongoing restructuring and severance actions at WPP Media are set to bring long-term annualised cost savings of over £150 million. But in the short term, the restructuring is proving a distraction for management and weighing on margins. Alongside the weaker-than-expected top line, that’s led to a downgrade to the full-year profit outlook. It’s clear that more needs to be done to turn WPP’s future around, and while the hunt for a new CEO continues, it’s unlikely that WPP will regain its crown as the world’s biggest advertising agency.”