Advertising giant WPP has slashed its dividend as it delivered disappointing interim results that reflect the ‘challenging environment’ facing the industry, with revenue declining across key regions while the company invests heavily in repositioning its media operations.
WPP is being ravaged by the changing face of the industry amid the rise of artificial intelligence and shifts in consumer trends.
WPP shares were down over 4% at the time of writing.
A recent trading statement alerted the market to the problems WPP are experiencing, and today’s results provide investors with a breakdown of where things are going wrong.
Revenue Decline Continues
The London-based marketing services group reported H1 revenue of £6.7 billion, down 7.8% on a reported basis and 2.4% like-for-like. Revenue less pass-through costs fell 10.2% reported and 4.3% like-for-like to £5.0 billion.
The second quarter showed little improvement on a poor Q1. Q2 revenue dropped 10.4% reported with a 4.0% like-for-like decline. Revenue less pass-through costs fell even further, down 12.6% reported and 5.8% like-for-like.
Regional Performance Mixed
Geographically, the results paint a picture of widespread pressure. North America, WPP’s largest market, declined 2.4% in the first half, accelerating to a 4.6% drop in Q2.
The UK market proved particularly challenging with a 6.0% decline in H1, while Western Continental Europe fell 5.5%. China continues to struggle significantly, down 16.6% in the first half.
India provided one of the few bright spots, remaining broadly flat with just 0.1% growth.
Media Division Under Pressure
WPP Media, the company’s programmatic advertising and media planning arm, saw revenue less pass-through costs decline 2.9% in H1, worsening to 4.7% in Q2. This comes as the company undertakes what it describes as “significant repositioning and investment” in the division. This is an area that will be hit by the rising trend of AI.
Other integrated creative agencies fared worse, declining 5.8% in H1 and 7.2% in Q2. The public relations unit saw revenue fall 7.8% due to discretionary spend headwinds.
Group operating margins came under significant pressure as headline operating profit fell to £412 million, representing a margin of 8.2% compared to 11.5% in H1 2024.
The company attributed the margin decline to lower revenues and higher severance costs, particularly at WPP Media as it restructures operations.
Perhaps most telling of the company’s current challenges, the board cut the interim dividend to 7.5p from 15.0p in the prior year. Directors said the decision creates room for the incoming CEO to review the strategy. WPP’s net cash outflow will also likely play a part in the dividend cut.