- Q1 revenue down 5%
- Tariffs to impact client spending
- Performance to improve in second half
Communications giant WPP (WPP) reported a worse-than-feared 5% drop in first-quarter revenue and warned that macroeconomic challenges and the timing of new business will impact the group’s second quarter performance.
CEO Mark Read conceded his charge is currently navigating a ‘challenging’ economic environment, although the shares rallied 2% to 570p in early dealings as WPP reiterated its full-year outlook with Read expecting WPP’s performance to pick up in the second half.
SUBDUED FIRST QUARTER
WPP’s first quarter revenue softened 5% to £3.24 billion and fell 0.7% on a like-for-like basis, a weak showing that chimed with the soft starts to 2025 flagged by advertising and public relations rivals Publicis (PUB:EPA) and Omnicom (OMC:NYSE).
In terms of the geographic performance, North America was broadly flat with revenue down 0.1%, while WPP’s UK sales fell 5.5%, Western Continental Europe was 4.5% lower and Rest of World revenue reversed 3.8%, including growth of 5.5% in India that was offset by a 17.4% decline in China.
Encouragingly, WPP’s top 25 clients saw growth of 2.5% in the quarter underpinned by a robust performance in CPG, further improvement in Tech & Digital Services and stabilisation in Healthcare, although Retail, Telecom and Travel & Leisure saw declines.
WPP noted ‘elevated macro uncertainty’ in the near term. However, the FTSE 100 company stood by its previous full-year guidance for flat to 2% lower like-for-like sales with performance set to improve in the second half, as well as a stable operating margin.
WHAT DID THE CEO SAY?
‘While WPP is not itself directly affected by tariffs, they will impact a number of our clients as well as the broader economy,’ warned Read.
‘At this point we have not seen any significant change in client spending and we reiterate our full-year guidance which already reflected a challenging environment. As ever, we remain agile and vigilant and will continue to be disciplined on how we are managing our cost base.’
Read insisted WPP continues to make ‘solid progress’ on its strategic priorities. ‘With the internal focus of integration behind them, VML and Burson are seeing renewed momentum in new business with Generali, Heineken and Levi Strauss & Co important wins during the quarter.’
Moreover, the acquisition of InfoSum and its integration into the data offer of WPP’s media planning and buying business GroupM ‘accelerates our AI-driven data approach, leapfrogging traditional identity-based solutions’, said the CEO.
ECONOMIC BELLWETHER
Russ Mould, investment director at AJ Bell, observed that WPP has historically been seen as a bellwether for the global economy.
‘Companies are more willing to spend money on advertising when they are feeling bullish about their prospects and, conversely, dial back spending when they are feeling less confident,’ commented Mould.
‘Given the breadth of WPP’s operations its performance offers insight into how businesses are feeling across the globe and the worse-than-expected first quarter like-for-like revenue is not encouraging in this regard.
‘After all, this is before the tariff turmoil reached its zenith and while WPP is sticking with its full-year guidance for now, this could be tested through the course of 2025.
‘Investors were on the ball and spotted the risks a while ago, explaining why WPP shares had already weakened before the latest update and why they enjoyed a small bounce now as keeping guidance implies that management don’t see things getting any worse.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
