WPP PLC (LSE:WPP) shares fell 5% to levels not seen in almost three years after the company warned for the second time in as many months that full-year revenue will be lower than expected, with profit margins also being hit by weaker advertising spending in North America and China.
The FTSE 100-listed ad giant's revenues less pass-through costs fell 5% in the third quarter, although only 0.6% on a like-for-like (LFL) basis.
US revenues declined as "cautious spending trends" from technology clients continued, an exacerbation of the problem that had led to the outlook being lowered at the half-year stage.
Growth in the UK, western Europe and the rest of the world was not enough to offset this.
Guidance for 2023 is now for LFL revenue less pass-through costs growth of around 0.5-1.0%, down from 1.5-3.0% in August and 3-5% earlier after the first quarter.
Moreover, headline operating margin is now expected to be 14.8-15.0%, excluding the impact of currency swings, down from the previous 15.0%.
To strengthen WPP’s competitive offer, simplify the business and benefit from technology such as AI, the group said it is creating VML as “the world’s largest creative agency”, and further integrating GroupM, its media investment group, into the rest of the organisation, meaning common products and a single technology platform, streamlining operations and back-office functions, which together are predicted to result in £100 million of annualised savings from 2025, with some effect to be felt next year.
Chief executive Mark Read said: “In a world being rapidly reshaped, we need to continue to evolve our offer to clients and simplify our business.”
He said creating VML and further evolving GroupM will “strengthen our offer to clients, simplify the integration of our services and maximise the returns on our ongoing investments in AI and technology”.
The performance in the past quarter 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”, he said.
More detail on the strategic roadmap and actions to drive growth, efficiencies and margin expansion is promised at a capital markets day in January.
The shares fell to 660p in early trading today, down 29% over the past six months to levels last seen in November 2020.