WPP downgrades growth forecast as tech clients cut spending

WPP has reported revenues of $9.2 billion for the first half of 2023, up 6.9% on the same period in 2022.

The holding company's revenue less pass-through costs—its preferred measure of performance— was $7.4 billion, up 5.5% year on year. 

However, WPP has cut its growth forcecast for the year from 3-5% to 1.5-3%, as US growth was hit by a slowdown in spend among tech clients.

In Q2, revenues were $4.8 billion, with revenue less pass-through costs growing organically by 1.3% to hit $3.8 billion.

Operating profit margin dropped 0.1% to 11.5% in H1. WPP said efficiency benefts had been offset by investment in IT, including its data company Choreograph and AI-powered platform WPP Open, and “higher severance costs”.

WPP said its media business, Group M, grew 6.1% in Q2 (the same rate of growth as in Q1), while creative agencies declined by 2.3%, against 0.7% growth in Q1.

The UK “grew strongly, led by Group M”, with organic growth of 9%. Consumer packaged goods and healthcare were the strongest client sectors.

North America organic growth declined by 4.1% (4.5% in the US) reflecting lower revenues from technology clients, which “predominantly impacted our integrated creative agencies”, and the “expected impact of 2022 client losses in the retail sector”. This was partially offset by spending growth in CPG, healthcare and financial services.

The company cited new billings of $2 billion in H1, compared with $3.4 billion in the same period of 2022, and the acquisitions of Goat and Obviously, in the area of influencer marketing, and investment in Majority, a diversity-led creative agency.

WPP pointed to “the potential loss of certain Pfizer assignments currently held by WPP” but highlighted wins including the media accounts for Maruti Suzuki and Reckitt and creative business for Pernod Ricard and Beko.

Mark Read, chief executive of WPP, said: “Our performance in the first half has been resilient, with Q2 growth accelerating in all regions except the USA, which was impacted in the second quarter by lower spending from technology clients and some delays in technology-related projects. This was felt primarily in our integrated creative agencies. 

“Our media business, Group M, grew consistently across the first six months, as did our businesses in the UK, Europe, Latin America and Asia-Pacific. 

“Client spending in consumer packaged goods, financial services and healthcare remained good and, despite short-term challenges, our technology clients represent an important driver of long-term growth.”

Concerning other holding companies, WPP's growth of 1.3% compares with 7.1% at Publicis Groupe, 3.4% at Omnicom, 6.3% at Havas, and a decline of 1.7% at IPG.