WPP shares plunge again on halved dividend and strategic review
Shares in advertising giant WPP dropped by as much as 4.7 per cent on Thursday morning after it revealed it would launch a strategic review and halve its interim dividend amid falling profit and stagnant revenue.
The embattled media group, which owns major agencies like global PR shop Burson and creative juggernaut Ogilvy, revealed its profits had plunged by nearly half over the first half of the year when was jettisoned by several of its most lucrative clients.
Falling revenues – telegraphed in a profit warning in July – ate into the firm’s operating profit to the tune of 48 per cent in the six months to 30 June, prompting the FTSE 100 group to announce a strategic review that will be led by incoming boss Cindy Rose.
It also halved its dividend to 7.5 pence per share, sparking another fall in the firm’s share price that now means it has shed over half its market capitalisation this year alone.
It is now 67 per cent down on its post-pandemic high of 1,183p, and nearly 80 per cent below its all-time high of 1,900p in early 2017.
Mark Read, who announced he was stepping down as chief executive earlier this summer, said the results were evidence of what had “been a challenging first half” because of “pressures on client spending and a slower new business environment”.
“Throughout my seven years as CEO, technological innovation has been a constant and I believe that thanks to our investment in AI we can look to the future with confidence,” he added.
“I would like to thank our clients for their partnership and our people for their dedication and I wish them, and Cindy, every success in the future.”
Subscribe to the Boardroom Uncovered show from City PM here.
WPP the worst performer in ‘structural storm’
WPP’s outsized fall in profit was largely down to a goodwill impairment it forked out over the separation of two of its flagship creative agencies, AKQA and Grey. The latter was ‘realigned’ under Ogilvy in May.
The advertising industry has been forced to contend with a confluence of highly disruptive forces over several years, which have rocked the dominance enjoyed by some of its biggest players.
The proliferation of digital and social media behemoths – like Meta and Google-owner Alphabet – selling advertising space direct to advertisers has eaten into the likes of WPP’s enormous media buying divisions.
According to a recent analysis by WPP-owned GroupM – which now sits under the newly forged ‘WPP Media’ – over half of every advertising dollar is now spent with ‘Big Tech’.
Meanwhile the rapid ascent of artificial intelligence is expected to upend advertisers’ models, making the creation of advertising spots quicker and easier, and changing consumer habits.
Several large holding companies have struggled to keep up with the pace of change afoot in the sector. Saxo Markets’ Neil Wilson said WPP was battling “huge structural storms in the ad industry”.
But WPP’s performance has been an outlier to the downside. It has been rocked by the loss of several marquee clients to ascendant French rival Publicis, including the Coca-Cola media account in North America and Mars’ $1.7bn (£1.3bn) integrated marketing work.