26th Oct 2023 15:07
(Alliance News) - If advertising firms offer a strong read-across for the state of the global economy, numbers from WPP PLC on Thursday were far from reassuring.
WPP shares were 1.2% lower at 682.60 pence each in London on Thursday afternoon.
WPP said third-quarter revenue declined 1.8% on-year to GBP3.51 billion, but rose 2.3% like-for-like. Revenue less pass-through costs was 5.0% weaker at GBP2.84 billion, and down 0.6% like-for-like.
"Our top-line performance in Q3 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," Chief Executive Officer Mark Read said.
Read noted WPP won some "creative and media assignments" during the quarter, including pacts with Nestle SA and Verizon Communications Inc.
Looking ahead, WPP now expects 2023 like-for-like revenue, less pass-through costs, to grow between 0.5% and 1.0%. It had previously predicted a rise between 1.5% and 3.0%. That earlier guidance came as a result of WPP cutting its growth guidance from a 3% to 5% range back in August.
Looking slightly further ahead, WPP will hold a capital markets day in January. It will inform on its "strategic roadmap to drive growth, further efficiencies and margin expansion over the next three to five years".
AJ Bell analyst Danni Hewson commented: "When advertisers are in trouble, it is typically not a good sign for the economy.
"The ad space is seen as a good bellwether because companies will increase spending on ads when they are feeling positive and scale back during tougher times. WPP has significant scale, breadth and geographic reach, making this even more relevant. Significantly, US tech clients are proving more cautious and there has also been a slowdown in spending in China to contend with."
Hewson said there may be some pressure mounting on WPP CEO Read.
"Mark Read did a decent job of steadying the ship at WPP since his appointment in 2018 but with the share price faltering, he is under pressure to start delivering despite the difficult backdrop," the AJ Bell analyst added.
Shore Capital Markets analyst Roddy Davidson set out a more bullish assessment, however.
"Looking beyond current conditions, we continue to view WPP's as a well-managed and deeply resourced global player with an extensive blue chip client base and a focus on harnessing technology and AI provides – all of which suggests the potential for attractive long-term [earnings per share and dividend per share] growth and strong cash generation," the Shore analyst said.
By Eric Cunha, Alliance News news editor
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