WPP shares fall after profit drop

22 February 2024, 16:04

WPP_Installation. Picture: PA

The company said it had been hit by lower spending by technology businesses.

Shares in advertising giant WPP dropped on Thursday after it reported a near quartering of profits last year.

The business, whose headquarters are in London, said that while revenue had increased 2.9% to £14.8 billion, profit had dropped significantly.

Before tax profit fell 70.1% to £346 million, bosses revealed on Thursday, but that was in part because the company wrote down the value of the property it owns.

Headline pre-tax profit which strips out such one-off costs, fell 4.8% to £1.5 billion, the business said.

“While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year with 0.9% like-for-like growth and a 0.2 point improvement in our headline operating margin at constant currency,” said chief executive Mark Read.

“This was driven by disciplined cost control, while continuing to invest in AI, data and technology.”

Shares in the business were down 5.2% on Thursday afternoon.

The company said it had won new deals with Allianz, Cadbury-owner Mondelez, Nestle and PayPal among others.

But it also lost some of its work with drugs giant Pfizer.

Hargreaves Lansdown lead equity analyst Sophie Lund-Yates said: “WPP is being hit by lower technology spending in the US.

“The media, analytics and advertising giant is in the firing line for any slowdown in corporate spending or sentiment, as its products are often nice-to-have, rather than something that helps companies keep the lights on.

“With that said, WPP has done an awful lot of the right things to position itself for the future.

“It’s throwing money at improving its offering, including AI capabilities.

“There will be some trepidation surrounding exactly when these hefty investments will bear meaningful fruit, but it’s a step in the right direction.

“Ultimately, WPP is an economic bellwether, which will struggle to really thrive until corporate purse strings are a bit more fast and loose.

“The version of WPP waiting in the wings for that moment is in a much better position to capture demand.”

By Press Association