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WPP said last year was “more challenging” than expected after US technology companies cut marketing investment, but that it expected the US elections, Olympics and Super Bowl to boost growth in 2024.
In the final quarter of last year, revenues from the US — WPP’s largest market by far — fell 4.5 per cent on a like-for-like basis owing to lower spending by technology, healthcare and retail clients, although WPP’s business was stronger in the UK and India.
Revenue for the full year less pass-through costs was £11.9bn, reflecting a like-for-like rise of 0.9 per cent, a slowdown on the prior year but at the upper end of previous guidance. The UK-based advertising group set out plans for modest growth again in 2024, with revenue, less pass-through costs, between flat or 1 per cent growth. This is lower than the targets set out by rivals such as Publicis and Omnicom for the year.
WPP’s annual pre-tax profits fell by more than two-thirds to £346mn in 2023 as it faced restructuring costs at its global agencies. The group set out plans for about £600mn of annual savings by 2025 against its 2019 cost base, in part as result of this reorganisation.
The ad group’s share price has fallen by a quarter over the past year as it has faced faltering spending among some of its core clients in the technology sector. The industry also faces risks from artificial intelligence that could replace some of the tasks normally carried out by large agencies. On Thursday, shares were trading about 3 per cent lower on 757p.
Mark Read, chief executive of WPP, 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.”
He pointed to net new business of $4.5bn in 2023, and said he was confident WPP “can deliver accelerated and increasingly profitable growth over the medium term”.
The company plans to invest £250mn a year in developing AI tools to help its creative and media businesses, with many of the traditional roles in the industry expected to be replaced or changed by the use of such technology. AI can help create advertising campaigns more cheaply and at scale, and target such marketing at different consumer groups.
Read said WPP had completed a restructuring of its marketing, advertising and PR agencies under six networks — AKQA, Ogilvy, VML, Hogarth, GroupM and Burson. The group is also in talks with a number of candidates to replace its outgoing chair Roberto Quarta this year.
Read said 2023 was a “year of adjustment” after strong growth through the pandemic, and particularly “given our exposure to technology clients”.
He added that clients were more positive about the year ahead. “We’re seeing more stability and spend from our technology clients. We do have some headwinds in China, which remains a challenging market for everybody. But we will see an underlying improvement in the performance of the business over the course of the year.”
He said that elections “tend to boost media prices and give a little bit of a boost to the business as does the Olympics”, and pointed to the huge marketing spend around the Super Bowl this month.
“The most watched TV broadcast in the US since the lunar landings. It’s not actually a sporting event, but an advertising event.”
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