WPP hit by slowdown in ad spending as downturn bites
WPP has suffered a 70pc fall in profits triggered by a costly restructuring and a slowdown in advertising as the recession bites.
The London-listed group reported a pre-tax profit of £346m in 2023, down from £1.4bn the previous year.
The slump comes as a wider economic downturn prompts many clients to trim their advertising budgets, particularly tech and retail companies.
However, the bulk of the drop was driven by restructuring costs and writedowns in the value of its brands and property.
WPP, which is a sprawling network of agencies, recently restructured its business into six distinct networks in an attempt to reduce costs. Profits were hit by writedowns in the value of some of its brands following the changes, as well as an impairment on the value of its property portfolio.
When restructuring costs and valuation changes were excluded, headline profit before tax fell 4.8pc to £1.5bn. Revenue grew 0.9pc to £11.9bn.
Shares fell 6.4pc yesterday to take the total decline in the past year to 28pc. The company now has a market value of £7.8bn.
WPP, which owns agencies including Groupm, Ogilvy and Wunderman Thompson, has outlined plans to spend £250m a year on artificial intelligence (AI) as it looks to fend off the growing threat to ad agencies from the new technology. Mark Read, chief executive of WPP, acknowledged that 2023 was “more challenging than we expected”, but insisted the company had delivered a resilient performance.
WPP was behind four of the top five adverts at the Super Bowl this month, which drew in a record audience of 123m. It included a campaign for mobile network Verizon that starred Beyoncé.
WPP said it expects revenues to grow a maximum of 1pc in 2024, helped by the impact of mergers and acquisitions.