A GLOBAL slowdown in spending by US tech giants forced WPP into its second revenue warning this year amid wider caution among big consumer goods giants.
The ad giant also says the key Chinese market is faltering and that costs cuts are needed, a worrying suggestion for the 13,000 UK staff,most of whom are in London.
It will give more detail on its plans to drive growth and cutcosts in January.
Today it halved its forecast for sales growth in 2023 to just 0.5% to 1%, from 1.5% to 3% previously. Margins are also under pressure.
WPP, led by Mark Read, admits the results are below expectations but said it has won accounts from Estée Lauder, Nestlé and Verizon. Revenue in the thirdquarter was £3.5bn, down 1.8%.
WPP shares fell 21p to 670p today, leaving the business valued at £7.2 billion.
The stock is down 20% so far this year.
Read declined to comment on swirling takeover speculation.In the City, Blackstone and Silver Lake are mooted bidders for the business, but it is far from clear how serious either bidder might be.
He preferred to discuss his plans to build VML, which he says will be the world’s largest creative agency.
He says VML will have “world-class creativity and deep expertise in commerce, data and technology”.
Tech companies are about 20% of WPP’s business and those giants and UK businesses are “cautious about the year”, he said. US sales fell4.2% in the quarter.
"In a world being rapidly reshaped, we need to continue to evolve our offer to clients and simplify our business. I am excited by the creation of the world's largestcreative agency, VML, and the continued evolution of GroupM. Both these developments will strengthen our offer to clients, simplify the integration ofour services and maximise the returns on our ongoing investments in AI and technology."
WPP first warned on the slowdown in the tech industry in August, with Meta, Google and Microsoft all cutting marketing expenditure.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “Communications and advertising giant WPP’s engines have stalled again. Usually high-spending technology clients in North America have applied the brakes amid an uncertain economic backdrop. China’s also dragging performance down as the macro environment doesn’t lend itself to loose corporate spending. This has culminated in another reduction in full-year expectations. While seeing growthgo into reverse isn’t ideal, it’s not wholly unexpected given that advertising activity is a clear-cut barometer of the economyRivals including S4 Capital, led by former WPP boss Sir Martin Sorrell, have also admitted that revenues have been hit as marketing budgets are trimmed.
On Monday WPP fired an executive who was detained in China on bribery charges following a raid on its offices. The company did not name theexecutive.
WPP said it was “terminating the executive’s employment with the company, and GroupM is suspending trade with any external organisation we understand to be part of the police inquiries”.
