WPP Shares Plunge as Weak Q3 Results Trigger Guidance Cut

WPP (LON: WPP) shares are under pressure following a disappointing third-quarter trading update and a downward revision of full-year organic growth guidance.

The advertising giant now expects LFL revenue less pass-through costs to decline by 5.5% to 6.0%, a significant step down from the previous forecast of -3% to -5%.

WPP shares are down more than 9% following the report.

Third-quarter revenue totaled £3,259 million, an 8.4% year-over-year decrease on a reported basis and a 3.5% decline on a like-for-like (LFL) basis. Revenue less pass-through costs, a key metric for WPP, fell 5.9% LFL to £2,459 million. Year-to-date figures paint a similar picture, with revenue down 8.0% reported and 2.8% LFL, while revenue less pass-through costs is down 10.5% reported and 4.8% LFL.

The revised guidance reflects the weak YTD performance and a cautious outlook for the fourth quarter. WPP also expects its headline operating profit margin to be around 13%, compared to previous guidance of a 50 to 175 basis point year-on-year decline, excluding FX impacts. The adjusted operating cash flow pre-working capital remains unchanged at £1.1 billion to £1.2 billion.

The company's performance was impacted by a slowdown in WPP Media compared to the second quarter. Global Integrated Agencies saw a 6.2% LFL revenue decline, with WPP Media down 5.7% and other agencies down 6.5%. Public Relations declined by 5.9%, while Specialist Agencies fell by 2.2%. North America declined 6.0% and the UK was down 8.9%, Western Continental Europe declined 4.4% and Rest of World declined 5.0%.

Despite the grim figures and revised outlook, the company is undergoing a strategic review.

Key Drivers of Underperformance:

• WPP Media Slowdown: A significant deceleration in the media division's performance compared to the previous quarter.
• Geographic Weakness: Declines in key markets like North America and the UK weighed heavily on overall results.
• Client Pressure: Top 25 clients are down 2.0% year to date vs. Group LFL down 4.8%, impacted by client assignment losses and reduced spending from CPG, Automotive, and Government sectors.

Cindy Rose, Chief Executive Officer of WPP, said: “My ambition is for WPP to lead our industry in terms of innovation, client delivery and organic growth. However, I acknowledge that our recent performance is unacceptable and we are taking action to address this.” She also noted the company's commitment to simplifying its offerings, improving execution, expanding into enterprise and technology solutions, and maintaining a disciplined approach to capital allocation.