REG - WPP PLC - First Quarter 2025 Trading Update
25/04/2025 07:00
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RNS Number : 1356G WPP PLC 25 April 2025
25 April 2025
First Quarter 2025 Trading Update
Continued strategic progress despite challenging macro; FY guidance reiterated
First Quarter £ million +/(-) % reported(1) +/(-) % LFL(2)
Revenue 3,243 (5.0) (0.7)
Revenue less pass-through costs 2,482 (7.6) (2.7)
Q1 revenue of £3,243m was down 5.0% YoY on a reported basis and down 0.7%
like-for-like (LFL), while revenue less pass-through costs of £2,482m was
down 2.7% LFL. Performance in the quarter is consistent with expectations and
guidance given at the preliminary results in February. While we note elevated
macro uncertainty in the near-term, we continue to expect 2025 LFL revenue
less pass-through costs of flat to -2% and around flat headline operating
profit margin (excluding the impact of FX).
Mark Read, Chief Executive Officer of WPP, said:
"We continue to make solid progress on our strategic priorities. With the
internal focus of integration behind them, VML and Burson are seeing renewed
momentum in new business with Generali, Heineken and Levi Strauss & Co
important wins during the quarter. The acquisition of InfoSum and its
integration into GroupM's data offer accelerates our AI-driven data approach,
leapfrogging traditional identity-based solutions. We are also on track with
the continued adoption of WPP Open across the organisation with 48,000 of our
people (c.60% of client-facing staff) using it in March vs. 33,000 in
December.
"Our financial performance in Q1 was in line with our expectations, reflecting
macroeconomic challenges and the timing of new business, and we expect these
factors to continue in Q2 with performance anticipated to improve in the
second half.
"While WPP is not itself directly affected by tariffs, they will impact a
number of our clients as well as the broader economy. At this point we have
not seen any significant change in client spending and we reiterate our
full-year guidance which already reflected a challenging environment. As ever,
we remain agile and vigilant and will continue to be disciplined on how we are
managing our cost base."
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(1.) Percentage change in reported sterling.
(2.) Like-for-like. LFL comparisons are calculated as follows: current year,
constant currency actual results (which include acquisitions from the relevant
date of completion) are compared with prior year, constant currency actual
results, adjusted to include the results of acquisitions and disposals for the
commensurate period in the prior year.
Q1 2025 performance
• Q1 revenue - Q1 2025 revenue of £3,243m was down 5.0%, a LFL decline
of 0.7%. Revenue less pass-through costs of £2,482m was down 7.6% reported
and 2.7% LFL.
• Business segment and regions - Global Integrated Agencies Q1 LFL
revenue less pass-through costs was down 2.8%, with GroupM, our media
business, down 0.9% while other Global Integrated Agencies declined 4.4%.
Public Relations saw Q1 LFL revenue less pass-through costs down 6.6% while
Specialist Agencies grew 1.2%. By geography, North America was broadly flat at
-0.1%, while the UK was -5.5%, Western Continental Europe -4.5% and Rest of
World -3.8%, including growth of 5.5% in India offset by a decline of -17.4%
in China.
• Clients - WPP's top 25 clients saw growth of 2.5% in the quarter
underpinned by a robust performance in CPG, further improvement in Tech &
Digital Services and stabilisation in Healthcare, while Retail, Telecom and
Travel & Leisure saw declines.
Delivering on strategic priorities for 2025
• Staying at the forefront of AI via WPP Open - AI, data and
technology is increasingly central to the way we serve our clients and was
critical to new business wins in Q1 2025 including Heineken's global commerce
business. Annual investment is ramping up to £300m (from £250m in 2024) and
usage of WPP Open continues to grow at pace with c.60% of our client-facing
staff using the platform in March.
• Improving the competitiveness of GroupM - GroupM's performance in
the quarter reflects the impact of historical client losses. Under the
leadership of Brian Lesser the business is building on and accelerating the
simplification plan laid out in January 2024. Operationally it is driving
adoption of Open Media Studio and, via the recent acquisition of InfoSum, is
well advanced on its plan to create the next generation of AI-enhanced data
and marketing solutions for clients, delivered through the industry's most
powerful and secure infrastructure. As we accelerate the simplification of
GroupM we would expect the phasing of this to weigh on the Group's margin in
the first half but be neutral across the full year.
• New client assignments - Wins included: Electronic Arts and Godrej
Consumer Products in media; Generali, Heineken, Ionna and National Vision
within creative/commerce/design; Levis Strauss & Co in PR; and L'Oréal's
Influencer portfolio.
• More efficient operations - Annualisation of the structural cost
savings and a continued focus on operational efficiency and disciplined cost
management are enabling continued investment in WPP Open, AI and data. This
includes the integration of new AI tools into Open, a key factor driving
day-to-day productivity improvements for our people.
Financial outlook for 2025
• Reiterating 2025 guidance - LFL revenue less pass-through costs of flat
to -2% with performance improving in the second half. We still expect headline
operating profit margin for the full year to be around flat (excluding FX).
First quarter 2025 overview
Revenue in the first quarter was £3.2bn, down 5.0% from £3.4bn in Q1 2024,
and down 0.7% LFL. Revenue less pass-through costs was £2.5bn, down 7.6% from
£2.7bn in Q1 2024, and down 2.7% LFL.
£ million Q1 2025 % % % +/(-) % LFL
reported M&A FX
Revenue 3,243 (5.0) (3.1) (1.2) (0.7)
Revenue less pass-through costs 2,482 (7.6) (3.7) (1.2) (2.7)
Segmental review
Business segments - revenue less pass-through costs
£ million Q1 2025 Q1 2024 +/(-) % reported +/(-) % LFL
Global Integrated Agencies 2,119 2,202 (3.8) (2.8)
Public Relations 167 276 (39.5) (6.6)
Specialist Agencies 196 209 (6.2) 1.2
Total Group 2,482 2,687 (7.6) (2.7)
Global Integrated Agencies: GroupM, our media planning and buying business,
saw a LFL decline in revenue less pass-through costs of 0.9% in Q1 (Q1 2024:
+2.4%), with growth in the US offset by the impact of client assignment losses
from prior years in the UK and Europe and continued weakness in China.
Other Global Integrated Agencies declined 4.4% LFL (Q1 2024: -3.3%), impacted
by continued pressure on project-based work, which weighed particularly on
AKQA in the quarter, as well as tough comparisons at Ogilvy. Against this,
Hogarth saw a return to high single-digit growth supported by the continued
rebound in spend by technology clients.
Public Relations: Revenue less pass-through costs were down 39.5% driven by
the disposal of FGS Global which completed in Q4 2024. On a LFL basis, Burson
saw a broadly similar trend to Q4 with revenue less pass-through costs down in
the mid to high single digits as the business continued to face a challenging
environment for client discretionary spending, in particular in Europe. We are
encouraged by improved new business momentum in Q1, in particular in the US.
Specialist Agencies: CMI Media Group, our specialist healthcare media planning
and buying agency, continued to grow strongly, building on double-digit growth
in 2024. Meanwhile, Landor, Design Bridge and Partners, and a number of our
smaller specialist agencies, while still affected by delays in project-based
spending, saw a more moderated rate of decline. Overall Specialist Agencies
saw growth of 1.2% (Q1 2024: -7.6%).
Regional segments - revenue less pass-through costs
£ million Q1 2025 Q1 2024 +/(-) % reported +/(-) % LFL
N. America 992 1,055 (6.0) (0.1)
United Kingdom 368 383 (3.9) (5.5)
W Cont. Europe 487 556 (12.4) (4.5)
AP, LA, AME, CEE 635 693 (8.4) (3.8)
Total Group 2,482 2,687 (7.6) (2.7)
North America saw a slight sequential improvement, declining 0.1% in Q1 2025
relative to Q4 2024 (-1.4%). Q1 continued to see pressure on project-based
work, in particular at AKQA, while the region benefited from better spend in
Tech & Digital Services across media and production and a more robust
performance in Healthcare.
The United Kingdom declined 5.5% against the toughest comparison of the year
(Q1 2024: +0.3%) with pressure on project-based spend, particularly in
Healthcare and Automotive, offsetting more robust trends in CPG. Western
Continental Europe saw a broad-based decline against the toughest comparison
from 2024 (Q1 2024: +3.3%). Spain remains a relative outperformer, down
slightly against a strong double-digit comparison.
Rest of World declined 3.8%, driven primarily by Asia Pacific which declined
5.7%. Growth in India of 5.5%, reflecting continued strong new business
momentum in particular at GroupM, was offset by a 17.4% decline in China,
which was impacted by client assignment losses and persistent macroeconomic
pressures. There were declines in Latin America (-1.6%) and Middle East &
Africa (-1.9%). Central & Eastern Europe continued to grow (+2.0%).
Top five markets - revenue less pass-through costs
% LFL +/(-) USA UK Germany China India
Q1 2025 0.0 (5.5) (5.0) (17.4) 5.5
Client sector - revenue less pass-through costs
Q1 2025 % share, revenue less pass-through costs(3) +/(-) % LFL
CPG 28.0 0.3
Tech & Digital Services 17.7 4.5
Healthcare & Pharma 11.6 0.1
Automotive 11.1 5.0
Retail 8.7 (2.9)
Telecom, Media & Entertainment 6.5 (4.8)
Financial Services 6.2 2.6
Other 4.0 (13.9)
Travel & Leisure 3.5 (5.3)
Government, Public Sector & Non-profit 2.7 13.0
(3.) Proportion of WPP revenue less pass-through costs in Q1 2025; table made
up of clients representing 82% of WPP total revenue less pass-through costs.
Balance sheet highlights
Average adjusted net debt (for the last 12 month rolling period) at 31 March
2025 was £3.4bn, compared to £3.7bn at 31 March 2024, and £3.5bn at 31
December 2024.
Adjusted net debt at 31 March 2025 was £3.7bn, against £4.0bn as at
31 March 2024.
In March, WPP repaid a €500m bond on maturity that had previously been
refinanced in 2024 through the issuance of two new bonds.
Outlook
We are reaffirming our guidance for 2025 as follows:
Like-for-like revenue less pass-through costs growth of flat to -2% with
performance expected to improve in the second
half
Headline operating margin expected to be around flat
year-on-year (excluding the impact of FX)
Other 2025 financial indications:
• Mergers and acquisitions will reduce revenue less pass-through costs by
around 3.0 points primarily due to the disposal of FGS Global, partially
offset by anticipated M&A
• FX impact: current rates (at 22 April 2025) imply a c.2.0% drag on
FY 2025 revenue less pass-through costs, with c.20bps reduction expected on FY
2025 headline operating margin
• Headline earnings from associates around £40m
• Non-controlling interests around £65m
• Headline net finance costs of around £280m
• Effective tax rate (measured as headline tax as a % of headline
profit before tax) of around 29%. Cash taxes will include tax in relation to
the FGS Global disposal
• Capex of around £250m
• Cash restructuring costs of around £110m
• Adjusted operating cash flow before working capital of around
£1.4bn
Medium-term targets
In January 2024, we presented our updated medium-term financial framework
including the following three targets:
• 3%+ LFL growth in revenue less pass-through costs
• 16-17% headline operating profit margin
• Adjusted operating cash flow conversion of 85%+(4)
( )
(4.) Adjusted operating cash flow divided by headline operating profit.
Q1 2025 highlights
At our January 2024 Capital Markets Day we set out four strategic pillars.
Below we highlight key developments from Q1 against these areas of strategic
focus.
1. Lead through AI, data and technology
• Driving investment and adoption of WPP Open - At the preliminary
results in February 2025 we outlined our ambition to drive further investment
in WPP Open, taking the annual spend on our AI-powered marketing operating
system to £300m in 2025 from £250m in 2024. Key enhancements in the quarter
include the integration of Google's Veo2 to enhance video generation
capabilities (see link
(https://www.linkedin.com/posts/wpp_wpp-is-proud-to-bring-veo-2-google-cloud-activity-7302991771830038529-6Jzw/?utm_source=share&utm_medium=member_ios&rcm=ACoAAAUKfw4B_9KHGbULuUNe3bFxBTTE_x38eeA)
).
Just as important as ramping investment is driving usage and we have seen
further progress in adoption with 48,000 of our people (equivalent to c.60% of
client-facing staff) using the platform actively on a monthly basis, up from
33,000/c.40% in December.
WPP Open continues to see increased client adoption with Google, IBM,
L'Oréal, LVMH, Nestlé and The Coca-Cola Company seeing benefits both in how
we work and the effectiveness of their investments. WPP Open has also been a
critical factor in recent account wins including Heineken during the course of
the quarter (see link
(https://www.wpp.com/en/news/2025/03/wpp-selected-as-global-shopper-marketing-and-commerce-partner-for-heineken)
).
• Supporting GroupM's ID to AI approach via the acquisition of InfoSum
- Although it was announced just after the quarter end (see link
(https://www.wpp.com/en/news/2025/04/wpp-acquires-infosum-in-major-investment-in-its-ai-driven-data-offer)
), the acquisition of InfoSum marks a major strategic step forward for
GroupM's AI-driven data offer. At our preliminary results, GroupM's new CEO
Brian Lesser outlined his vision for data intelligence at GroupM, helping WPP
clients to maximise the value of their first-party data with privacy-enhancing
connections to third-party data providers and media partners. The acquisition
of InfoSum embeds an AI-enabled, secure and privacy-enhancing data
collaboration platform within WPP Open, enabling data-driven marketing and AI
model training for WPP and its clients, and is a critical milestone in our
journey to leapfrog traditional identity-led solutions.
• Complementing direct investment in AI with strategic partnerships -
In early March 2025, WPP announced a strategic partnership with, and
investment in, Stability AI, a pioneer in generative AI and the developer of
Stable Diffusion, an industry-leader in image generation (see link
(https://www.wpp.com/en/news/2025/03/wpp-announces-investment-in-stability-ai)
). The partnership will further enhance WPP's ability to deliver cutting-edge,
AI-driven content solutions to its clients across various entertainment
channels such as streaming platforms, interactive experiences and immersive
storytelling, and it reinforces WPP's commitment to remaining at the forefront
of technological advancements in the creative industries.
2. Accelerate growth through the power of creative transformation
• WARC 100 Lists confirm creative, media and effectiveness credentials -
In early March 2025 (see link
(https://www.wpp.com/en/news/2025/03/wpp-claims-top-honours-on-the-warc-creative-100)
) WPP was recognised as the most creative company on WARC's 2025 Creative 100
List, the third year in a row the company has received this honour. Ogilvy and
VML ranked first and second for most creative agency networks. The following
week (see link
(https://www.wpp.com/en/news/2025/03/wpp-leads-warc-media-100-list-for-eighth-consecutive-year)
) WARC recognised WPP as the top company in its Media 100 list for the eighth
consecutive year, with Mindshare and EssenceMediacom ranking first and second
respectively. The 'triple crown' was achieved at the end of March 2025 (see
link
(https://www.wpp.com/en/news/2025/03/wpp-named-top-company-on-effective-100-list-securing-the-warc-2025-triple-crown)
) with the announcement that WPP had also been named the number one company in
the WARC Effective 100, with Ogilvy appearing as the top agency network for
the third year.
• Strong showing by WPP-supported brands at Super Bowl LIX - At this
year's Super Bowl, WPP integrated creative agencies were responsible for some
of the most successful advertising spots shown during coverage of the game,
including Unilever's W (https://www.youtube.com/watch?v=RIXB-7RHjBY) hen Sally
Met (https://www.youtube.com/watch?v=RIXB-7RHjBY) Hell
(https://www.youtube.com/watch?v=RIXB-7RHjBY) mann
(https://www.youtube.com/watch?v=RIXB-7RHjBY) '
(https://www.youtube.com/watch?v=RIXB-7RHjBY) s
(https://www.youtube.com/watch?v=RIXB-7RHjBY) spot. GroupM secured the media
for 20 spots (up from 19 in 2024). Other highlights included work for Angel
Soft, Verizon and Dove (see link
(https://www.wpp.com/en/wpp-iq/2025/02/super-bowl-lix-a-playbook-for-brand-success)
for more detail and videos).
3. Build world-class, market-leading brands
• Driving a simpler, more integrated offering at GroupM - During Q1 2025,
Emily del Greco took the role of Global Chief Operating Officer at GroupM,
while Toby Jenner, formerly CEO of Wavemaker, was appointed Global Chief
Business Officer and Adam Gerhart, formerly CEO of Mindshare, became Chief
Client Officer. These appointments, alongside an acceleration of the
simplification programme, are a key part of building a more client-centric
operating model, making GroupM a more unified company with one voice to
clients and partners while also maximising operational efficiency.
• Creation of VML Enterprise Solutions highlights technology &
transformation capabilities - In early April 2025 (see link
(https://www.vml.com/news/vml-names-jeff-geheb-ceo-of-vml-enterprise-solutions)
) VML's technology transformation, commerce, customer experience and
consulting capabilities were brought together under the leadership of Jeff
Gehab as CEO of VML Enterprise Solutions. VML Enterprise Solutions comprises
10,000+ experts across 40+ global offices within the VML global network. Key
clients include Ford, The Coca-Cola Company, Google, IKEA, Sainsbury's,
Sherwin-Williams, T-Mobile and United Rentals.
4. Execute efficiently to drive financial returns through margin and cash
• Enterprise-wide AI integration for efficiency - WPP is implementing AI
tools and capabilities to enhance employee productivity, streamline business
operations, and accelerate overall business transformation. As part of this,
in Q1 2025 Copilot and Copilot Studio were progressively rolled out across WPP
and new Microsoft AI tools integrated within the WPP Open user experience.
• Scaling Global Delivery Centres - In late Q4 2024, we announced the
strategic scaling of WPP's Global Delivery Centres (GDCs) in India (see link
(https://www.wpp.com/en/news/2024/12/wpp-scales-its-global-delivery-centre-through-increased-investment-in-india)
). The breadth of offering within WPP's GDCs - spanning media, content,
commerce, technology consulting, data and CRM - is unique and offers both WPP,
and our clients, a significant opportunity to harness scale, standardise
processes and leverage AI across workflows. In Q1 2025 a new centre of
excellence for VFX workstreams was created.
Corporate governance, purpose and ESG
• Annual and Sustainability Reports - Our 2024
(https://www.wpp.com/en/investors/annual-report-2024) A
(https://www.wpp.com/en/investors/annual-report-2024) nnual
(https://www.wpp.com/en/investors/annual-report-2024) R
(https://www.wpp.com/en/investors/annual-report-2024) eport
(https://www.wpp.com/en/investors/annual-report-2024) was published at the end
of March 2025. The report provides a comprehensive overview of WPP's financial
results, strategic progress and future growth initiatives while including
important updates on corporate governance and ESG. Additional context on ways
WPP is working to deliver against its purpose can be seen in our 2024
Sustainability Report
(https://www.wpp.com/en/sustainability/sustainability-report-2024) .
Cautionary statement regarding forward-looking statements
This document contains statements that are, or may be deemed to be,
"forward-looking statements". Forward-looking statements give the Company's
current expectations or forecasts of future events. These forward-looking
statements may include, among other things, plans, objectives, beliefs,
intentions, strategies, projections and anticipated future economic
performance based on assumptions and the like that are subject to risks and
uncertainties. These statements can be identified by the fact that they do not
relate strictly to historical or current facts. They use words such as 'aim',
'anticipate', 'believe', 'estimate', 'expect', 'forecast', 'guidance',
'intend', 'may', 'will', 'should', 'potential', 'possible', 'predict',
'project', 'plan', 'target', and other words and similar references to future
periods but are not the exclusive means of identifying such statements. As
such, all forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances that are beyond the control of the
Company. Actual results or outcomes may differ materially from those discussed
or implied in the forward-looking statements. Therefore, you should not rely
on such forward-looking statements, which speak only as of the date they are
made, as a prediction of actual results or otherwise. Important factors which
may cause actual results to differ include but are not limited to: the
unanticipated loss of a material client or key personnel; delays, suspensions
or reductions in client advertising budgets; shifts in industry rates of
compensation; regulatory compliance costs or litigation; changes in
competitive factors in the industries in which we operate and demand for our
products and services; changes in client advertising, marketing and corporate
communications requirements; our inability to realise the future anticipated
benefits of acquisitions; failure to realise our assumptions regarding
goodwill and indefinite lived intangible assets; natural disasters or acts of
terrorism; the Company's ability to attract new clients; the economic and
geopolitical impact of the conflicts in Ukraine and the Middle East; the risk
of global economic downturn; slower growth, increasing interest rates and high
and sustained inflation; supply chain issues affecting the distribution of our
clients' products; technological changes and risks to the security of IT and
operational infrastructure, systems, data and information resulting from
increased threat of cyber and other attacks; effectively managing the risks,
challenges and efficiencies presented by using Artificial Intelligence (AI)
and Generative AI technologies and partnerships in our business; risks related
to our environmental, social and governance goals and initiatives, including
impacts from regulators and other stakeholders, and the impact of factors
outside of our control on such goals and initiatives; the Company's exposure
to changes in the values of other major currencies (because a substantial
portion of its revenues are derived and costs incurred outside of the UK); and
the overall level of economic activity in the Company's major markets (which
varies depending on, among other things, regional, national and international
political and economic conditions and government regulations in the world's
advertising markets). In addition, you should consider the risks described in
Item 3D, captioned 'Risk Factors' in the Group's most recent Annual Report on
Form 20-F, which could also cause actual results to differ from
forward-looking information. Neither the Company, nor any of its directors,
officers or employees, provides any representation, assurance or guarantee
that the occurrence of any events anticipated, expressed or implied in any
forward-looking statements will actually occur. Accordingly, no assurance can
be given that any particular expectation will be met and investors are
cautioned not to place undue reliance on the forward-looking statements. Other
than in accordance with its legal or regulatory obligations (including under
the Market Abuse Regulation, the UK Listing Rules and the Disclosure and
Transparency Rules of the Financial Conduct Authority), the Company undertakes
no obligation to update or revise any such forward-looking statements, whether
as a result of new information, future events or otherwise. Any
forward-looking statements made by or on behalf of the Group speak only as of
the date they are made and are based upon the knowledge and information
available to the Directors at the time.
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