WPP’s shares plunged more than 16% on Wednesday after the company issued a dire trading update with downgraded profit expectations for the first half of the year.
WPP trading update
The global advertising giant said that a challenging economic backdrop had led to a deterioration in performance in the second quarter.
“We now anticipate H1 like-for-like (LFL) revenue less pass-through costs to decline by -4.2% to -4.5%, with a decline of -5.5% to -6.0% in Q2 which, although impacted by one-off factors, is below our expectations”, WPP wrote in its trading update.
It also warned of continued macro uncertainty weighing on client spend and weaker net new business than originally anticipated.
Mark Read, outgoing Chief Executive Officer of WPP, said: “Since the start of the year, we have faced a challenging trading environment with macro pressures intensifying and lower net new business.
“While we expected the second quarter to be similar to the first quarter, performance in June was worse than anticipated and we expect this pattern of trading in the first half to continue into the second half.
“As a result, we are updating our guidance for the full year and reducing our expectations on LFL revenue less pass-through costs growth to -3% to -5% (from flat to -2%) with a year-on-year decline in headline operating profit margin of 50 to 175 bps (vs. around flat previously).
“Our focus remains on ensuring the right balance between investing in the business for the long-term and continuing to reduce structural costs, while taking appropriate actions to respond to the current trading environment.”
WPP, one of the world’s biggest advertising companies, has also struggled to maintain growth amid the rise of new technologies, such as artificial intelligence.
CEO Read announced in June that he would stand down from his role before the end of the year.
The company’s shares were trading 16.3% lower at £4.41 in London by mid-morning Wednesday.