First signs of recovery as WPP returns to growth

The world’s biggest advertising group has signalled the first signs of a recovery in the market, even as China’s prolonged downturn continues to prove a drag on business.
WPP returned to growth in the past quarter with better than expected revenues, thanks to winning new media accounts with the likes of Starbucks, Amazon and Unilever.
The FTSE 100 marketing house, which owns agencies including Finsbury and Ogilvy, reported revenue less pass-through costs of £2.9 billion for the third quarter, up 0.5 per cent on a like-for-like basis. That was an improvement on the 1 per cent decline in the first half of the year.
Mark Read, chief executive, said: “It’s good to see that a recovery is definitely in the first signs. We need to continue to deliver next year. There’s a lot of new business prospects ahead of us and good opportunities.”
Like-for-like revenue rose 1.7 per cent in North America and 2.2 per cent in western continental Europe, while the UK was flat after a 5.3 per cent fall in the first half.
There was a 2.2 per cent decline for the rest of the world region, reflecting a continued slide in China of 21.3 per cent. That marked a slight improvement from the 24 per cent decline in the first half.
China is WPP’s fifth biggest market and the division employs around 6,000 staff. Read said it had been a “challenging time” for the division as many of its clients were in the luxury goods, automotive and consumer packaged goods sectors.
“Chinese consumer spending has not really recovered in a consistent way since Covid,” he said. “A lot of Chinese consumers have been looking to save, they’ve been trying to bring the housing market under control, and that’s impacted people and their wealth and economic security. That’s obviously weighed heavily on some of the sectors in which we operate.”
Read said the bribery scandal at WPP, which erupted last year and saw it fire an executive and suspend trade with external organisations, had “had an impact at the beginning of the year” but that the situation was now more stable. “We’ve changed our leadership and brought in new leaders, and we’re working to make sure that’s behind us.”
Asked if WPP planned to exit China, Read said: “I don’t think we’re looking to exit China. I think many of our clients are committed to the market. And while they are, and while we have a big business there, we have to develop it.”
WPP was built by Sir Martin Sorrell, who bought dozens of advertising, marketing and communications agencies. Sorrell, now 79, left the company in acrimonious circumstances about five years ago and was replaced by Read, who has been trying to simplify the business. He has brought many agencies under the same roof, meaning 90 per cent of WPP’s annual revenue now comes from six networks: AKQA, Ogilvy, VML, Hogarth, GroupM and Burson.
WPP’s share price has been under pressure amid concerns about the state of the advertising market. The group warned last year that some of its clients, especially the big American technology businesses such as Apple and Google, had cut their marketing spend in response to the uncertain economic outlook.
While cuts are being made elsewhere, Read has been investing heavily in strengthening WPP’s capabilities in using artificial intelligence.
“AI will be fundamental to our future as a company,” he said. “It enables us to come up with creative ideas more quickly to find insights in the market. It allows us to produce more work more quickly for clients and prove the relevance and targeting of our media plans.”
However, he admitted there were some concerns for the wider industry. “We are worried about fakes and deep fakes and the potential for AI to lead to more fraud. Like any new technology, there’s both potential and also risk.”
He also highlighted the importance of protecting intellectual property following a number of recent copyright infringement lawsuits against AI companies.
Shares in WPP, which have risen 16 per cent in the past 12 months, rose another 5.5 per cent, or 42½p, to 816p in late afternooon trading on Wednesday.